Human Ventures

Filed under: free

Newspapers Need to Learn How to Share

I shared in an earlier post the idea that many media companies feel they made a huge mistake by making their content available for free in the early days of the internet. They believe they commoditized their own product.

I contend that their decision acknowledged the near-zero marginal costs of distribution online, combined with the reality that people often pay for infomation based on what they think it costs to create and distribute (mistakenly emphasising the physical product), rather than the value they derive from it, which is nearly impossible to calculate.

In this way, information does want to be free. Still, I think there remains ample opportunity for media companies to differentiate and continue drawing on subscriptions as a source of revenue. 

For example, the NY Times is free online (for now), yet I pay good money to subscribe to the NY Times on my Kindle.

Why? Because I value the ability to receive high quality news in an accessible, convenient, and ad-free format. 

So there's one, and one that companies are already exploiting - differentiate in how you deliver content to readers.

Number two, and the Nook and the WSJ can teach us much here, is making online subscriptions more attractive by allowing some sharing.

Information's value is largely a function of the size of the network that has/can have access to it. It does me minimal good to pay for a subscription to Fortune if I the great ideas contained therein can't be distributed among, and used to influence, friends and colleagues. 

Indeed, my access to a subscription-only publication actually increases the need for, and value of, good sharing capability.  I'm subscribing because I want to be a hub of info, not just because I want the info for myself.

This is the way it has always worked. People subscribed to WSJ in print largely to be "in the know." But that never meant knowing for themselves alone, but rather in order to increase their value to others in their ability to be a great source of info. 

Maybe we need a new mantra. Not so much "information wants to be free" but "information wants to be social," whether free or not.

Is Macmillan Fighting Free?

One of Chris Anderson's great coined phrases is that "information wants to be free."  

It's very true. And it's not just consumers of information driving down its price. As information creators and distributors, we share important info with friends and colleagues almost incessantly, and we do it not to fill our pockets but to be of help to others and build our "reputational capital." 

Bloggers and hardcore online content creators of all types show just how far we will go to give away information in exchange for other intangibles.

It's no wonder, then, that as newspapers, magazines, movies, music, etc. have all gone digital, where the variable cost of distribution is essentially zero and where competitors offering "free" abound, the price of information has continued to drop. Publishers can no longer hide behind the cost of physical distribution, they can scarcely differentiate on quality of content, and their relatively limited access to insider information is readily apparent via a simple Google search.

It's tempting to think that media executives were tacitly recognizing this by going free when they went online several years ago. And yet these same executives are not shy about sharing their regrets. They believe that "free" was not inevitable, but rather that they led people to undervalue their product by giving into the fad of "free."

And it's in this context that you have to understand the Macmillan-Amazon row. Books are one of the final bastions of physical information. They have successfully resisted digital distribution for years. As a result, you'll still pay $5-$10 for a book by a dead author that has been public domain for over a century. 

However, the success of the Kindle and anticipated success of the iPad and other readers threaten to add eBooks to the list of information subject to the pressures of free.

Macmillan, learning from its peers in the newspaper and magazine industries, made a preemptive move to assert its belief in the intrinsic value of its products, regardless of whether they occupy a physical form, before consumers could fully make their value judgments known. 

If you ask me, in the long term they are fighting a losing battle. I don't believe that good books will or should be "free." But I believe that consumers will ultimately be the judges of the value of paper-less books that compete for mindshare with the amazing amounts of good, free information out there. Like newspapers, books and book publishers, too, will ultimately have to reinvent themselves to stay in business. 

Rather than defending its turf and outdated business model, Macmillan would be better served to start creating the future of books.

Response to: "Is it right to have the poor pay?"

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Imagine you are walking along a wide sidewalk downtown Your City, USA.  In front of you and to the left you spot a table.  People are handing out vitamin supplement samples... for free. Do you take one?

A block later, you encounter another table set up.  It's a different group, but also handing out vitamin supplements for a small fee - say $0.25 for a mini bottle.  Do you buy one?

Now, guess which table was more successful at encouraging people to try vitamin supplements?

A recent Fast Company article citing a similar experiment conducted by J-PAL has created a bit of a stir in the social enterprise blogosphere this last week.  

First, BOPreneur Paul Hudnut wrote a very thoughtful and somewhat provocative post titled, "Is It Right to Have the Poor Pay?"  Shortly after, Francisco Noguera at NextBillion posted this equally interesting response to Hudnut's comments.

The Fast Company article concluded that J-PAL's experiment, which demonstrated that free mosquito nets were more widely adopted than paid-for nets, had proven false the widely-held belief that it's right to have the poor pay small fees for development-related goods and services because doing so encourages a sense of ownership. Really?

Hudnut's post makes the great point that, while it may not always be appropriate to have the poor pay, "charity doesn't scale."   Noguera agrees that "free" sometimes is the best approach, even though market-based approached are generally preferable.  He also remarks on how cross-subsidies can make the latter possible within a social enterprise model.  Both make wonderful points.

But what about the simple fact that "free" is virtually ALWAYS going to be preferable to consumers!  Especially when the alternative is a small fee. I haven't read the J-PAL study cited in the Fast Company article, but if it's as straightforward as it sounds, the outcome should be no surprise to anyone.

The real question is not, "To free or not to free?"  The real question is, Do you measure success by how many mosquito nets you hand out? If so, maybe free is best. But I'd prefer to measure success based on what % of people are using their mosquito nets six months later.  Or perhaps the % of mosquito nets that are still effective (i.e. in good shape) after 12 months.  Or the change in the number of new malaria cases in the community after 3 years. If these are the outcomes you're trying to impact, maybe selling them a mosquito net at a small fee still is the best solution.

Which brings me to my real point here.  Businesses frequently have to create markets and stimulate demand through consumer education and advertising (though internet startups are increasingly doing this through free).  With effort, they get people to value their product enough to pay for it.

Should international development be any different?

"Free" and the Future of Social Enterprise

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My latest SocialEarth post (HERE) explores the relationship between web 2.0 companies, the book "Free" by Chris Anderson, and the world of social enterprise. Please check it out here: While I advocate for the positive aspects of "free" in the post (mostly because that's where I stand), I also wanted to share the following NPR series that explores both the pros and cons of free. Enjoy! Part 1: Free For All? Profits Can Be Elusive Online Part 2: Web Firms Find Paths To Profits: Free Vs. Fees Part 3: Musicians Look For Pay In An MP3 World
Posterous theme by Cory Watilo