'Give It Away And Pray' Isn't A Business Model... But It Doesn't Mean That 'Free' Doesn't Work
from the once-again...-with-feeling dept
I've been noticing an interesting trend lately. While more folks aren't totally averse to the idea that they need to somehow embrace "free," they're mishandling what they do with "free" and then going on to complain how "free" doesn't work. The basic problem is this: they hear about the importance of "free" and so they give something away for free. But they don't have a business model around the free content. They don't understand the economic forces at work. They just give stuff away and pray... and then whine when nothing happens. As we've pointed out before, no one says that "free" by itself pays the bills. You need to have a more complete strategy than that -- and it involves a lot more than "give it away and pray." It's good that they're at least trying, but if they don't understand the real issues and fail at the experiments, they suddenly come back and claim that "free" isn't the answer, and suddenly rule out all business models involving free. And that is a real recipe for failure.
The latest to head down this road is NY Times columnist David Pogue, who bashes the idea of digital publishing of books by pointing to a long and interesting blog post from author Steven Poole, who did the "give away and pray" option along with a tip jar. It didn't make him much money. That shouldn't be any surprise, because tip jars aren't a real business model. But, because Poole seemed to have an expectation in his mind, he ends up being quite disappointed, noting that 1 out of every 1,750 downloads (0.057%) left some money. What's left implicit here is that that figure is too low. What this really means is that Poole didn't really give away the book for free. He had an expectation that people would magically pay for it. But, that's not a business model. That's not tying the free and infinite good to other scarce goods that will help you make money.
Unfortunately, both Pogue and Poole then use this to bash the entire concept of free-based business models, with Poole getting unnecessarily offensive in his response:
"I'll call it, for short, "the Slashdot argument". It says that books, music, films, software and so on ought to be freely distributed to anyone who wants them, simply because they can be freely distributed. What is the writer or musician to do, though, if she can't earn money from her art? Simple, says the Slashdotter: earn your money playing live (if you're one of those musicians who plays live), or selling T-shirts or merchandise, or providing some other kind of "value-added" service. Many such arguments seem to me to be simple greed disguised in high-falutin' idealism about how "information wants to be free". Perhaps it's not empty pedantry to point out that "information" doesn't want anything in and for itself. The information in which humans traffic is created by humans. And most information-creating humans need to earn dollars or yuan to survive.While I'm sure there may be some Slashdot-types who may make this argument, it doesn't mean that it's an accurate representation of the more important discussion of these business models. The main problem is his use of "ought," as in people saying things "ought" to be free. It's not that things ought to be free because they can be free -- but that things will be free because that's just basic economics. Price gets driven to marginal cost in a competitive market, and the reason it happens is because others do learn to put in place business models that work, and then if you're the lone holdout, people start to ignore you. Also, I'll note that that Poole brushes off the (indeed, simplistic) business model suggestions as being "high falutin' idealism" but fails to actually try out any real business model.
And then he weakly follows it up by implying that you can't earn money by giving away stuff for free. But, again, he's blaming the wrong thing: he's blaming free for his own failure to use a real business model where the free offering was closely tied to additional scarcity he could sell. He continues, getting even more insulting as he goes:
In any case, I think the Slashdot argument can actually be disposed of rapidly with one rhetorical question, as follows.This misleading and mistargeted argument has been debunked so many times, it's disappointing to see both Poole and Pogue repeat it. But, since it needs a response, let's do it again: you give away the infinite goods, not the scarce goods. Your time is a scarce good. No one is saying that everything needs to be free -- they're saying that infinite goods will be free, because of it's very nature in economics. In fact, Poole's argument is particularly weak when it comes to programmers, because most programmers don't earn any kind of royalties for the software they write. They are paid a salary, for their time -- but not for the software itself (which is an infinite good). And, I won't even get into the number of programmers who work on open source projects for free... or the fact that Poole is blogging for free...
Oh Mr Freetard, you work as a programmer, do you? How interesting. So do you perform all your corporate programming duties for free, and earn your keep by selling personally branded mousemats on the side?
Didn't think so.
Again, Poole and Pogue are so focused on free, that they fail to distinguish between infinite and scarce goods or the business models involved in what's going on. Poole then weakly dismisses the Radiohead experiment:
Perhaps I could have tried distributing Trigger Happy the Radiohead way, making sure you had to pay a minimum to get the goods. Would I still have attracted 30,000 readers like that? I doubt it. The sublime In Rainbows seems to have been a nice little earner for Radiohead, but that's because they're Radiohead -- and they became Radiohead through the nasty old music-industry business model. So did Nine Inch Nails, whose recent internet release of (the excellent) Ghosts was very clever -- the first nine songs of a triple album for free in compressed mp3; the whole thing in a lossless format for $5. But if there's been a comparable success by a band that hasn't already gained its cultural capital and name-recognition through the evils of copyright and corporate promotion, I'd like to know about it.Poole and Pogue (who quotes the same snippet) both miss the fact that in both cases described above, the bands in question didn't "give away and pray," but both put together real strategic business models that were focused on using the infinite goods (the music) to sell more scarce goods. In the case of Radiohead (despite some claims to the contrary) at the same time Radiohead announced the downloads it also told fans that it would be selling a beautiful "discbox" for the album as well. This was a very valuable scarce good -- that the free music made a lot more valuable by increasing the demand for it. As for Nine Inch Nails, Trent Reznor offered a tiered system of scarce goods that were all made more valuable by the availability of the music -- proven by the fact that Reznor quickly sold out of his limited edition deluxe offering.
And I still chuckle about the argument that these models "only work for big bands." That's because a few years ago, when we pointed out how this worked for some small up-and-coming bands, people would whine "but that only works for small bands -- big bands would be screwed!" The model, when well designed works for small bands just as well as big bands. No, it might not turn around millions in a week, but it can certainly help an artist make a living. Witness the case of Maria Schneider, who ended up making a Grammy-winning album using some the concepts discussed around these parts. And, of course, we've worked out the details of the type of business model that an up-and-coming band could use to embrace these concepts to grow.
