[Tim Lee]
Alan Jacobs, blogging at the American Scene, (where I'm also a sometime contributor) wasn't impressed by Mike Masnick's post on "free"-based business models. I find Alan's post a little bit ironic because I'm pretty sure that (unless Reihan is playing favorites among American Scene bloggers) he didn't get paid to write his post. His post was titled "MY WRITING DOESN'T WANT TO BE FREE," but I was still able to read it without paying for the privilege. Something doesn't compute there. Anyway, Alan says:
When Poole points out — in response to the surprisingly common argument that bands, say, can give away their records for free and make money with live shows and t-shirt sales — that computer programmers don't program for free and sell mousepads on the side, Masnick replies, serenely, that that comparison doesn't apply because programmers get salaries. Well, precisely. But rock musicians don't. Freelance writers don't. This is Poole's point, and David Pogue's too. They write for a living, so if they make their writing available for free, how do they pay the bills?
I think the problem here is one part miscommunication, and one part failure of imagination. In point of fact, some programmers do give away their code (in the form of contributing to free software projects) and sell goodies (in the form of setup and support services for that software) on the side. Of course, most of the time, these business models are pursued not by individuals, but by firms. As I pointed out on Monday, this is the business model of several software firms, including Red Hat and MySQL. But the essential point is the same: giving away your "main" product as a way of selling complementary products is a perfectly viable way to make money.
Of course, the individual programmers in such companies get salaries, but that objection confuses free content with free labor. Content, once produced, can be produced infinitely at near-zero cost; Red Hat and MySQL can give copies of their operating system and database, respectively, to anyone who wants them at near-zero cost. In contrast, labor is and always will be scarce. Obviously, it would be insane to suggest that writers, musicians, programmers, and other creative professionals should provide their labor for free. As a freelance writer and sometime programmer, I would object to that as loudly as anyone. But on the other hand, virtually all the content I produce is given away for free, supported in some cases by advertising or other publicity-based business models and in other cases by charitable contributions. I and the organizations I work for "make my writing available for free," yet so far I've been able to "pay the bills." Amazing how that works.
Now, Alan wants to know how David Pogue could make a profit off of his book. My guess is that Pogue dramatically overestimates the negative effect releasing an electronic version of his book would have on sales of the paper book, and that he ignores the possibility that an electronic version might even spark additional interest among some readers in the paper copy. I have purchased several paper books that had free online editions simply because the paper book is more convenient for curling up with on the couch.
But in a sense this is beside the point. As competition in the market for information goods continues to increase, more and more creative professionals are going to find that their competitors are releasing works for free, supported by sales of ads, concert tickets, consulting service, or other complementary goods. The transition to "free"-based business models is virtually complete for news and opinion and it's becoming increasingly common with music and software. (And of course television and radio have operated on this model for decades) I'm not going to predict when it's likely to happen with books, or what the book-based business models of the future will be, but the point is that if it does happen, no one is going to keep buying David Pogue's books simply so he can continue feeding his family.
If you can figure out a free-based business model for your creative works, it's a huge competitive advantage, because it's much easier to reach a larger audience if you don't ask people to pay. That's why we've seen a steady drumbeat of failed paywall-based business models in the newspaper business. Evidently Pogue hasn't figured out a business model that will allow him to make money while giving away his manuals, and that's fine. Maybe none exist. But Pogue's lack of creativity isn't evidence that no one else will figure something out. And it certainly doesn't prove that "free"-based business models in general are doomed to failure.
Photo courtesy Paul Keleher
Obviously, it would be insane to suggest that writers, musicians, programmers, and other creative professionals should provide their labor for free.
I'm sorry, but you accuse Alan of misunderstanding, but you are talking past him here as well. As soon as you have posited this (the quote I've excerpted here), you are disagreeing with Masnick. Which was kind of Alan's point.
More generally, I'm still not seeing what I would consider a plausible business model that would replace paying for a physical book, or journal, or magazine, etc. Yes, that may represent a failure of imagination; but I think one think that Alan was asking for was to not have to imagine-- I think he was asking for a specific mechanism that could pay the bills. And I'm still not confident that such a thing exists.
The mere fact that "'free'-based business models" work--for now--for some products for some companies obviously doesn't mean that such models are a viable alternative to traditional business models for the vast majority of intellectual property. I see no evidence of a general move by the music, movie, software, or publishing industries toward "free-based" models. The success of iTunes seems to me a far more important indicator of the likely future trend of the music business than the decision of a few bands to experiment with giving away a few songs or albums for free. The idea that the commercial markets for sales ads or "complementary" products and services are large enough to support the "free" distribution of the primary products of most musicians, writers, software developers, etc. strikes me as absurd.
