Sunday, January 11, 2009

The Future is Free?

Last week BBC Radio 4 covered an interview with Chris Anderson, editor-in-chief of Wired magazine on his new book 'Free: The Future of a Radical Price'. Anderson best know for his writing on ‘Long Tail’ economics, has now moved on to a future where the customer no longer pays? He believes that digital product prices are now falling until the point when they reach zero and that this is creating a new business model where companies grow rich by charging their customers nothing at all.

‘We go from an economy where things get more expensive, such as oil and food - the economy of atoms - to an economy where everything gets cheaper, which is the economy of bits.’

He cites Google, Wikipedia, Craiglist as a disciples of the new model and that although their consumer offer is free, the likes of Google are extremely profitable. Someone has to pay, but in his model a few paying customers can cross-subsidise everybody else. Open-source computer software such as Linux, is free to users who can then alter and build upon the system, but only as long as they make it freely available to everyone else. Even the likes of IBM now create free software and cargo and baggage on airlines can cross subsidise passenger flights. He cites Flickr Basic being free, whilst Flickr Pro is sold to premium subscribers.

As games move more online then Anderson believes they are moving to his free model and that the majority of players will play for free and that the games companies will make their money from other means.

So what about ‘books’? We have seen the emergence of the free back list ebook offer to promote new front list. We have seen increasing use of free digital marketing materials, including the whole book for a limited time period. However, unlike other media sectors, we are still currently stuck in an ownership model based on collecting book libraries. Perhaps, the future of digital books are online and on a rental basis and it is easy to envisage these being cross subsidised. However, as the majority of books are still physical and the industry remains in denial over digital being cheaper, we may not adopt the Anderson model at the same speed as others.

1 comment:

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