How much does 'free' cost? (Part One)

A reflection this week on the latest thoughts of Chris Anderson, who first appeared on may people's radar with his excellent book 'The Long Tail'. In this book Chris reviewed the impact of the digital age on society, using the music and film industries as examples. His most recent book is 'Free: The Future of a Radical Price' and he's written a really interesting article on the same subject in the August (UK) edition of 'Wired' magazine.Background
Speakers have traditionally had a business model in which their speaking income was supplemented by 'product' sales. For many years the default product was a book. Not only were books useful as additional sources of income, but they also served to reinforce the speaker's position as an authority on his or her topic. In more recent times additional products have joined the stable:

Audio CD's

Video DVD's

Online material - books, videos and audio programmes

Recordings from webinars, etc

All these have been packaged around the speaker's core business of performing on the platform. The other trend associated with speakers' products - and one that isn't unique to speakers - is the move away from physical products (such as books and DVD's) to digital products, accessed via the internet. It is this latter trend that Chris Anderson is so interested in, and if you've not yet read his latest book (see above), or his earlier work, 'The Long Tail', I commend them both to you.

The basic issue

The basic issue that Chris Anderson is drawing to our attention is that the price of doing business online is falling year on year, day by day, minute by minute - and from an industrial perspective this is something totally new. We are sailing in uncharted waters. For example, about the time I was born a single transistor cost $10 - and for those of you who don't want to do the research, or guess how old I am, I was born in 1960. Intel's latest chip contains two billion transistors and costs around $300, which makes the price per transistor almost too cheap to quantify. The cost of delivering bandwidth, processing power and storage is falling at an unprecedented and accelerating rate.

This collapse in costs is a characteristic which can be a problem or an opportunity, depending on how you view it. For example, if you're in the business of selling boxes for the IT industry, you have a profit margin problem. If you're interested in transmitting stuff to an audience - great - it's getting cheaper and faster every day. For example, think how difficult and expensive it would have been for me to transmit this weekly broadcast, worldwide, 10 years ago, 20 years ago and 30 years ago.

10 years ago (1999) - tricky but possible. I was still on dial-up then, as would have been many readers. The internet - and broadband - developed rapidly during the 1990's.

20 years ago (1989) - PC communications were in their infancy (the fundamental internet protocol, TCP/IP didn't really exist prior to 1983) and the IBM PC was announced in 1981, so even basic PC-based applications like word processing were still in their early days.

30 years ago (1979) - The world didn't know what a PC was and although the internet can trace its roots back to 1973, at that stage it wasn't anything that you or I would have recognised, based on today's experiences.

So what?

The fact is, it's costing you less and less to service an online customer base - so actually, you can afford to give stuff away.

The race to free

You're in a position of being able to give stuff away for free - the question is should you? Chris Anderson says, "Yes". He tested this with his latest book, 'Free: The Future of a Radical Price'. You can buy the book (as normal) and you can also access an online version, totally free of charge. I am sure that this will come as something of a shock to many speakers - giving away vital intellectual property free - gosh, what's the world coming to...

Chris Anderson is making several points:

Almost anything you want is (or will shortly be) available online for free.

Your material probably isn't as unique or as valuable as you like to think it is

If you don't supply it free - your competitors will

You can actually increase your business in the long term by providing stuff for free that you would have previously charged for

For example, look at the music industry and compare what bands used to do in the past to make money, as opposed to what they do now:

Past

Spend money recording album

Spend money promoting album

Spend money copyrighting album

Lots of fans pay money to buy album

Lots of fans make illegal copies of album

The band goes on tour to where fans live

Fans pay to attend performance and also buy merchandise

Band hopes money in > money out

Present

Spend money recording album - but less money than before because good quality recording is now a lot cheaper

The album is copied (illegally) all over the place and lots of people get to experience the band first time - people who would never have spent their own money buying a CD

The same loyal fans that bought the CD before, still buy the CD this time around, because they love the music

The band goes on tour, just as before

Loyal fans still pay to attend and also lots of new fans come along too, because the band has wider exposure than previously

New fans and old fans buy merchandise

Band certainly has more money now than previously, because they have more customers (fans) and reduced production costs

So my challenge to you is this:

Can you come up with ways in which you could use "free" to create extra revenue for your business?

Ideas will be provided in Part Two of this topic next week, along with rules of thumb for dealing with a free world.

That's it folks for this week - as usual, your comments welcomed and appreciated, particularly with reference as to what you'd like to hear about. I do get quite a few emails by the way, and I read them all, so please don't feel shy about getting in contact.

Best wishes for the coming week.

Chris Davidson
Editor, Professional Speakers Journal
editor@professionalspeakersjournal.com