Friday, February 26, 2010

Book Review: Free: The Future of A Radical Price

Here's a conundrum of the modern age: people are getting used to not paying for digital content.
You, as a businessperson, have to deal with this problem.

This is the subject of Chris Anderson's Free: Future of a Radical Price. This book discusses the various revenue models you may have to adopt.

Here's an excerpt from the New York Times review:

"More precisely, the marginal cost of digital products, or the cost of delivering one additional copy, is approaching zero. The fixed cost of producing the first copy, however, may be as high as ever. All those servers and transmission lines, as cheap as they may be per gigabyte, require large initial investments. The articles still have to be written, the songs recorded, the movies made. The crucial business question, then, is how you cover those fixed costs. As many an airline bankruptcy demonstrates, it can be extremely hard to survive in a business with high fixed costs, low marginal costs and relatively easy entry. As long as serving one new customer costs next to nothing, the competition to attract as many customers as possible will drive prices toward zero. And zero doesn't pay the bills.

The answer, Anderson argues, lies in cross-subsidies: "shifting money around from product to product, person to person, between now and later, or into nonmonetary markets and back out again." Most obviously, online advertisers can subsidize content by paying for eyeballs or, in some cases, for detailed information on potential consumers. Less familiar is the "freemium" strategy, in which a site like Flickr offers one package of services free but charges for an ad-free package with more features, allowing a small fraction of users to subsidize the rest."

We just ordered our copy. It'll be here anyday. Check out is free.

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