So, it's nice to see someone at least willing to explore the concept of free without shutting out the possibility. But free alone isn't a business model. And it's wrong to blame free for the lack of establishing a complete business model. Just because "give it away and pray" isn't a workable business model, that doesn't mean that there aren't business models that do work. Hopefully, Poole and Pogue will eventually recognize that they're dismissing the wrong thing. They shouldn't be complaining about free (or making misleading accusations about those who simply recognize the economic forces at work) -- they should be complaining about a failure to put in place a real business model to take advantage of what will be free.
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Just an observation...
It is useful to keep in the back of one's mind that many of these "infinite" goods acquired that trait when a "scarce" good was distributed and later injected into the "marketplace" by someone having no authority to do so.
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Re: Just an observation...
It is useful to keep in the back of one's mind that many of these "infinite" goods acquired that trait when a "scarce" good was distributed and later injected into the "marketplace" by someone having no authority to do so.
No, you miss my meaning. The goods are *fundamentally* infinite, by the very fact that there is zero marginal cost to duplicate. The point has nothing to do with unauthorized copies. It's about the fundamental nature of the good, which can be seen in its marginal cost.
The point is that if you fail to recognize this, you're going to be in trouble when others create successful business models and you're left clinging to an unsustainable one.
So, no, it has nothing to do with unauthorized distribution...
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I must admit...
...that I made my above comment without having read the linked articles. Mine was merely a reaction to the notion that "infinite" goods by themselves are essentially valueless, and that one must tie such goods to "scarce" goods in order to achieve an income stream. Of course, my observation was merely to note that many of the now "infinite class" became so because some people see nothing wrong with taking something that is "scarce" are releasing it to the world knowing full well that what they are doing is wrong, both legally and morally.
I have since read the two articles and am a bit disturbed that how they are described in the above techdirt article is terribly inaccurate. The initial link states that in a couple of instances the author provided digital copies of books being sold in print as a special favor to purportedly "blind" individuals (presumably, there is a way to transcribe a PDF file into a braille copy). All this author is saying is that in his situation print copies serve his needs best.
The other linked article makes reference to an experiment of sorts, and not to the pursuit of a "business model doomed to failure" as Mr. Masnick suggest. Even the author agrees with that characterization based upon the empirical results of his experiment. The author then goes on to agree with Mr. Masnick's basic premise that the free release of digital goods can have beneficial effects on the quantity of sales for his scarce products, books in print.
What the second author does point out, however, is that not every creator of works of authorship fits neatly into the mold advocated here. While certainly many do, it is far too broad a generalization, and perhaps even reflects a degree is disdain, as to those whose livelihoods depend upon the creation of works that by nefarious means are unlawfully placed on the internet by persons having nothing better to do than "tweak the nose" of a legal system that attempts to provide some form of safe harbor. It seems that many of these miscreants are convinced that media conglomerates are "bad, bad, bad...), and justify their actions by the simple expedient of believing they are sticking it to the "man". In my view it is indeed a sad commentary on the moral and ethical principles scuh persons are in sore need of learning.
Mr. Masnick, you do have an "agenda" that promotes the reality of economic priciples once goods become "infinite". I do, however, believe that to some degree it provides unwitting support to those who choose to cheat.
Please do not get me wrong. DRM and other technologies that stick it to otherwise loyal customers in a short sighted and unfair approach. They are punishing the innocent for the actions of the wrongdoers. What troubles me (or as Joaquin Phoenix said in Gladiator..."I am sorely vexed..." is that legitimate means to try and stop cheaters from plying their "trade" is to some degree being derided with a constant stream on what borders on invective and disdain simply because some people are trying to protect the fruit of their labors from those who would deny them the opportunity to try and receive and income stream.
You focus on economics. I focus on law, all the while mindful that your economic points are in consonance with basic economic principles. Where we diverge is that I lend significant credence to the moral dimension of the issue. What is good for our economy does not necessarily translate into what is good for our society. I do not profess to know and articulate what is good for our society, but I am convinced that it involves significantly more considerations that merely economics.
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Hasn't he heard of "preview"? In his case, he should've given only a first couple chapters of the book, and charged for the rest of it. frankly, his problems might be just the quality of his work. i mean, c'mon. it'd like getting a bad score on the test and blaming on the test format while ignoring his own ignorance in the test topic. if he was a chick, he'd be one of those really ugly, insecure, overweight, and desperate for sex, who no one wants to be involved with.
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Re: Re: Just an observation...
"No, you miss my meaning. The goods are *fundamentally* infinite, by the very fact that there is zero marginal cost to duplicate. The point has nothing to do with unauthorized copies. It's about the fundamental nature of the good, which can be seen in its marginal cost."
A book in printed form is "scarce" by your definition, even though marginal costs for printing it may approach zero. Being scarce it has, in my vernacular, "value" to some persons in the marketplace. The same can be said for digital goods in the sense that they remain "scarce" even though marginal costs are zero, or something pretty darn close, unless and until they are released into the market on an unrestricted basis. My point is simply I am troubled that a "scarce" good, even one with zero marginal cost, is automatically fair game once a miscreant unilaterally decides to wrongfully distribute the work for free to the world at large.
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Personally, I think they're going about this all wrong.
They've jumped right from selling over-priced physical products to giving away free digital copies, all without a business plan, as the article states.
What they should be doing (in my opinion) is offering DRM free digital copies at a low price. If you tell people that they don't need to pay for something, many people won't. However, give people a good price and tell them that they have to pay and many people will. At the very least, the bandwidth won't be wasted by people who don't intend to pay. Why even provide them with a free download? If they truly don't want to pay for it, they'll get it elsewhere just as they've always done. 100% of the bandwidth is used by paying customers.
Of course for this to work, the price has to be low enough that people will gladly pay it rather than taking the risk of pirating the content. However, regardless of what they charge, it'll still be more than $free.
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You really expect to much if you want artists to create groundbreaking business models that magically make them lots of money, while letting you get the content for free. Wake up to the real world, producing content requires a GREAT investment. If you take enjoyment out of the content, it is only fair that you should pay for it. Samples are fine, but if you give away your entire content for free, you leave no incentive for average people to buy, and that's where the real money is in the masses, not from gouging a small number of devoted fans.
Oh and the point of a business model is to make money from your investment in your product, not to give away the product for free...