You mention television, but the trend in television funding seems to contradict your argument also. Forty years ago, all or almost all television in the U.S. was based on your "free" business model. But today, most people get their TV through cable or satellite services, for which they pay the service providers, who in turn pay the content providers. "Premium," on-demand and pay-per-view services involve an even more direct payment from viewers to content providers. And the huge growth in TV content sold on DVD is yet another example of the move away from the "free" model you describe.
Giving things away for free isn't all that new. Standard Oil did it, so did Mr. Gillette with his new fangled safety razors.
http://www.exxonmobilchemical.com.cn/China-English/LCW/About_ExxonMobil/Our_History_in_China.asp
MySQL essentially sets their licensing up so that companies will want to purchase a commercial license for their applications powered by MySQL. While you can power your application without doing so you have to follow the General Public License which is restrictive and requires you to publish your application. They are essentially giving the software to enthusiasts for free, in the hopes that when they develop applications for companies, that they will use MySQL (because of they have used it before) and the company will purchase a license.
In short, companies only give things out for free if they expect that investment in free product to be rewarded.
Odd for Alan to complain about not getting paid for his writing when far and away the biggest problem for most writers is not in getting paid by the people who read them but in getting Anyone to read them.
Related tangent: most musicians don't get paid for the music they record. At least, rock musicians. The cost of recording is usually paid by the record label, which recoups that cost via royalties. So if a band spends 10,000 dollars recording an album, it must sell 10,000 copies before it can hope to see any profit. For many bands, the record is basically advertisement for the tour, which is where money is made. This is how it has always been, mp3s or no.
If you can figure out a free-based business model for your creative works, it's a huge competitive advantage, because it's much easier to reach a larger audience if you don't ask people to pay.
I'm skeptical of this. On the one hand, you reach a larger audience. But on the other hand, they're not giving you any money, and advertisers are certainly not going to pay you $15 or even $1 per book or CD sold. Right? Suppose that in a world of free downloadable books, you have five times as many downloads of your book but advertisers only pay you a tenth as much per customer as would have been paid by those customers under the old pay model.
Freddie, I suggest you re-read Mike's post. Nowhere does he suggest that creative professionals ought to give their labor away for free. As for business model examples: advertising is the main one. Virtually every newspaper and magazine now has a website where content is available for free. I don't see that changing.
Mixner, that's an interesting point about cable television. But you'll notice that cable channels still run a lot of advertising. Also, note that a lot of sites are now experimenting with new video features, and none of them are charging for it. Once the Internet becomes fast enough to serve high-definition video, I suspect you'll see the price of a lot of video content to come down to zero as well, but I guess we'll have to wait and see.
As far as the iTunes store goes, some quick math: Apple has sold four billion iTunes songs and 100 million iPods. That works out to about 40 songs per iPod. The smaller iPod Nano has space for 1000 songs. Where do you think the other 960 songs are coming from? Some come from peoples' existing CD collections, some come from legal, free online downloads, some come from other MP3-based stores, and some come from illicit peer-to-peer file sharing. But in any of those cases, iTunes is far from the primary source of music.
JordanT: I couldn't agree more. The point isn't free by itself. The point is that giving some stuff away for free can help sell other stuff that's not free.
Tim_Lee, I see arguments like yours all the time, and it's quite frustrating to see someone apparently intelligent, actually endorse them.
First, do you honestly see a contradiction in, as Jacobs did, making some statement on which you don't claim copyright protection, while believing that you wouldn't make certain others but for copyright?
Second, you claim that the advertising revenues pay your bills.
1) If there really were no copyright, people could just send crawlers to copy your (and others') work and set up sites on which people get to read your stuff without seeing irritating ads, so you haven't shown a for-profit copyright free model for selling your work.
2) (and this is the whole problem with anti-copyright arguments) Missed opportunities for writers are missed Pareto improvements. As long as writers can't get the amount they *would* through copyright based models, everyone is made worse off by there being less of this superior output. The fact that you can get enough "to pay the bills" is irrelevant. What should bother you is how intellectual works are only being produced on the assumption that their return will merely suffice to "pay the bills".
If the point is still hard to see, imagine if some greedy capitalist were considering locating a factory in a third-world country, but expressed concern that the legal regime would not ensure he would be able to keep random people from expropriating it or carting off equipment. Then, further imagine that I told him that's "no big deal", since "it just means someone hasn't yet thought of a property-law-free way of protecting your investment". What would be your response? Now, transform into a reponse to the point you did make.
Finally, I don't see what your'e trying to prove about the song sales on the iPods. Do you want to know why people bothered paying for digital iPod music, when you can just download them all for free? I'll give you a hint: it begins with c.
