

Malcolm Gladwell: Is free the future? - nevan
http://www.newyorker.com/arts/critics/books/2009/07/06/090706crbo_books_gladwell

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nimbix
If free is the future, why does Chris Anderson's book titled "Free" still cost
$26.99? Considering the whole book is about making money by giving things
away, I'm surprised he hasn't figured it out how to do this with his own book.

Also, I believe that the power of FREE is not about money. It's about avoiding
the hassle of paying. It doesn't matter whether you're paying 10 dollars or 1
cent - the hassle factor is about the same in both cases. This makes a free
product more than 1 cent cheaper than a 1 cent product.

~~~
tetha
The book is about things being free in the digital domain, so in the internet.
Thus, a physical copy of the book is still allowed to cost some money, as the
paper just does cost money. However, a good question would be: where is the
free ebook?

~~~
mcantor
I think you missed Mr. Gladwell's point... if we extend his reasoning, books
do not cost money because they require paper (fuel). Books cost money because
of the complex infrastructure required to find, edit, print, assemble and
distribute them!

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cschwarm
Here's a counter model for newspapers (and the media industry, in general) to
free:

Start a club and grant access to (full online) texts to club members, only.
Keep a fixed percentage of the revenue for administration. Say, 30 or 40
percent. This is where your profit comes from. Spend the rest of the money for
people creating the value: reporters, journalists, photographers, or even club
members.

Start with a fixed budget for a year and an initial membership price. If
revenue (fee * members) exceeds the budget, send a refund to members or raise
the budget for the next year. If it doesn't, stop the club or raise the
membership fee for next year. You may let members vote on that issue.

Let people follow (as exemplified by Twitter) the journalists they want to
read. Journalists followed by many are obviously popular, and thus valuable.
In other words: Make them celebrities, to some degree. Inform club members
about new pieces of the journalists they follow by mail or SMS. Provide an
interface for members that resembles a feed reader: A member only gets to see
information from journalists he or she follows. Let members vote on articles.

Create an incentive to journalists to advertise their commitment to a certain
club. For example, make a part of their payment depend on the numbers of
followers they have. You may also allow them to employ other journalists (or
ghost-writers). Then, they may utilize their blogs and appearances in other
media to point to 'their' club. They could engage with their reader community
(by answering comment discussions, for example).

In other words: Your sales pitch is not about the news you provide, anymore,
but the access you provide to (popular) journalists.

You may also let members follow other members and show only comments made by
them (or notify about new comments). Invite members with lots of followers to
write articles. This creates an incentive to members to write good comments.
You may also increase to incentive to be a club member by letting people
become members by invitation, only. Being a "Wall Street Journal Club Member",
for example, could mean something. If you provide a page for each member, they
may use it on their usual web presence (LinkedIn, etc.)

Offer some free content on the site; for example, general news, introductions
to popular articles, outdated articles, or comments (or discussions by your
journalists. Make is SEO-friendly so people can link to it and Google can pick
it up. You could use advertising to finance the free part.

This has the following effect: Firstly, they have an incentive to advertise
the club: the more people participate, the more value they get (or the less
they will have to spend). Secondly, there's an incentive for readers to
withhold more valuable information to others (instead of spreading them and
making money with Google Adwords). They are also less likely to spread their
account information to others.

In other words: Create a mix of Digg, Twitter and Feed Readers and add a
stronger incentive to keep information private.

Or course, that's just a quick summery. Comments welcome.

~~~
yungchin
"there's an incentive for readers to withhold more valuable information to
others (instead of spreading them and making money with Google Adwords)"

There are two problems. The first one is that you make an assumption here,
that individuals choose what's in the best interest of the group (if it's only
about the individual, the Adwords money might outweigh the information
value...). Secondly, even if the assumption holds and people will behave
according to this rationale, then still it takes only two or three odd, less-
rational individuals to redistribute the information, thereby devaluating it
back to free.

That doesn't mean your model won't work. It seems it will (and does already)
work very well for something like The Economist - perhaps it simply requires a
certain type of readership...

~~~
cschwarm
Thanks for the critic. I'd like to explain:

First, I assume self-interest, not group-interest. That's what the club is
for: The more people become members, the more content anyone gets, including
you as a member. This is guaranteed by the club structure. For additional
effect, the club may also own the copyright of the content.

Second, redistributing information is work. You can't simply copy'n'paste
articles due of copyright. Even if this still pays for some individuals,
finding good information is also work. It's easier to become a club member,
especially when you have additional benefits such as being the first to know
by automatic notifications, being able to set manual filters by following,
being able to get to know other members by following, etc.

The Economist offers nothing like that.

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pclark
I don't get it.

 _stuff_ isn't free. Take news. You make the content free _to consumers_ then
sell _something_ of value to businesses. You mask a B2B operation with a B2C
front.

Whats of value? Aggregate reading data for news aggregators, personalised
advertising slots, some new crazy business model _companies will pay for
data_.

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mattmaroon
One could spend a lot of time writing about how worthless Chris Anderson books
are. The number of startups based on his Long Tail theory, which is proving
almost totally fallacious, and in fact comes from a very inaccurate data set,
is staggering. At least with this book, people have already been building
startups around the theory for 10 years.

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johnohara
The Chicago Tribune has an estimated 541,000 daily readers. 898,000 on Sunday.
Let's use the daily number to stay on the conservative side.

Daily newsstand price is $1.00.

$1.00 x 541,000 x 365 = $197,465,000

What percent of that number does it take to bring all those ideas (including
stories, columns, ads and obits) to market?

