Radio, Google, most content on the Internet, they’re all free.
Could that business model, the one where the content is free and advertiser-supported, be the hot new thing for many products and services that live in an Internet-enabled world?
And yes, it will be free.
Here’s the core of Chris’s argument, from a really terrific Q&A which I strongly recommend:
The Internet is infinite shelf space, and when your cost of distribution falls to zero you can be indiscriminant about what you offer. You can have an iTunes with an infinite number of songs because the cost of doing so is zero. It’s driven by the underlying technology costs. I was sitting down with my children and asked what is getting more expensive and what is getting cheaper? It is easy to think about things that are getting more expensive, gasoline and orange juice are just going through the roof. But anything touching technology is getting cheaper. Hey, remember when phone calls used to cost money? You used to have to pay for your newspaper and now it’s all free. Everything online tends to lower the cost. I suddenly realized that we live in a world of free. We always have. Most media has always been free to air. They say that if you understand why they sell newspapers in boxes that don’t limit the number of copies you can take, you understand the newspaper business. They aren’t selling newspapers. They’re selling audiences to advertisers. [Magazines] charge a nominal price that is as close to zero as possible to incentivize the largest number of people to subscribe, but not so close to zero that it makes the product look de-valued.
What about, say, satellite radio?
I think there’s always going to be an opportunity for the paid premium model. Think of free as a free sample. You can have your free version of TypePad or if you want more features and capacities you pay for the premium one. A tiny fraction of consumers pay for the premium one, but because it is on such a large base it’s good business. So I think the notion of a free and paid pairing, where the free model is a sampler for a large audience and the premium one is for the hard core is a very natural business model, and I wouldn’t be surprised if we in the media industry work harder at finding ways to offer value-added services that are worth paying for.
In my view one of the big problems of satellite radio is that to truly get a “free sample” you need to experience it in the same way you intend to use it – not on an iPod or via online streaming, but in your car. And the only way to do that right now is to buy a car with satellite radio pre-installed, something which can happen only so often and so fast. This is, however, why you’re seeing more sales shift in that direction – because it’s the only direction that provides an experientially relevant “free sample.”
Anderson also thinks most music will eventually be free (and I agree with him).
And you know what they call an endless stream of free, ad-supported music, right?