Steps to reproduce:
- 1. Redefine the market: The benefit is musical enjoyment
- 2. Break the benefits down (not a complete list...): Infinite components: the music itself. Scarce components: access to the musicians, concert tickets, merchandise, creation of new songs, CDs, private concerts, backstage passes, time, anyone's attention, etc. etc. etc.
- 3. Set the infinite components free: Put them on websites, file sharing networks, BitTorrent, social network sites wherever you can, while promoting the free songs and getting more publicity for the band itself -- all of which increases the value for the final step
- 4. Charge for the scarce components: Concert tickets are more valuable. Access to the band is more valuable. Getting the band to write a special song (sponsorship?) is more valuable. Merchandise is more valuable.
It's a tough one to grasp, especially for our generation. Even with the reality of Google dominating the Internet with zero, now bringing in more money than Microsoft, Apple, Oracle and IBM, we still can't seem to understand that it's all about the musician (Google in this case). And if their music sucked (bad search engine) they would have gained nothing. However if the music rocks (Google's search became #1 - for "free"), then the real
money to be earned is in the other areas of scarcity that DO exist. And I think we all know what would've happened if a fledgling Google demanded payment for their search engine. AOL and Compuserve can attest to what happens when old-world thinking throws all the wallet-hooking weight imaginable at consumers when other options became available. Every PC had AOL pre-installed and we were drenched with advertisements espousing their greatness and revealing the savory temptations that await the financially capable and willing. Auto-withdrawal completes the out-of-sight, out-of-mind profit picture, so advertise even more! Losing subscribers? Lock em in somehow! "Free" Trials - it simply HAS to work right?? Zap - gone - over.
Capitalize on the infinite, and your returns will be orders of magnitude beyond what's generated if you limit your exposure by demanding payment for it. Those who demand payment for their own exposure are forced to pay
for it through marketing. However if your work *sucks* then there's no way to make it big in the economy of zero. At a much deeper level this is one of the real issues for the anti-free crowd (and this is most certainly not you perks, you know you rock
), since licenses and hooks of all kinds temporarily ensure revenue for those who produce crap, or for those who's offerings aren't worth the price. Companies want the biggest hooks possible with the least amount of effort required to justify them.
Microsoft? - it's at the root of their anti-free stance. Apple? Gargantuan profits from great yet overpriced products. The predictability of this revenue for them is far more appealing than risking a Google-like free fall into the world of compensation based on the true cost/value of the products they produce. But as the article mentions:
The concept of zero took ages for societies to recognize, let alone understand. Mike has explained before how it's been a stumbling block in economics for some libertarian and "free market" types more recently. People who think about economics in terms of scarcity get upset when abundance pushes price down towards zero, as if the economic equation were broken. But if you flip the equation and think of it as a cost of zero, you realize that the trick is to use as much of those abundant goods as possible, adding value to complementary scarcities for which you can charge. Zero doesn't break economics, it just requires a different approach.
But as you know I'm not interested in amassing ridiculous amounts of personal wealth so I'm clearly not suggesting that by my example you can see the benefits of free. I've just always been fascinated with macro-economics and this relatively new and fundamentally different approach to business that's truly Googled our world is extremely
fascinating to me. It's not only inverted the mega-profit picture, it's opened the door to dissolving the digital divide. Now that's
worth learning more about