Free Fallin’

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I haven’t had a chance to pick up a copy of Chris Anderson’s Free yet (I’m planning on stealing it from a Barnes & Noble when it comes out July 7 — after all, we’re not supposed to pay authors for content anymore, right?). But I’ve been following the debate between Anderson and Malcolm Gladwell and others. So, at the risk of weighing in on the debate without having read the most important source material (the book), let me throw out a few preliminary neuro-thoughts on the concept of Free.

The main gist of Free (the book and the concept), as far as I can tell, is that when the cost of producing and distributing something (journalism, music, video content) approaches zero, that’s going to be its price. Zero. Zip. Nada. Free. After all, in a competitive marketplace, the price of a good is driven down essentially to its cost of production. The problem with Free, however — according to its detractors — is that the cost may approach zero, but it’s never actually zero. Bandwidth may be cheap, and getting cheaper, but it ain’t free. And while content such as YouTube videos and blog posts may be free, the free stuff is rarely as good as the non-free stuff (think a blockbuster movie versus a video of a cat playing piano, or a New York Times report on secret CIA prisons versus whatever’s on the Huffington Post today).

And, so, the question is: With so much stuff “made of ideas,” can you charge for any of it? Anderson’s answer seems to be: No, but that’s okay. You can sell ads next to the free stuff, and sometimes you can blend free and premium (paid) to create “freemium.” Whether Free is desirable is one question, but Anderson’s main argument is that it’s inevitable. I’d argue that Free isn’t quite so inevitable, for a few reasons…

Free Is an Anchor, Anchors Can Be Moved

There was a time, not too long ago, when the conventional wisdom was that no one would ever pay for music again. It was the age of Napster, and no one was going to open his or her wallet when it was so much easier to just go on the Internets and steal stuff. And, of course, it became a popular argument that downloading music illegally wasn’t “stealing” anyway; the real thieves were the artists and record companies who thought consumers should actually pay for a product they wanted and used and enjoyed.

And then something funny happened: People started paying for music (again). A little while ago, I looked at this in terms of an “anchor price.” (An anchor price is essentially what you expect an item to cost or the price you’ve gotten used to. An anchor can be set very quickly; say you’re shopping for a particular kind of specialty home-repair tool — you have no idea what it should cost, so whatever price you see first will become your anchor. You feel what’s been called “paying pain” when a price moves above the anchor you’ve set in your head.) For a short while, Napster reset the anchor price for music among younger consumers: Music should cost $0.00.

This is the sort of Free that’s taken hold in certain industries — most problematically journalism. Content has been almost totally free on the Internet for a while now, so that’s what people expect it to be in the future. Free. But online ad revenue has not really materialized, and it’s not about to materialize in the Second Great Depression. So, journalism is about to find out whether it can pull off the same trick as Apple did with iTunes: making people pay for what was once free. That is, resetting the anchor price from $0.00 to something higher.

Without rehashing the entire post linked above, I think it can be done, at least with some products. If enough big actors (big papers like the New York Times) do it, and if someone comes up with a relatively painless micropayments system like iTunes, there’s at least a chance of replicating the success of what’s been done with online music.

An anchor price of Free is strong. But it’s not invincible.

Piracy Exists, but Threats Work

Related to the point above, it’s also worth noting that one of the things driving the idea of Free is the assumption that material “made of ideas” can’t really be protected from theft the way that, say, a physical object like a CD or a book or a newspaper can. And, thus, you’re better off giving it away anyway and hoping to use the “exposure” to make up your revenue elsewhere. (I don’t know if Anderson makes this argument in his book, but it’s a common one among peddlers of information-wants-to-be-free West Coast hocus pocus.)

But let’s look at the music industry again. While no one would argue that the music industry has managed to stop piracy, it has managed to create a booming market for paid online music. Partly this is because of good micropayment systems. But partly it seems to be because they’ve had some success in convincing people that piracy is theft and that an individual consumer might be prosecuted for such theft. While the logic may seem stupid — how can the 1-in-100-million threat of being sued by the record companies stop the average person from pirating? — it’s totally sound, based on well-established psychological principles. As we’ve seen with IRS audits (In a poll conducted for the IRS Oversight Board, 68 percent of Americans said it was their fear of an audit that made them pay taxes. Meanwhile, less than one-fifth of one percent of taxpayers face a face-to-face audit in a year), even the most minimal chance of getting caught and facing penalties is enough to stop most people who would otherwise act illegally.

The same principle that has stemmed the tide of music piracy could work on movies, ebooks, perhaps even news stories (though, those news stories can be quickly rewritten without violating copyrights, and new schemes to strengthen the “hot news doctrine,” which bars the rereporting of a news outlets stories, are unworkable and probably undesirable even if they could be made to work).

Again, while Anderson may not build his vision of Free around piracy, piracy is part of what’s helped embed the anchor price of Free in the culture. But, once again, this isn’t inevitable. It’s something content creators and distributors can fight.

Free Is Magic, but What Kind?

Anderson cites, in a section quoted by Gladwell, experiments done by Dan Ariely, author of Predictably Irrational, on the power of FREE (Ariely give the word the ALL CAPS treatment, as opposed to Anderson’s measley one Cap). But, of course, that book is about the irrational, stupid, idiotic things we do because of the word FREE. We buy one and get one free, when we didn’t even need one in the first place. We buy a $15 book at Amazon to avoid a $3 shipping charge. We accept 37 promotional pencils at a conference when the actual number of pencils we need is zero.

In other words, FREE makes us dumber consumers. People act irrationally in the pursuit of FREE, wanting to pay $0.00 for music (even though that screws their favorite artists) or wanting to read all their news for $0.00 (even though any real reporting takes at least reporters’ salaries to produce, and often much more than that). Consumers may want irrational things, but that doesn’t mean it’s anyone’s responsibility to give it to them.