***
This is not to say that I'm unsympathetic to your general point. A few years ago, I actually wrote up a whole essay elaborating, and exploring the implications for, the idea that an equally effective copyright-free business model for intellectual works is speculation in the impacted markets. But you're basically side-stepping all of the serious issues raised.
JordanT,
your misunderstanding of how the GPL works is common.
GPL protects the source of the product, not the use.
You can use it as a database serving your commercial interests as your please. You could probably even sell a hardware product that included it ( as long as people knew they weren't paying for it ), and a software product that utilized it ( since SQL is a standard ).
Where you would get in trouble is if you wanted to make JordanTSQL, which was a modified MySQL, and then sell it.
The commercial support is for the 24/7 support that many businesses require of their database software, and a vote in which bugs/features get attention ( either explicitly or implicitly )
I remember lecturing on the "new economy" in the 90s--because of the internet, I told people, useful products will be given away and people will buy follow-on products--or have to buy them. Then, didn't the "bubble" burst or something, I forget. Yeah, it did! If you give away everything, you are getting no money in return. Most of the companies still around are coming up with new things to sell, not new things to give away. And often, they are aided by content-producers thinking they are getting some useful "exposure" to help them sell later what these companies demand for free now. Makes it tough at the supermarket.
How do the budgets of mainstream news media compare to political advertising spending?
One of my personal (crank?) theories is that the endgame of newspapers is as nonprofit wings of political parties that support their editorial viewpoints.
There's something to be said for explicit bias.
As to software, note that funding for GPL-software also comes from people like Intel; free software makes hardware more salable. Also, to elaborate on DanT's point: even modifying and reselling GPLed software is allowed. What you can't do is prohibit any further redistribution by those you gave it to.
Stuart Buck: The details are different for each business model, but a couple of things to keep in mind. First, because your product is free, you can afford to give away a lot of copies of your product for every one that generates revenue. I think I saw an estimate once that MySQL gives away 100 copies of its database for every paying customer. This isn't a loss for MySQL because most of those customers wouldn't have paid otherwise, while providing them with copies of the database costs them nothing.
Second, authors don't get anywhere close to the purchase price of CDs or books. Most of the profit is eaten up by printing, distribution, marketing, overhead, etc. So musicians don't have to generate anywhere close to $15 per foregone CD sale to break even. And I don't think it's at all crazy to think that giving your music away for free would allow you to reach 10 times as many people as a sales-only model.
Person: I didn't say anything about copyright, and I don't see how your response relates to my post.
Tim_Lee: That's because you're very poor at abstract thought. Give it another go.
Whatever Masnick is saying, it relates to this idea of free content, and Alan is asking, and I'm asking-- what is the business model? I still haven't seen anything resembling a plausible business model that fits Masnick's criteria.
Person, whether Tim can "pay the bills" *is* relevant, providing "paying the bills" consitutes success by his own definition. There *will* be free content, even if it's produced only as a hobby, and some of that content will be of high quality. The real question is whether non-free content can succeed against free content in the market place.
Consider: Peter, Paul, and Mary are writers of the same genre of fiction. Their work is similar in quality and appeal. Peter charges people $8.95 to own a piece of his work. Paul charges people $0.99 to rent copies of his work; a date-expiration algorithm deletes the content after the rental period is up. Mary gives her work away freely, expecting/hoping to profit on advertising, etc.
What happens?
1) Mary's "free-based" business model does not provide enough income to meet her financial desires. She will have to find another line of work, leaving the market for this type of fiction to Peter and Paul.
2) Mary is profiting enough (by her definition) with her business model to steal market share from Peter and Paul, forcing them to lower the price points at which they distribute their content, possibly to zero. For her, "profiting enough" might mean making $100 a month, or even less, if she has other sources of income.
By the way, Tim's argument has nothing to do with copyright, and most mainstream discussions of intellectual property do not argue that there is no place for copyright, only a) whether the length of copyright as defined by current laws is warranted, and b) patents (especially for business models and software), which are as different from copyrights as a cactus is to an oak tree.
LCL
Person, whether Tim can "pay the bills" *is* relevant, providing "paying the bills" consitutes success by his own definition. There *will* be free content, even if it's produced only as a hobby, and some of that content will be of high quality. The real question is whether non-free content can succeed against free content in the market place.
Lance_Linden, if you arbitrarily decide what counts as relevant, then yes, you can rule anything I've listed as irrelevant.
How does the fact that Tim_Lee can "pay his bills" through his free method, change anyone's opinion on the issue? Yes, he gets enough compensation to continue producing that way. Who ever disputed that? The relevant question is whether to worry about the loss of the content that did in fact require copyright in order to be produced.
All of his, and your, attempts to prove the viability of such models are ultimately attempting to show why copyright can safely be eliminated. If that's not actually what you're trying to show, your arguments are irrelevant -- they don't change anyone's opinion on anything. Who didn't already know free methods exist?
