Review: “Free: The Future of a Radical Price” by Chris Anderson
Despite the fact that Wired editor-in-chief Chris Anderson’s latest book, Free: The Future of a Radical Price, wasn’t released until this week, it has still managed to generate much pre-publication discussion about the future of the digital economy. Anderson found himself enmeshed in a pre-publication plagiarism scandal two weeks ago when the Virginia Quarterly Review found that some passages in the book directly matched Wikipedia entries. (Anderson quickly apologized, blaming inaccurate citing and overall carelessness.)
Then, of course, there’s the actual content of the book, which has been received by journalists and business-minded folks in decidedly polarizing ways. Malcolm Gladwell unleashed a scathing review of Free in last week’s New Yorker, scolding Anderson for adhering to the freeconomy as an “iron law” and writing, “The only iron law here is the one too obvious to write a book about, which is that the digital age has so transformed the ways in which things are made and sold that there are no iron laws.” (Plenty of responses followed.)
But for Anderson, Free is indeed the ultimate destiny of our economy. “Sooner or later every company is going to have to figure out how to use Free or compete with Free, one way or another,” he writes in the beginning of the book. This assertion will probably look depressingly familiar to journalists who’ve watched their traditional business models fall apart in the wild west of the web, where “free” is the gold standard.
Mental transaction costs
Some continue to push for a system of micropayments to support news sites, but Anderson argues having to pay anything — even a penny — for online content radically drives down readership. “It’s as if our brains were wired to raise a flag every time we’re confronted with a price,” he writes. “This is the ‘is it worth it?’ flag. If you charge a price, any price, we are forced to ask ourselves if we really want to open our wallets. But if the price is zero, that flag never goes up and the decision just got easier.”
Anderson borrows a term from George Washington economist Nick Szabo, labeling this flag the “mental transaction cost.” Laziness has made us all want to avoid making any decision, no matter how inconsequential. Even if something is financially affordable, once we begin to question if it’s “worth it,” we’ve already spent cognitive energy considering the decision, and will most likely choose not to spend the money, even if it’s just a penny. Anderson says micropayments “are destined to fail, Szabo concluded, because although they minimize the economic costs of choices, they still have all the cognitive costs…many potential customers would be put off by the payment and decision process.” While TimesSelect wasn’t exactly a system for micropayments, perhaps this principle helps explain the failure of The New York Times’ experiment with premium content. News fiends or not, once we’re forced to create an account and enter our credit card numbers — even to be charged a reasonable, affordable amount — we shy away and seek out similar content elsewhere for free.
Anderson also touches on advertising in Free, segueing from his disdain for micropayments to a section titled “The End of Paid Content.” He gives six reasons (borrowed from entertainment lawyer Jonathan Handel) for the evolution to a free economy:
— Supply and demand: The Internet has made the available amount of content functionally infinite, while the demand for content has remained the same.
— Loss of physical form: It feels much less like stealing when what you’re stealing isn’t a tangible object.
— Ease of access: Downloading makes nabbing content more seamless than having to go to a store and buying it.
— The shift to ad-supported content: Now that we’re used to everything being free online, what else should be free in our real lives?
— The tech industry wants content to be free: Free content means you have to buy more products to host that content (think free music to put on your not-free iPod).
— Generation Free: Growing up post-Napster, younger generations find copyright irrelevant.
Newspapers’ most common solution to the giving-it-away-online problem has been making up for it with advertising. But Anderson addresses that by quoting Scott Karp, the founder of Publish2. “Advertising in traditional media, whether newspapers, magazines, or TV, is all about selling a scarce resource — space,” he says. “The problem is that on the web, there’s a nearly infinite amount of space. So when traditional media companies try to sell space online the same way they sell space offline, they find they only have a fraction of the pricing power.” While online advertising has expanded beyond selling raw CPM, newspapers will be hard pressed to support themselves through online ads alone.
The impact on journalism
So if micropayments are futile and ad-supported models are limited, what does Anderson see as the future of newspapers? Since Free has shrunk the gap between professional and amateur journalists, he believes that “as more people create content for nonmonetary reasons, the competition to those doing it for money grows…all this means is that publishing is no longer the sole privilege of the paid. It doesn’t mean you can’t get paid for publishing.” J-school students already buried in competition can be forgiven for finding Anderson’s stance a little bleak. He blames the loss of journalism jobs on news organizations’ inability to adapt to a technologically shifting landscape: “The professional journalists who are seeing their jobs evaporate are typically those whose employers failed to find a new role in a world of abundant information…the top tier (The New York Times, Wall Street Journal, etc.) will probably shrink a bit, and the tier below that may be decimated.” Such is the world of the freeconomy, where the future isn’t an economic leveler, but a place where a few leaders win and the broad middle loses out.