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Repeat after me. Cost does not equal value.
"Mine was merely a reaction to the notion that "infinite" goods by themselves are essentially valueless..."
No, they are not 'valueless' and nobody said that they were. I believe that they said that the goods in question were cost-free. For instance, air does not cost you any money, but is very valuable.
Amazon frequently gives out free downloads. I downloaded eight tracks the other day. Some were not at all to my liking, two sounded pretty neat, and one of the crappy ones I burned to a disc for a friend of mine to listen to because they like that sort of music.
I am now more likely to purchase more music and/or otherwise search for more dealings with the two neat bands because of something that was free for me and had zero cost for Amazon. In addition, I'll probably recommend the good music along with my passing on of the weird song. So they've earned some of the best kind of advertising (word of mouth), and more business from me, and spent virtually nothing. Somehow, those free downloads are looking very vaulable now, huh? Both to myself and to Amazon.
Now, this is a small example of a company working a little bit of free into a business model that was great anyway. So why would a profit monster take a risk on this crazy new 'free' kick that those young whippersnappers keep going on about? Because free can work, if done right. Mike knows it and the guys at Amazon know it. Obviously it's not for everyone and it won't work 100% of the time, even when done correctly, but the same can be said for business models without 'free'.
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"You really expect to much if you want artists to create groundbreaking business models that magically make them lots of money, while letting you get the content for free."
Oh, boy, you're just putting yourself out there, aren't you? Writers and painters and other artists seem to do just fine working day jobs and getting grants and practicing thier art as much as they can otherwise. Thier main concern is the creation of art, not the money to be made at it.
Throughout history, artists have created on the side or had patrons that owned the end product of what they produced. How much money do you think Da Vinci made from the Mona Lisa? Who gets the residuals from the Sistine Chapel? No one. Thier time was bought and paid for and the end result belongs to the owner, just like the end product of completed paperwork from a secretary's day.
Would it be nice to made megabucks doing what makes you happiest? Yep, but the same is true in any industry. I'd be ecstatic to make millions sitting in my pajamas designing websites and I bet Mike Masnick wouldn't turn down millions for blogging about topics that interest him. Does that mean that we should hold the world to blame for not thinking that our end products are worth millions?
I really don't understand the allure of treating a song-writer or a vocalist different from anyone else who puts in a days work. Can I sing like Mariah Carey? Nope, but Mariah Carey certainly can't code a website. Personally, I think the complaining artists are the ones that expect too much.
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Re: I must admit...
"Of course, my observation was merely to note that many of the now "infinite class" became so because some people see nothing wrong with taking something that is "scarce" are releasing it to the world knowing full well that what they are doing is wrong, both legally and morally."
Bull. The infinite goods became such because they were transferred to digital formats. Digital goods cost nothing to reproduce and next to nothing to distribute.
You seem to be referring to piracy, which is a strange reference in response to an article discussing content creators who have released their own products for free by their own choice.
"What troubles me ... is that legitimate means to try and stop cheaters from plying their "trade" is to some degree being derided with a constant stream on what borders on invective and disdain simply because some people are trying to protect the fruit of their labors from those who would deny them the opportunity to try and receive and income stream."
Erm, what? Exactly what does that have to do with this article? Which "legitimate means" are you referring to if you've already dismissed DRM as being unworkable?
"You focus on economics. I focus on law"
Nothing in these articles support breaking the law. The economic facts are that price will always naturally approach marginal cost due to market pressures. Digital goods have a marginal cost approaching zero.
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Re: Re: Re: Just an observation...
You seem to have missed the point again.
A printed book is not an "infinite good". It can theoretically be reproduced infinitely, but each reproduction involves a cost, physical materials, physical labour, shipping costs, etc. This will never approach zero, but the market value of the book will approach the marginal cost involved in creating it (or less - e.g. supermarkets using some books as a loss leader to increase business in other areas). This is a scare good because these costs have to be planned and managed.
Zero marginal cost applies to the digital goods. it costs the same to produce a million copies as it does to create one. Hence, infinite good.
Again, this has nothing to do with piracy so please stop trying to muddy the argument with that fallacy. As a consumer, I recognise that a physical hunk of printed paper in my hand cost a lot more than a PDF on my computer screen, so I am willing to pay more for it. You cannot demand the same payment for a digital good because I know that it didn't cost as much to produce.
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What Kind of Book?
Dave Pogue is an author of computer user manuals. That is the important fact which everyone seems to miss. This inherently means that he is not the true author, in a meaningful sense. Microsoft or Apple, as the case may be, is the true author, and Pogue is merely a kind of ghostwriter. I have not read Pogue's manuals myself. However, over the years, I have read dozens of such books, and there are certain recurrent samenesses inherent in the genre. Of recent authors, I favor Alan Simpson's presentation. I tried one of those O'Reilly Annoyances books, but didn't much like it. However, for the most part, since the advent of the internet, I find it easier to go directly to the horse's mouth, the official technical documentation which is available for download from the applicable firms or organizations. For example, Intel has recognized that it is not worth their while to try to make money selling programming handbooks at a hundred or two hundred dollars a copy. They are in the business of selling chips, so they have the various manuals available for free download. I find, for me at least, that the ghostwriter tends to get in the way of understanding the material. He translates things into folksy English, and strips away the hard-edged precision of technical documentation. The single most useful book I bought back in the pre-internet era was Thom Hogan's _Programmer's PC Sourcebook_ (1988), five hundred pages of compiled tables, being such things as byte listings of headers, entry point descriptions, record formats, chip pinouts, etc. A worthy internet-based successor to Hogan is Ralf Brown's _Interrupt List_, available at various places on the internet.
About half of the contents of a user manual will be actual reproductions of material generated by the software: screen shots, terminal session printoffs, listings of configuration files, etc., and, I should add, rightly so. Half of the remainder will be lists of commands, options, etc., taken more or less verbatim from the official documentation, or in some cases, even from the source code comments. There will be almost nothing in the book which is not at least a paraphrase of material supplied by the software or hardware vendor. Originality is not a virtue for dictionary writers. Now, here's the problem-- there are lots of ghostwriters, all with much the same material to draw upon.