Let's say 85%. That's $167,845,250.

$197,465,000 - $167,845,250 = $29,619,750

Now make everything digital. Sell the trucks and presses, layoff all
production and delivery personnel. Hire only digital content creators and use
the Amazon Kindle.

Annual subscription per reader: $54.75

At 70/30, the Amazon Kindle subscription would have to be $182.50 not the
$120.00 cited in the article.

I'm not including revenue from advertising (which may not translate well on
the Kindle) but if you owned the Chicago Tribune or The Dallas Morning News
would you agree to the terms?

~~~
sethg
Subscribers pay much less than the newsstand price, and you can haggle down
from the advertised subscription price as well, so I think your estimates are
way off.

The factoid I remember, although I can't cite a source offhand, is that the
cost of printing and delivering a daily newspaper is just about equal to the
cost that the consumer pays, and the rest of the newspaper's income is coming
from advertising.

If ebook readers were more widely used then it might be practical to run a
newspaper by selling an online-only edition (perhaps making everything free on
the Web after a 48-hour delay), but I'm not sure we're there yet. Also, I
suspect that the first publisher to offer news in this way will be some
upstart who is _not_ encumbered by the sunk costs and contractual obligations
surrounding a paper-and-ink newspaper.

~~~
ShabbyDoo
When I read about the proposed 70/30 split, I thought that it was quite
generous of Amazon! Let's presume that the cost of printing and delivery is
equal to current subscription revenue. Amazon just gave the newspapers a huge
increase in profitability (presuming everyone switched to a Kindle tomorrow).

My sister-in-law is the business manager for a magazine with 250K subscribers.
Their printing/distro costs exceed the average subscription price, so they'd
be overjoyed if they could strike such a deal with Amazon and get their
subscribers to convert over (unlikely).

~~~
sethg
But you're not taking into account _advertising_ revenue. I'm not sure a
Kindle-based newspaper could attract as much ad revenue as a print newspaper,
because the medium just isn't as attractive to advertisers; ads on ebooks or
the Web feel much more intrusive to readers than ads in newspapers or
magazines.

~~~
ShabbyDoo
I'm not sure either. Does Kindle allow for customized advertising? One problem
this magazine has is that 40% of their subscriptions are outside of North
America. It's a good thing overall, but they could increase ad revenue by
printing two books -- one for NA and the other for "world" (mostly Western
Europe in practice) and selling space in just one or the other.

------
dantheman
I remember reading that the YouTube bandwidth costs cited in this article were
way out of wack and beard no semblance to reality. Has anyone seen any updates
on those figures? Are they, in fact, correct?

~~~
akamaka
My figures:

100.5 million unique viewers in Oct 2008. Average of 53.5 views per user that
month. (source: [http://www.businessinsider.com/2008/12/youtube-
hits-100-mill...](http://www.businessinsider.com/2008/12/youtube-
hits-100-million-viewers-hulu-surges)) Average video size, 10mb.

100.5m * 53.5 * 10 / 1024 = 52m GB served.

At a generous price of 5 cents a gigabyte, that works out to about $2.5
million a month, or $31.5 million in 2008.

~~~
jonknee
That doesn't factor in peering, Google is in a ton of data centers and almost
every major ISP peers with them (they'd be stupid not to with all the outgoing
traffic going to them).

Either way the Credit Suisse estimate was _way_ off.

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Tangurena
I'm disappointed by Gladwell misinterpreting Lewis Strauss' remarks. When
Strauss claimed that _electrical energy [will be] too cheap to meter_ , he was
talking about subsidizing plutonium production. Originally, the feds needed
plutonium for nuclear weapon production, and they were paying about $1,000,000
per kilo of privately produced plutonium. At those prices, the sales of
plutonium would cover the price of building and operating a plant, and the
electricity would be a free by-product.

When the feds quit purchasing plutonium in the early 1970s, it destroyed the
economic model for building and operating nuclear power plants. Not the
meltdown at three mile island, nor tree hugging lawyers.

Please read _The Curve of Binding Energy_ for more details.
[http://www.amazon.com/Curve-Binding-Energy-Alarming-
Theodore...](http://www.amazon.com/Curve-Binding-Energy-Alarming-
Theodore/dp/0374515980)

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mooism2
The point isn't really that everything will be free. The point is that lots of
informational products will have a free option --- and that there will be pay
versions too.

The future is differential pricing.

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va_coder
I think Gladwell and Anderson are both right. Anderson is right that many
products that once cost money will now be free. Gladwell is right that many
more products will never be free for many reasons, and one good reason is
there are hidden costs that make it impossible for someone to provide the
product for free.

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10ren
If history is written by the victors, who will benefit by writing news for
free?

~~~
pg
My first thought was, alarmingly, lobbyists.

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10ren
The slashdot story points out that "information wants to be free" is a
misrepresentative subquote. An alternative misrepresentation is "information
wants to be expensive".

[http://en.wikipedia.org/wiki/Information_wants_to_be_free#Hi...](http://en.wikipedia.org/wiki/Information_wants_to_be_free#History)

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socratees
I doubt the model of online advertisement as the model of the future. Also, I
have not clicked on any facebook ads, linkedin ads, or ads on google mail as
long as i can remember. The only time i click the ads is when I'm actively
searching for a product on Google. Do you click on ads just for the sake of
it?

~~~
va_coder
I've watched over a thousand truck ads on tv and never considering buying one.
That doesn't mean the ads don't work.

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mildweed
Did Malcolm just invoke Moore's law to explain how newspapers should be
priced?!? That's as relevant a Goodwin's.

