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.
The ‘Free’ model falls down when — to extend the pub metaphor — people turn up to use your gas barbecue and bring their own drink. Or when a rival opens an off-licence at the bottom of your beer garden selling beer at a discount. This sounds absurd — and in the real world it would be. In the digital world it happens all the time: the money is made in one place while the costs fall somewhere else altogether.
So when broadcasters allow internet users to download films or watch high-definition television programmes online, they pocket the revenue while the costs of providing the extra bandwidth fall to your internet provider. Is this fair? Equally, is it right that Google make money by directing people to a web page while the people who wrote the page earn nothing?
Much of this misdirection of money has arisen because of a widely held assumption that people won’t pay for content online. And yet, as Apple’s iTunes music store shows, if you make it easy enough, it isn’t impossible to get people to pay smallish sums quite readily. Although some online newspapers tried charging for their content and then abandoned the attempt after readers fled, it isn’t clear whether their readers were rejecting the practice because of the cost or because of the hassle involved. It’s time people gave the idea of micro-payments a second try. After all, if Susan Boyle had earned only a fraction of a penny from each of her 75 million views on YouTube, she would have enough to keep her cat Pebbles in hand-reared organic mice for life.