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Questions
Here are the questions I have in mind:
1. What about other books? He mentions that he didn't get the expected number of tips from the book away he gave away for free. How have sales of his other books been affected? To reference another example not mentioned in the article - Saul Williams' Niggytardust album was given away for free but experienced a spike in demand (and profit) after an older record was used in a TV commercial. Have these books been linked in any way to leverage each other in a similar way?
2. How long has this experiment gone on for? God knows I download a lot of free (legal) mp3s where I've gone on to buy the full album, but sometimes not for over 6 months because I haven't gotten around to listening to them yet. Maybe people are going to pay after reading the book?
3. What other incentives were there to leave money other than "leave something if you enjoyed it"? Was there any incentive or reminder to revisit the site after reading the book?
4. Was the book actually any good? "Leave money if you enjoyed the book" only works if people actually enjoy it...
5. How does he consider his failure in terms of other authors who've done the same thing and succeeded - e.g. Cory Doctorow? What does he consider to be his failing since others have managed to give away content and make a profit successfully (and the example of Doctorow is not only more relevant but far better since he's hardly a household name for non-geeks)?
One final point:
"Oh Mr Freetard, you work as a programmer, do you? How interesting. So do you perform all your corporate programming duties for free, and earn your keep by selling personally branded mousemats on the side? "
No. Most programmers work for some kind of salary or under some kind of paid freelance contract. Those who give away their work for free (e.g. open source programmers) either get non-monetary compensation for their work or the software is created as part of an over-arcing strategy that encourages users to pay for other things (as per Red Hat, etc. - the software is free, support, service and access to certain types of update are paid for). Either way, no working programmer gives their code away for free and expects to have money magically appear without any extra effort.
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Even though he is indeed going about taking on the free business model in entirely the wrong frame of mind and with entirely the wrong tactics, it occurs to me that Steven Poole has the same problem as a lot of authors; his infinite goods are the single most valuable thing he produces, and there aren't many scarce goods he can sell on the back of them. He can use the first in each trilogy as a loss leader but that's about the limit of his options, because smaller, more capable and cheaper portable computers are making eBooks a fair substitute for a paper copy; granted, there's a feel to a genuine printed book that mere stored data can never match, but I don't think I'm alone in being unwilling to pay $10 or more for it except in a few special cases, especially not in the middle of a recession.
I think we writers, published and otherwise, are all going to have to face up to the fact that the Internet has raised the bar a lot higher on how good we have to be before we can make so much money that we don't need a proper job any more.
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Uh. Possibly oversimplifying, but:
So let's say I'm a rabbit and am looking at a carrot. Pretty tasty, huh? Well, as a rabbit, I don't care why everyone fighting over the stick and type of twine to use.
Eventually, you may simply give up only to throw the carrot at me, but what fun is that?
CARROT-TWINE-STICK. All equally important in "Free".
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I'm glad to see from the comment of MLS on May 23rd, 2008 @ 9:55pm that at least one person read what I wrote carefully, rather than hastily skimming and getting all indignant. As for this:
I have some information that you might find interesting: books take time to write. If someone gives away her book for free, she is necessarily also giving away for free the scarce good of her time spent writing it.(reply to this comment) (link to this comment)
I understand the artist side of things. They want to make money on the actual art they create, not added merchandise (like t-shirts, concert tickets, etc...). But, the problem is that in this day and age of digital freedom, they need to look to those options to make money. It isn't that it is the right thing, but it is what needs to be done. THey can try to fight it, do what they can to protect their media, but somehow it will get out there and it will be stolen. My thought is you immediately offer your music, art, etc... for free, and market other materials with it that can be purchased. I know, not the ideal solution, but one has to wonder if the digital theft will ever be solved. I am sure artists feel horrible about all of this. Think of the time a band spends writing and recording an album, then to only be faced with the option of giving it away for free, hoping people buy a t-shirt too.
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Re:
There is no doubt that the time taken to write the book, the labour, is a scarce good.
The distribution, which is what is being discussed here is entirely another matter.
I am not willing to pay a lot for an ebook, regardless of an earlier comment in this thread because I know that the cost of duplication is, for all practical purposes, zero. In terms of this discussion it's an infinite good.
Should I read the work in digital form and find I like it enough the odds are very good that I'll want a hard copy. Scarce good. Preferably a hard cover book as opposed to cheap soft cover.
To me, that is the payoff for the writer, that I will want a higher quality version of the work that has incredible advantages over the digital copy.
As yet there isn't a digital technology that even begins to approach a printed book. I can't thumb through any known digital reproduction, write notes or comments in the margin, dog ear it so that I can flip back ever so quickly and so on.
That may mark me as somehow old fashioned but I don't care.
In the end, though, what the "free" offering may do is entice me to invest in a "scarce" offering of the same material, the book, in printed form because of the advantages and higher quality, in my mind, of the hard bound copy over any digital format I can think of.
With all due respect, a tip jar on a web site isn't the same.
ttfn
John
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Re:
A product or information is only a total sum of itself. It does not include the brains that produce the works itself or the time it is used to produce the work.
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the tip jar IS a valid business model.
Mike, you are wrong. The tip jar is a totally legit business model. How else do you capture money from those for whom the value of the product is near zero? That is MOST OF YOUR POTENTIAL CUSTOMERS. Think about it.
You just have to use it to price discriminate.
The tip jar gets those willing to pay least. If we stick to it and create a CULTURE of tipping, then it will get even more of those willing to pay least.
The 'official downloadable product' at your asking price gets you those willing to pay more.
Still sell the physical product. That will get you those willing to pay even more for a possibly more convenient offline option.
Sell deluxe or signed editions. That will get you those willing to pay top dollar for collectibles.
What has piracy got to do with any of this? Those who pirate have just been priced out of your product by your inept business models, and they are using the means at their disposal to acquire the product at a cost which is most commensurate with the value. By providing an alternative, you can recapture them. But you have to make it easy to tip only just a wee tiny little bit. If I am going to tip $0.50 then it had better be with one click or else I am bored already.
The tip jar. That is how you capture the all the pirates.
We tip a bellhop, a barkeep, waitress, live entertainer--why not a media author? Really, why not? Merely a cultural difference.