Anderson closes his chapter entitled “You Get What You Pay For” with an outlook on the future of journalism that some may find hard to swallow. “Journalism as a profession will share the stage with journalism as an avocation,” he writes. “Meanwhile, others may use their skills to teach and organize amateurs to do a better job covering their own communities, becoming more editor/coach than writer. If so, leveraging the Free — paying people to get other people to write for nonmonetary rewards — may not be the enemy of professional journalists. Instead, it may be their salvation.”
[Anderson has released the electronic copy of his book for — you guessed it — free. Read the whole thing below, or at Google Books here.]
Photo of Chris Anderson by James Duncan Davidson used under Creative Commons.
17 comments:
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I’ve been listening to Anderson’s audiobook off and on for the past few days. My one thought on his analysis? He’s never watched television.
Anderson’s approach to analyzing “Free” is wonderful, but he persistently alludes to an approach to marketing that’s been perfected since the days of Farnsworth. Television content is free, has a low entry cost (TVs for about $200), and is paid for by advertisers. Why would computers be any different?
But throughout the portion I’ve listened to, he never says it outright: “Computers are the televisions of the 21st century – they are vehicles for advertisements.” Not only does he not address this, he seems to be at a loss for how to describe the business model ABC, NBC, and CBS perfected long ago.
Lucas,
In my humble opinion,you make exactly the right point. TV and Print are the two mass push media. So it was, so it will be. The internet and all the media that is associated with it are optimized for pull communication, searching,buying, talking and storing. If a web ad leads to a sell through it works. But gathering eyeballs in a pull media won’t work, unless the issue is to gather and support fans.
As for “free.” A more useful concept might be “free-to-me” As Gladwell pointed out brilliantly in his review at the New Yorker, the Internet is not free. It is supported by huge server farms taking up very significant amounts of energy through very expensive fiber optic cables.
Yes the marginal costs are very low, but that’s because the infrastructure is so expensive. It’s similar to any infrastructure, the water system, the “free highways”, the under priced mass transit systems.
One role for the journalist with this infrastructure was beautifully described in the video that Matt Thompson did years ago. The emerging value in an information rich environment is to edit, curate and deliver the most interesting content to communities of fans.
Unabridged “Free” audiobook is also available for free on Audible.com, but ironically the abridged version will cost you $18.99.
I discovered that trying to view Chris Anderson’s “Free” on Scribd will give a rather discriminatory error message:
“Sorry, this content is geographically restricted. Due to our agreements with our publishing partners, the document you requested is only available to users located in the United States.”
I consider that by itself sheer real-world demonstration of a major loophole in Anderson’s thesis. He is Wired, mind you. And he is talking about the Internet, isn’t he?
Find the book also in Google Books – is it geographically limited there too? http://bit.ly/7rbE9
Lucas, try looking up “The Chaos Scenario” by Bob Garfield. Is there enough advertising out there to support all of this free content? http://thechaosscenario.net/blog/
info_marvin:
Yes, no access from Europe on Google Books. Lame.
Interesting interview with Anderson in NPR.
Would we agree that as the price of a commodity approaches zero, the value of that commodity usually diminishes, too? Stuff that’s given out for free — plastic gimmicks, public-relations materials, the content of most blogs — is seldom much good. Why should a creator devote talent, time and toil to the creation of a commodity for which he/she receives no return other than satisfaction? Sure, people put stuff on the web for free, with no advertising. But most of it is crap. If you want something good, you have to pay for it. Otherwise no one will make the good thing in the first place.
I think it is a mistake to conflate the freedom to copy and link stories with the a) free classified ads (via craigslist et al), b) monopolization of retail sales (with subsequent ad losses) and c) ongoing reconstruction of the economy (fewer car dealers buying ads, fewer builders selling homes) of the current mini-depression, as a reason for the decline in newspaper employment. The circulation audit scandal set metros pricing power back much further than Huffington Post, why would advertisers believe the circ numbers ever after that?
The danger is people will mistake bloggers as the reason for the lower-quality and lower amounts of news already here, and on its way, rather than the legislators who rewired our economy after the oil embargo era to enable b) and c), and publishers, too short-sighted to forestall a). This is dangerous because very different responses are needed to fix things, depending on what you see as the root cause of the situation. You could shoot yourself going after bloggers when what is really needed is a news site that beats Craiglist and attracts ads in an era of people buying underwear from Amazon, not Macys.