Chris Anderson on the Meaning of Free

In the new economy, how can people give away so much and still make money? In his new book Free: The Future of a Radical Price, the editor of Wired investigates.

Comedy's legendary Monty Python members—you know, "I'm a lumberjack and I’m okay," the Killer Rabbit, the Dead Parrot—were tired of seeing their legendary sketches pirated and fuzzily posted on YouTube, free to whoever wanted a quick laugh. So they posted their own, higher-quality versions on YouTube—also free—but let fans know that complete DVD versions were available for purchase. Sales rose 23,000 percent. As Chris Anderson explains in his new book, Free: The Future of a Radical Price (Hyperion, $26.99), "Free worked, and worked brilliantly … People are making lots of money charging nothing. Not nothing for everything, but nothing for enough that we have essentially created a country-sized economy around the price of $0.00." Anderson, 48, the editor of Wired magazine, discussed the allure of zero with Jesse Kornbluth.

In the 20th century, "free" meant giving away one thing to create demand for another. Get a free cell phone, for example, by buying a monthly plan. What is "free" now?
Yes, 20th-century "free" was about real objects made of atoms. Real costs were involved, so the consumer paid one way or another. In the 21st century, "free" is digital bits with marginal costs. For all practical purposes, they really are free.

So there is a "free lunch?"
In the digital economy, someone pays, but increasingly it's not you. Google and Wikipedia, for example, don't show up on your credit card. So how do you pay? Not with money, but with your time and attention. Some resources, of course, are scarce and getting scarcer; you pay for those. Digital goods and services, because they can be reproduced and distributed at almost no cost, are abundant.

For years, newspapers put articles on the Web for free. But the advertising to support the sites hasn't materialized. Meanwhile, many paying customers have migrated to the papers' free sites. Was it a mistake for them to give away content?
No. They had no choice. The New York Times is a number of things: a business, the "paper of record," and a thought leader that maintains its leadership by dominating the conversation. Now that conversation is online, the Times has to be online or its business will fail. A few years ago, it decided to leave the news free on the Web but put its columnists behind a pay wall. That didn't work.

Once you've given content away on the Web, can you get people to pay?
Absolutely. Use "free" to get an audience, then segment your user base so you have a free version and a premium one. The Wall Street Journal created a clever hybrid—some free articles, some available only to paid subscribers.

I get the sense that—when it comes to news, anyway—we'll soon have two classes of Internet users: 1) people who have money and will pay for quality reporting and analysis, and 2) people who are less well-off or care less about quality and will accept any information that's free. So the elite will be better informed, and others may get trashier media. True?
I'm simply observing what happens in economics when marginal costs fall. In economic terms, "free" is the law of gravity. I don't tell the apple to fall; it just falls. I don't tell water to flow downhill; it just does. In that way, it’s simple: As costs approach zero, "free" prevails.

From Reader's Digest - July 2009

 

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