But in the future, authors are going to NEED tips to survive--there is no other way--and they had better get with the program to create a culture where that is reasonably expected.
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Re: the tip jar IS a valid business model.
Indeed, I would like to point out, what does it cost you to put up a tip jar? Nothing! Whether or not you change the way you distribute your media, put it up anyway!
Wait for someone to find your manual totally useful in a pinch and then tip you a few bucks for being useful.
Wait for someone to use your $500 software which they pirated in a totally cool way, and feel a little guilty, and then WHAM right on your homepage they can tip you $10 guilt free.
Wait for someone who just pirated your music (because it is easier to get all my music from one place: easynews) to listen to it in a dark room and be totally zapped by the genius, and run over to the website to throw in a couple of bucks.
I never do any of this, because nobody has a tip jar. So I can't guilt trip any of my friends and family, and I can't do the grassroots effort to create a culture of tipping quid pro quo. But by god, I wish I could.
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@ John Wilson: yes, driving sales of the physical book is one of the many upsides of giving away free e-copies that I wrote about in my post, not mentioned by OP here of course. The point I then made is that if e-distribution becomes the norm for all books (through some magic e-device that is somehow "as good as" a physical book for most people), that is no longer an upside.
On the other hand, I'm intrigued to know why, if the amount you are willing to pay for something is predicated on the cost of distribution, ie zero for an ebook, you are nonetheless willing to pay a lot more than the cost of production and distribution for a nice hardcover book.
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Re: I must admit...
Mike focuses on economics. You focus on the law and morality.
Beyond either of those there's a more fundamental consideration: Practicality. If, as a practical matter, you cannot stop a behavior (either by force of law, force of morality, peer pressure or some other way) then arguments from economics and law both are moot.
Underlying fact about not-for-profit copying today is that you cannot stop it. (For-profit copying is easier to stop because there's a money trail.)
However the rather special case of copying someone else's work as a "free" good is pretty much beside the point of the original post. It's not quite a straw man argument in this context, but in my opinion raising it only serves to confuse the fundamental issue.
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Re:
And that failure to understand is what is, ultimately, causing your failure to generate income off the models being suggested. It's really quite simple. People like to have limited and one of a kind items. Something the Jones's next door don't have yet, and they are willing to pay a lot of money for these items. So, anybody can get a copy of the book online for free, but me, I got a hardcover with an extra short story, one with an autographed photo, and one with an extended intro dealing with the creation of the work. I had to pay not only the going price for the book, say $10.00, but an extra amount for all those special one of a kind or limited extras, bumping the price up to say $15.00 a book. If you can't understand the economics in that then you have no business being in business.
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Re:
First of all, without the original art, the T-Shirts, Concert Tickets, and all the other odds and sodds wouldn't exist. Therefore, they are making money directly off from thier art. I've talked to artists, mostly up and coming, but a few established, and most don't seem to mind that thier work can be gotten for free. Take musicians for example. For up and comers, they don't make squat off from thier record sales, but generate most of thier income from performances. For them, the internet is simply the best form of advertisement. Because of the free distribution of thier work more people are exposed to thier art and therefore more come to enjoy it and pay to see them perform. Now let's take books. Everybody I personally know prefers to get a physical copy of a book. Why? Cause it's portable and cheap. Comps are nowhere near as portable or cheap. Neither are the readers. I can buy a bum load of printed books for the price of a reader. Therefore, yes I read some online. But the ones I like, the ones that have value to me, I go and buy so that I can take them with me when I travel. Would they make more if I had to pay for the online experience? No, because I would simply ignore them and go find people who are willing to let me sample before I buy. After all, you don't buy a chair without sitting in it first.
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Re:
Err...Not quite. Because you only spend the time writing the book once, then you can give away (or sell) an infinite number of books without spending more time to write it. So time is a sunk cost into the creation of the book. You don't have to spend the time rewriting the book each time it's downloaded, so you're not really "giving away" your time each time it is downloaded.
Granted, it does take time and effort to be make the book, and he'd probably like to recover that at some point. Why doesn't he just acknowledge his cost and say: "Hey, for me to make any books in the future I need to recover the amount of time/money/xyz I put into the first book." Then put up a counter on the website that shows your total received donations and a little bar going towards $100,000 or whatever sum he decides he needs to make to make another book.
Basically have the community as a whole "commission" the next work via donations. Your time is a scarce good. So make them buy it?
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Re: I must admit...
..that I made my above comment without having read the linked articles. Mine was merely a reaction to the notion that "infinite" goods by themselves are essentially valueless
MLS, what bothers me is that you repeat these kinds of statements, even though we've pointed out how incorrect they are in the past. Infinite goods are no more valuless than is air. Air has plenty of value, yet you don't pay for it, because it is abundantly available.
It's simply the supply and demand curve. If the supply is abundant the cost will go away.
It has TONS of VALUE, however. But value and price are separate things. Value is a component of the demand curve, but it is not the determinant of price. It's the determinant of the maximum price that someone will pay.
So please stop saying that we are claiming an infinite good has no value.
We're saying something quite different. It has plenty of value. The trick is figuring out the way to capture that value -- and that's to figure out a way to connect the infinite good to a scarce good where the value can be captured.
I have since read the two articles and am a bit disturbed that how they are described in the above techdirt article is terribly inaccurate.
I don't see how my summarization is inaccurate.
The initial link states that in a couple of instances the author provided digital copies of books being sold in print as a special favor to purportedly "blind" individuals (presumably, there is a way to transcribe a PDF file into a braille copy). All this author is saying is that in his situation print copies serve his needs best.
I wasn't discussing that part of his post, but the part where he repeats all of Poole's assertions.
The other linked article makes reference to an experiment of sorts, and not to the pursuit of a "business model doomed to failure" as Mr. Masnick suggest. Even the author agrees with that characterization based upon the empirical results of his experiment.
But he blames "free" rather than the business model he chose for free. That's the important point, which is exactly what I pointed out in my post.
I fail to see how that's inaccurate in the slightest.
What the second author does point out, however, is that not every creator of works of authorship fits neatly into the mold advocated here.
