The Wiki Man

Rory Sutherland

Wednesday, 6th May 2009

A fortnightly column on technology and the web

I have just passed a pub in Gosport. ‘Beer garden with free gas barbecue’, reads a notice outside. ‘Bring your own food.’

Perhaps the landlord has just been reading an advance copy of Chris Anderson’s upcoming book Free, subtitled Why $0.00 is the future of business. This book (an expanded version of a Wired article at http://tinyurl.com/2okqbk) suggests a new business model has arisen where companies, rock bands and publishers give things away at no charge in order to make money somewhere else.

In truth there is nothing new about this — since Hogarth’s time pubs have experimented with cross-subsidies, offering free straw or, latterly, peanuts to attract customers or make them thirsty. Anderson mentions King Gillette, who a century ago gave away handles for his razors in order to make money selling the blades. Free handsets for mobile phones are a modern equivalent.

It’s a practice partly driven by quirks of human psychology, in that people are remarkably eccentric about what they are prepared to pay for (beer) and what they are not (gas for the barbecue). And it’s especially common online since, when paying for online media, people are even crankier than usual. Offer anyone a current copy of the Sunday Times and they hand over £2 without demur (£3 at WH Smith’s, when it will then come with a chocolate bar the size of the flight deck of the USS Nimitz). Suggest they pay £10 a year for access to a searchable online database of every article to have appeared in the Times since 1785, on the other hand, and they react as though you’re deranged. Perversely the very abundance of content available online diminishes what people are prepared to pay for it.

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William

May 11th, 2009 12:38pm Report this comment

This is a very interesting article, Rory.

Unlike some, I don’t believe in the death of the music industry. The two main expenses of the recording industry – recording and distribution – have been dramatically reduced in the computer age so costs are down and people still want to make music and still want to listen to music. How do you get the two to match up? One of the key issues, as you say, is to make it easier for people to buy music. Apple’s iTunes store is tremendous in this regard and with the spread of gadgets like the iPhone then buying music online or through your mobile phone will only increase. There could be future tie-ins with merchandise, concert tickets, etc. You buy a couple of cheap MP3’s and are offered concert tickets, T-shirts, etc. by the artist. Make it easy and people will click and buy. Make it difficult and they’ll navigate away.

The only thing I would add is that the savings in distribution costs isn’t always passed on. You can buy an album for £6.99 from iTunes or buy it for £6.99 on the High Street. How so? The iTunes album should be cheaper as there is no CD cost, no printing cost, no distribution cost. It’s this kind of feeling of being slightly ripped off that annoys people. Yet people are generally honest. You will always have a hardcore of people who will want music and other content for free but most people are happy to pay for something that they like so make it easy for them! When record companies were complaining about Russian websites offering MP3’s for 10p or 20p part of me asked why they weren’t offering low-cost MP3’s themselves? I’m not excusing Russian piracy but you have to be flexible and consider if it’s better to sell more for less than sell less for more.

I’ve always considered it madness for newspapers to offer their content for free and then wonder why hardcopy sales are declining. Yet I subscribe to The Spectator when I could easily just view it online every week for free? Why? One is that I like The Spectator so I want to support it and keep the content coming. I also like to have a hardcopy version of the magazine. I don’t really feel that way about newspapers. Would I take out an online subscription to a newspaper? Possibly. If it was the right price. Or they could let me buy access to a particular section/article for, say, 5p. If I want to pay for The Guardian’s sports section but not its’ politics why can’t I do so online? At the moment, I get it free anyway! However, I may want to support the writing of Kevin McCarra but not the writing of Polly Toynbee. Again, they have to consider that something is ALWAYS better than nothing.

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