Posts Tagged abject failure

When the topic of content in the Internet era comes up, people like Rupert Murdoch are quick to point out that “free is not a business model.” They’re responding to the abject failure of (nearly?) every traditional content site that tries to charge for its content—the New York Times’ for-pay section is one prominent example. Music producers who oppose peer-to-peer file sharing also like to argue that you can’t make money by giving away content.

And they’re right. Sort of. If your business is selling groceries, then you can’t give away the groceries. But as Michael Masnick points out on TechDirt, free does not mean no business model. Lots of people have always known that free can be an integral component of a business model. You know, like banks giving away toasters when you open an account. The challenge here is that musicians and newspapers have built their business model around selling music and news, and those things are swiftly being commoditized by the Internet’s ability to transfer and copy information. Lots of people are succeeding by shifting their business model to embrace the newly-free nature of music and news. The new business models use the free content to add value to other goods and services, for which customers are willing to pay. Trent Reznor of Nine Inch Nails is a pioneer in this arena.

http://www.techdirt.com/articles/20080605/1638421319.shtml
After his Ghosts I-IV experiment that proved to be a huge success, Trent Reznor wasted little time in releasing the next Nine Inch Nails album as a completely free download. And, of course, he didn’t just give it away and pray. At the same time as he released the album, he notified fans of his latest concert.

Now, in an attempt to make that concert (whose tickets are a scarce good people will pay for) even more valuable, he’s giving away free tracks of all of the opening acts on the tour. In other words, he’s giving people even more reasons to pay to go to the concert. He’s giving away that infinite good (the music) to make those scarce goods (the tickets) more valuable. This fits with the model we were discussing just a few weeks ago, of bands giving free downloads to anyone who buys a concert ticket, to boost the value of that ticket.

Of course, shifting your business model is hard, and there’s some resistance from those who want to keep making money the way they always have. The typical response from the big money is to legislate against the forces that are making the existing business model obsolete. Lobbyists from the recording and movie industries push legislators for ever-more-restrictive copyright laws, like the totally failed Digital Millenium Copyright Act. (The Cato Institute’s paper, Circumventing Competition: The Perverse Consequences of the Digital Millennium Copyright Act covers problems with the DMCA in depth.)

But it’s not just “big money” who tries to legislate opposing business models out of existence. It seems that campgrounds in Maine object to the competition from big retailers like Wal-Mart who left RVs park in their lots for free, and want to see a law passed banning the practice.

In recent years, he said, there has been a cultural shift in how RVers travel, influenced in part by Web sites that use searchable databases to guide RVers to free parking spots.

“What has happened is nothing short of a phenomenon,” York said. “All of a sudden, we are looking at empty lots when we should be in the prime season.”

Proponents say the measure would help local campgrounds and RV parks stay in business and also allow the state to recoup nearly $1 million in lost state lodging taxes.

Well, at least they’re being straightforward about what’s going on here: campgrounds and the state are losing revenue, and want to outlaw the competitive business model that is taking away their business. And guess what: that business model involves “free”.

Heresy!