Huh? First of all, there is no "mold advocated here." I am merely pointing out the economic realities, as well as pointing to *numerous* different business models that can then be put in place to respond to those economic realities.
And, to deny that those economic realities exist, or to blame a failed business model on "free" is simply incorrect.
While certainly many do, it is far too broad a generalization, and perhaps even reflects a degree is disdain, as to those whose livelihoods depend upon the creation of works
Yikes. How is it possibly disdain to explain the economic forces at work, and back it up with business models that will help them make more money? I simply don't understand how you could find that disdainful.
that by nefarious means are unlawfully placed on the internet by persons having nothing better to do than "tweak the nose" of a legal system that attempts to provide some form of safe harbor. It seems that many of these miscreants are convinced that media conglomerates are "bad, bad, bad...), and justify their actions by the simple expedient of believing they are sticking it to the "man". In my view it is indeed a sad commentary on the moral and ethical principles scuh persons are in sore need of learning.
Again, if you can learn how to use that to your advantage in such a way that it helps make you more money... who cares what their rationale for doing what they do is?
If I gave you two situations:
(1) You could make 25% higher salary that you do today, but some people will get stuff for free, while a huge population gets impacted by your work.
or
(2) You could make 25% less salary than you do today, but a smaller group of people get touched by your work -- though all of them pay for it.
Wouldn't you say that situation 2 is better in almost every single way? No one is worse off. And yet, you're claiming that situation 2 is more moral? How is it possibly more moral when everyone (both you and the people you impact) are worse off? That makes no sense to me.
Mr. Masnick, you do have an "agenda" that promotes the reality of economic priciples once goods become "infinite". I do, however, believe that to some degree it provides unwitting support to those who choose to cheat.
That is an externality of the explanation -- which is directed at those who create, not those who consume. But, the point above stands. What does it matter if you can embrace these principles and do better due to it?
You focus on economics. I focus on law, all the while mindful that your economic points are in consonance with basic economic principles. Where we diverge is that I lend significant credence to the moral dimension of the issue.
I give significant credence to the moral dimension as well, but as I have made clear:
http://www.techdirt.com/articles/20061115/020157.shtml
Morality *only* is an issue when you have to decide who becomes worse off. If everyone is better off, there's simply no reason for morality to enter the equation.
I have trouble believing that you think it's a morally better outcome when everyone is worse off.
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Re:
Wake up to the real world, producing content requires a GREAT investment.
I never said otherwise.
If you take enjoyment out of the content, it is only fair that you should pay for it.
Do you pay for air? I assume you take enjoyment out of the ability to breathe.
if you give away your entire content for free, you leave no incentive for average people to buy
No incentive? Explain that to those (even those mentioned in the very article you read) that have made such business models work.
There is incentive, if you understand the economics.
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Re: Re: Re: Just an observation...
A book in printed form is "scarce" by your definition, even though marginal costs for printing it may approach zero. Being scarce it has, in my vernacular, "value" to some persons in the marketplace. The same can be said for digital goods in the sense that they remain "scarce" even though marginal costs are zero, or something pretty darn close, unless and until they are released into the market on an unrestricted basis. My point is simply I am troubled that a "scarce" good, even one with zero marginal cost, is automatically fair game once a miscreant unilaterally decides to wrongfully distribute the work for free to the world at large.
But no one's talking about taking the printed scarce good and having these "miscreants" (and you accuse me of loaded language?) turn it into an infinite good?
The point remains: you keep confusing the economic viewpoint of the producer of the content with the folks who may share it in an unauthorized manner. It makes this discussion rather silly.
Again, if you can embrace this in a way where everyone does better, what's to complain about? You have this moral hatred for folks who may be better off, and I just don't get it.
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Re:
it occurs to me that Steven Poole has the same problem as a lot of authors; his infinite goods are the single most valuable thing he produces, and there aren't many scarce goods he can sell on the back of them.
Five years ago, musicians were saying the same thing. Now plenty of them are making more money than they could before.
The fact that the content is the most valuable part is still true -- but they have connected it to other scarce goods in a way that gets more people to pay.
To say that there aren't scarce goods an author can sell is simply incorrect.
He still has physical books to sell. He still has his *time* to sell. His ability to write *new* works. All of these are scarce goods, and all can be sold.
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Re:
I have some information that you might find interesting: books take time to write. If someone gives away her book for free, she is necessarily also giving away for free the scarce good of her time spent writing it.
Steven, taking an insulting tone doesn't make you more correct.
As for the fact that books take time to write, who said we didn't know that or didn't agree to that. Yes, of course books take time to write, and that time is in fact a very scarce good. And that's why it's perfectly reasonable to build a business model based on selling that *time*. But that's not what you did.
I have pointed out repeatedly (and I find it amusing that you accuse me of not reading what you wrote, when you clearly did not read what I have written) that charging for one's scarce time IS a good business model. But that's not what you did. You set up a tip jar. That's not getting someone to pay for your time.
The book in digital form is infinite, your time is not. So why do you try to charge people for the infinite good and not your scarce good?
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Somebody's got to pay - but how?
Just because something is free to download doesn't mean it's free to use. There is no such thing as free puppies the saying goes. If there is no way to make money on something it has no value so you should do something else.
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Mike, I didn't "try to charge" anyone for anything: this is what you are, curiously, continuing to misunderstand about my post. If I had wanted to try to charge for the book, I would have required payment before download. For some reason you decided to interpret my post in a paranoid way, reading inventively between the lines to conclude that I didn't really give away the book for free. Well, yes, I did really give away the book for free. I added the tip jar purely as an extra experiment. You are getting angry about some imagined attack on your entire economic ideology, when all I did was say that soliciting voluntary donations on the back of a free download didn't make me much money — although, as I stressed, the experiment was very positive in other ways. Since we both agree that that particular business model doesn't work, I continue to have trouble understanding why you attempted such a condescendingly hostile tone in your post above.
Meanwhile, your alternative business models seem to me lacking in detail so far. How exactly, please, can an author give away a book and yet still charge people for her time in writing it? (I'm assuming we are not talking about the minority of books that are reprints of previously commissioned articles etc.)
By the way, you missed out an inconvenient fact about the Nine Inch Nails example: as I pointed out, they charged $5 for what you would call the "infinite" good of the lossless electronic files of Ghosts, and a lot of people bought them.