Finally, if you don't think mainstream discussions do argue for elimination of copyright, you're just ignorant. See: Stephan Kinsella and his groupies. Please do not presume to tell me "what people are really debating about". Just tell me what your opinion is, and what lazy arguments you want to throw out to defend them.
All of his, and your, attempts to prove the viability of such models are ultimately attempting to show why copyright can safely be eliminated.
I love how you know more about the purpose of my writing than I do. In point of fact, I'm not in favor of eliminating copyright. I simply think the economics of information markets is an interesting subject, and that a lot of the people writing about the subject are victims of sloppy thinking. Certainly my thoughts on these subjects have some policy implications, but the abolition of copyright isn't among them.
All of his, and your, attempts to prove the viability of such models are ultimately attempting to show why copyright can safely be eliminated. If that's not actually what you're trying to show, your arguments are irrelevant -- they don't change anyone's opinion on anything.
Person, that's nonsense - going "free" is a viable business choice that too few companies/artists/etc. consider. This discussion is about decisions made voluntarily by people, not by government mandate.
Oops, should have hit "Refresh".
Mixner, that's an interesting point about cable television. But you'll notice that cable channels still run a lot of advertising.
The point is that the long-term trend in the television industry has the decline of the "free"-based business model in favor of models in which viewers increasingly pay directly for content.
Also, note that a lot of sites are now experimenting with new video features, and none of them are charging for it.
The major video download services offering professional content are things like Netflix's Watch Now service, Apple TV, Xbox Live Video Marketplace, and VUDU. None of them operate on a "free"-based business model. All of them charge their customers directly for content.
As far as the iTunes store goes, some quick math: Apple has sold four billion iTunes songs and 100 million iPods. That works out to about 40 songs per iPod. The smaller iPod Nano has space for 1000 songs. Where do you think the other 960 songs are coming from? Some come from peoples' existing CD collections, some come from legal, free online downloads, some come from other MP3-based stores, and some come from illicit peer-to-peer file sharing. But in any of those cases, iTunes is far from the primary source of music.
I didn't say iTunes is the primary source of music (although I believe it is now among the top music retailers). I said it's probably a better indicator of the likely future of the music business than the handful of experiments with "free" distribution by Radiohead et al. that you have mentioned.
Person, my argument has *nothing* to do with copyright, either as policy or concept. A creator's choosing to not charge for access to content has nothing to do with copyright.
My argument was that it is wrong to state that whether Tim can pay the bills is irrelevant. Tim's financial goals, be they getting by or amassing huge sums of wealth, are very relevant to the business and distribution models he chooses.
Let's say that down the road is a burger stand run by a retiree. Because the retiree has other sources of income, she need not sell her hamburgers at a price that would max-out her revenue. She sells her burgers because she loves to cook and likes having something to do with her time. Your argument as I read it ("everyone is made worse off by there being less of this superior output. The fact that you can get enough 'to pay the bills' is irrelevant") is that this retiree is harming the burger-eating community by reducing the incentive of restaurants to make better, cheaper burgers. This does not make sense to me.
Price points are shaped by the seller's financial needs, goals, and expectations, and sometimes those goals are capped at merely "pay the bills." These price points, regardless of how they were reached, influence the marketplace. Sellers who choose higher price points need to compete in other areas, thus enforcing *stronger*, not weaker, incentives to create higher-quality content. This is as true with creative and information-based works as with hamburgers or anything else tangible. The only difference is the information can be created and increasingly be distributed more cheaply than stuff that can be eaten or dropped on a foot.
Do you have a response to this that does not revolve around decrying the decrying of copyright?
LCL
Hello,
* Are you financially Squeezed?
You can contact us via this email raphael_willistenlender@yahoo.com with immediate effect regarding your loan.
Thanks And God Bless You,
Mr Raphael Williston
E-mail:raphael_willistonlender@yahoo.com
RAPHAEL WILLISTON LOAN FIRM
Hello,
* Are you financially Squeezed?
You can contact us via this email raphael_willistenlender@yahoo.com with immediate effect regarding your loan.
Thanks And God Bless You,
Mr Raphael Williston
E-mail:raphael_willistonlender@yahoo.com
RAPHAEL WILLISTON LOAN FIRM
Hello,
* Are you financially Squeezed?
You can contact us via this email raphael_willistenlender@yahoo.com with immediate effect regarding your loan.
Thanks And God Bless You,
Mr Raphael Williston
E-mail:raphael_willistonlender@yahoo.com
RAPHAEL WILLISTON LOAN FIRM
Nice post check this..A business model is a framework of creating value. The term is used for a broad range of informal and formal descriptions that are used by enterprises to represent various aspects of its business, including its purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.