The power of the free

It's the conundrum of the 21st century: Everyone likes getting something for nothing, but we all want to get paid for the work we do.

Free, a new book by Wired magazine editor Chris Anderson, explores the pitfalls and opportunities of an emerging business model in which people enjoy goods and services at no charge.

In his first book, The Long Tail, Anderson postulated that as technology makes it easier to produce, store and distribute niche products, demand for them will rise.

Free goes a step further, looking at the growing trend of giving away things such as news, music and videos that can be digitised and posted on the internet.

In many cases, this can stimulate demand for items that generate revenue. But it is also controversial. Just ask anyone who works at – or was laid off from – a publishing company or record label.

Anderson says that free does not always mean easy. He writes that the internet is dominated by "network effects", where it is easier to communicate and where people behave like herds. "Network effects tend to concentrate power – the 'rich get richer' effect," he writes.

He points to Google, which became a $20 billion (Dh73bn) company by offering free products while making money on advertising.

On the other hand, free online classified ad service Craigslist earned only an estimated $40 million in 2006, Anderson writes. That's about 12 per cent of the drop in spending on classifieds in US newspapers that year.

Overall, Anderson's tone is optimistic, citing numerous examples of how companies have made money with "Free", his name for this economic model.

For instance, content from the TED conference on tech, entertainment and design has been available as a free webcast since 2006. The price to attend, however, has jumped from $4,400 that year to $6,000 in 2008. "Each ticket is worth more now that people know what they're missing," Anderson writes.

He notes that JCDecaux's Velib service has done well in Paris and other cities by offering an unlimited 30-minute bike rides to people who pay a registration fee. Riders pay for additional time.

And Radiohead released In Rainbows online and allowed fans to pay whatever they wanted, if anything, to download the album, which became its most commercially successful and led to sales of 1.2 million concert tickets.

Closer to home, Anderson's own publication has had trouble persuading readers of its online version, which is free, to subscribe to the print magazine. Wired's advertising was down 50 per cent year, The New York Times reported in May.

The picture has brightened since, and the year is looking not nearly as bad. "We'll be pretty much along industry lines," Anderson said.

He has acknowledged a report by the Virginia Quarterly Review, which said that Free contained passages reproduced nearly verbatim from uncredited sources, mainly Wikipedia.

"All those are my screwups after we decided not to run notes as planned, due to my inability to find a good citation format for web sources," Anderson said.

Hyperion said it was working with the author to correct the problem in all future editions of the book, including an online version.

True to its own model, Free is available for download at no charge for a limited time.

While a "one-size-fits-all version" might be free, readers who want more must pay for the author's time, Anderson writes, unabashedly adding, "Yes, that's my model, too. Speakers Bureau details are on my website."

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