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Another problem
It occurs to me there's another problem the Internet makes for all artists that's bound up in the problem of avoiding obscurity.
With such easy direct access to the best the world has to offer every product available online is in direct competition with the best of their field.
It's a problem that means whether or not your basic business plan is sound it has the additional hurdle of competing with the very best product in your field, Geography and media distribution no longer separating competitiors.
This problem will cause diappointment for some who would once have an opportunity now lost to them.
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Re:
You can alway sell your writing services.
Unless we have technologies to duplicate a steven p or something, your writing services will alway be scarce.
You could try to sell your services to readers, web publishers, or whoever that could be your customers.
Anyway, there's alway many way to sell scarce goods/services using infinite goods to increase demand for it.
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Re: I must admit...
Moral? You make me laugh.
Copyright and patent rights are gross violation of property rights.
Artists/media companies/studios/whoever have an illegitimate right to control what you can do with your copy. They own it. It is as illegitimate as a plantation owner owning slaves.
You should own yourself and the musics you brought. Nobody should be able to tell you to do with your musics or tell you what to do.
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Re:
Steven,
Don't worry about Mikebob and the Mikettes here at slashdot lite. Mikebob continues to flog his ideology while trying not to be specific enough to be contradicted. He tends to make grand sweeping statements and then just say the same thing over and over again until you tire of it. The few times I've caught him making specific comments they were just ridiculous. His arguments have false premises and unsound logic.
To prove his point, all Mikebob had to do was give you a specific suggestion rather then go off with his nonsensical infinite/free argument, which is actually abundance/low cost. It would be interesting to see what the increase in bandwidth on your site cost you.
Since you obviously are someone in the business willing to take risk, it would be interesting to see how an ad supported version of the book would do. It would also be interesting to find out how many of the people who downloaded the pdf actually read it. One way to find out would be to put a coupon in the pdf for a dollar off the book or even you next book.
Anyway, thanks for the post it was enlightened and well reasoned, a real breath of fresh air.
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Re: Re: Re: Re: Just an observation...
The confusion is easy to understand as the content is an infinite good which allows the distributor to distribute it at NO cost.
The content in music, books and video has always been an infinite good; what in the past made the goods scarce was not the content but the physical limits, consisting of labor and material, which limited distribution.
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Re: I must admit...
Of course, my observation was merely to note that many of the now "infinite class" became so because some people see nothing wrong with taking something that is "scarce" are releasing it to the world knowing full well that what they are doing is wrong, both legally and morally.
What we have here is a complete failure to understand.
The meaning of infinite goods is a good in which there is a ZERO marginal cost of reproduction. The reason that such goods can be copied and distributed is because they are infinite goods in the first place.
Taking an infinite good and placing any form of DRM on it does not make it a scares good which means there is a marginal cost ie it cost real dollars for each additional book produced in the form of printer labor, paper and ink to produce the book and then shipping cost to move the book from the printer to the distributor and addition cost for the retailer to distribute. Now compare that to an infinite good where the total cost of making an additional copy is the cost of running to computers and the interconnection to make the copy, a total cost of production of less than $.01
If you had understood anything about the issue you would have written this phase as follows:
“ some people see nothing wrong with taking something that is “an infinite good” and releasing it to the world knowing full well that what they are doing with the firm belief that what they are doing is both legally and morally correct. “ There is no cost of reproduction.
Knowledge deserves to be free not limited by some pandering pan handler who fails to understand that expecting a free handout each and every time some one thinks that that person is violating their precious intellectual property and they should get paid for patenting the idea first. Not thinking of the idea first but for having the tenacity to run to the government first and declaring that they are the owner of that idea. The application of this idea to music is no more redulicious than your declaration that an “infinite good” is a “scarse good”.
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what a confusing post. did you really study economics because it isn't at all clear from your post that you have much mastery of the subject. you do go out of your way to poke the NYT but i'm not interested in your personal swipes. it's the absence of any analysis to back up your contentions that's really disappointing here. all i read are unsupported 30,000 foot generalizations. perhaps there is a workable business model argument but you fail to make it
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Pure economic physics
Right on Mike,
Pure econmic physics...very fundanmental. Value and content (light, water), will seek it's own level. It is the availability of and ease of access to such value and content that merly facilitate the inevitable (physics). As long as desire, thurst, useage, imagination, spontinaity, capitalism, scams, honest, dishonest, useful, wasteful and so on make up human demand (economics), nothing, nothing at all will prevent these forces...nothing, so let it go, as you so eloquently point out(as I read it), free is only a small part of a much bigger picture , not the picture.
As for theft, aside from the DVD/Cd farms, again thoes who can derive large gain by sophisticated, illeagal, global,government tolerated/sponsored activities, will not be denined...economic physics.
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When will this pop economics go away?
I wrote a lot on this 'free' pop economics already, but I guess I need to write more.
Marginal cost of zero will make the price zero?
First, there is no such thing as zero marginal cost in reality. Do you really believe that a digital file copies itself? You don't need any person, computer, connection, electricity, and so on? Just look beyond the 'material cost' which is such a primitive point of view. Actually, in most businesses material is not the main cost. The human is.
Second, let's 'assume' the costs get close to zero. Does it mean price will naturally become zero (i.e. the marginal cost)? Not necessarily. Does Nike sell sneakers at marginal costs? They could sell at marginal costs, and make profits somewhere else like sporting events. But what really happens? The opposite. Why? Because they 'can' make money more directly by adding margin to the goods. One enabling factor is their control of the piracy, which exist, much better than the digital contents industry.
There will be more 'priced' digital contents that sell well, as we figure out a better way to control piracy. Do you want to bet? (Don't say that piracy should not be blocked, as I cannot bet on it then.)
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Amazing
It's simply jaw-droppingly astonishing to me how many well-educated people cannot seem to grasp the basic economic forces behind zero-marginal cost duplication and distribution. This is not an argument about morality or law in any way. It is a basic economic reality that isn't affected by laws or concerns for the content producer.
That being said, this is one of the best explainations of the new digital economy and how business models need to change that I've ever read. Nicely done, and I hope more content producers will read and understand your points here, for their own sake.
