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The Fear of Free

The Free phenomenon is scary because it suggests everything we know about business could be wrong.  At its heart, it is counter-intuitive to what we have been taught as business people. It goes to the heart of our understanding of the world, it disrupts our cognitive map and that scares the crap out of us. So we reject its challenge to protect our paradigm, a reaction as old as the search for mans place in the universe (just ask Copernicus).

But do we need to be so afraid? Does Free mean less (or even) no revenue? As far as I can tell the answer is NO. Free doesn’t mean no one pays, it just shifts the revenue collection point. Public goods such as street lighting demonstrate how Free has been around longer than Google.

One of the loudest voices in the anti-free brigade has been the traditional content providers such as magazines and newspapers, their catch cry being who is going to pay our journalists and columnists. But realistically it has never been the subscribers anyway! Charging for magazines and newspapers has always been a double dip, a second income stream after the advertising! Conde Naste recent closure of titles was not related to falling readership but reduced advertising (and competition amongst its titles for the advertising).

At its simplest form, price is a barrier to entry for customers. It is the cost of trial and by charging an up front fee (purchase price) any organisation is creating a reason not to buy. Most of the time it is this barrier that marketing is trying to hurdle, providing the reasons why a customer should pay the price.

So if magazines and newspaper were free, the customer would have no reason not to pick them up off the shelf. Circulation up, and advertising becomes more valuable enabling increased charges to offset loss of subscription income!

Seeing price as a barrier to entry allows Free to become an opportunity. It is still your choice, but consider how you will compete once your competitor’s allow Free access. Now that’s something to be afraid of.

If you’re really interested in Free you should check out Wired Magazine’s resource about Chris Anderson‘s book Free! Why $0.00 Is the Future of Business, or download the audiobook here.

You may also like to read Malcolm Gladwell‘s article in the New Yorker: “Priced to Sell. Is free the future?”, in which he criticises the gravity and true importance of Free. If you read Malcolm’s article you should also read Seth Godin‘s response to this: “Malcolm is Wrong”.

Do you thnk free is something to be feared? Let us know in the comments below.