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In essence...
I finally get it! Once a "non-digital" good goes "digital" nobody should ever have to pay for obtaining a "digital" copy. What the creator of what is now a "digital" good should do is use that "digital" good as a form of advertising so that they can realize an income stream (i.e., earn a livelihood) from selling "non-digital" stuff. Moreover, the foregoing rule holds true even if the original "non-digital" good is converted into "digital" form and distributed to the masses by someone who does so against the express wishes of the original creator.
As a corollary to the above, any creator of an original work (e.g., music) who would like to meet customer preferences by "selling" the work in "digital" form simply does not see the big picture if he/she would like to use any form of copy protection.
If the above are scrupulously observed by the creators of such works they will thusly be incentivized to create even more original works. Importantly, copyright law does not provide any such incentive and should be discarded an inimicable to social progress.
Yes, now that I think about it this makes complete sense.
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Re: In essence...
It's a shame you're totally wrong, of course, and I'm not sure why you're still trolling this thread...
Anyway:
"Once a "non-digital" good goes "digital" nobody should ever have to pay for obtaining a "digital" copy. "
I don't recall anybody saying that. What I do recall being said is that the market value of any good will approach marginal cost, and that the marginal cost of said product in a digital form is practically zero. Since people recognise that a digital file costs relatively nothing to reproduce compared to the physical copy, they consider it to be worth less. People are much less willing to pay $15 for an MP3 album than they are for a CD, and market prices are going down accordingly.
"As a corollary to the above, any creator of an original work (e.g., music) who would like to meet customer preferences by "selling" the work in "digital" form simply does not see the big picture if he/she would like to use any form of copy protection."
"Copy protection" means DRM. DRM makes goods less useful by restricting how and where they can be used, therefore reducing the amount people are willing to pay for it (less useful = less valuable). In addition this makes free, pirated, goods more valuable than the real thing.
Example: I own a Creative Zen player. I can play any unprotected music file on that player including any obtained through pirate networks if I wish as well as legally obtained tracks. I cannot, however, play music that's downloaded through iTunes if it's DRMed. I would like to pay for the music, and if a non-DRM option is available then I will do so. If not, then I am forced to buy a CD and rip it, or pirate the music if I can;'t buy the CD for some reason (e.g. exclusive tracks, CD not available in my country).
So, in this case an unprotected album will get you money, the DRMed copy is worth nothing to me, so I pay nothing. As another example, look at fiascos such as Google Video and PlaysForSure. People who downloaded legally from those sources have been penalised and have to pay again for their legally obtained content. Those who didn't bother and downloaded from TPB instead remain unaffected.
Does supporting such schemes really sound like "seeing the big picture"?
"Importantly, copyright law does not provide any such incentive and should be discarded an inimicable to social progress."
Again, please point out where anyone is advocating piracy. New business models are being discussed, which would involve money being paid to the creator. Everything being discussed involves the creator *willingly* giving away a good for free and/or reacting to the modern realities of the marketplace. The only question is whether payment is better obtained indirectly rather than directly on sale of an infinite good.
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Re: When will this pop economics go away?
"First, there is no such thing as zero marginal cost in reality."
Not literally zero, granted, but near enough. For example, I pay annually for a web hosting account with 5 terabytes of free bandwidth included as well as plenty of disk space. If I were to use that to sell copies of an 80Mb MP3 album, I would not have to spend any more overhead to sell 50,000 copies than I would on selling 100 - I'd still be under my transfer limit and all costs would be contained in my hosting account's billing.
Obviously, costs of a physical album would go up exponentially if I were to press those to CD instead. With the digital good, the costs remain pretty much static once I've prepared the site and files to be transferred. So, the cost of each unit is virtually zero.
"Does Nike sell sneakers at marginal costs? "
No, but that's where the "scarce" element rather than "infinite" element comes in. Nike have built a brand name and reputation. When you buy a Nike shoe, part of the price includes that. Nike can sell shoes at a higher price because people are willing to pay for that.
Many competing shoes are sold at much closer to their marginal cost because they don't have that same brand and reputation to build on. Nike are still vulnerable to piracy - cheap Chinese knock-offs, etc. - but they have a market that's willing to pay extra for the real thing.
This is what we're talking about here - giving people a reason to pay for the product. If they don't have a reason to buy the product at a price that's higher than marginal cost, you have to either give them a reason to do so, or leverage the product to get the customer to buy something else. Because the marginal cost is almost zero in the case of digital goods, and because the goods can be copied infinitely, it's often better to use the digital good to leverage another market.
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Re: Re: In essence...
"Copy protection" means DRM."
Please note I used the word "any", which can take a form as simple as an express statement on a CD that the music it contains should not be copied and such copies distributed to others for their own use.
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Re: Re: Re: In essence...
That's not copy protection though, that's a statement of copyright laws that apply with or without such a statement. It even applies to music that's legally given away unless the author has specifically stated otherwise (e.g. NIN's Ghosts albums, released under CC).
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A solution to the energy crisis
If we take Mike's new business model to heart and apply it to the energy field, prices would plummet overnight and the oil producers and refiners would become even wealthier. It would be a win-win situation. All that is necessary is for Mike to convince those people who siphon crude from the ground to give away their oil. There would be an instant increase in demand and with oil being sold as "infinite goods" (although everyone knows it isn't), everyone would become infinitely rich including the oil well operators and owners. Free oil. Just think about it. Wouldn't we all be better off?
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Re: Re: Re: Re: In essence...
Technical copy protections are the result of the realization by content providers that copyright laws applicable to such content were being routinely ignored.
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Re: A solution to the energy crisis
Great plan! Erm, unless the oil isn't an infinite, digital good that costs virtually zero to reproduce. Then it's totally different...
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Re: Re: Re: Re: Re: In essence...
Yes, hence DRM. Hence the problems discussed above. You're going in circles.
There are other ways around that than needlessly penalising the paying customer. The ones we're attempting to discuss, is where it's made virtually irrelevant if the infinite good is being freely distributed since it's used as leverage to make money elsewhere. There are other models but, as is being proven again and again, artificial technical restrictions and/or removal of consumer rights is not the way to go.