Listen to Wired editor-in-chief and Long Tail author Chris Anderson being interviewed by Peter Day on the BBC World Service’s Global Business programme. It can be downloaded here. Everything wants to be free, says Anderson: under-25s get it, over-25s don’t, he says.
Anderson, whose book, Free, will be out later this year, says music wants to be free, concerts want to be expensive. If that’s an aphorism, there’s a footnote.
Anderson explains digital technology is making things so cheap that businesses can make money by giving away things for free. Google, for example, has become a gold mine without charging anything for many of its services. There can be a payoff even in providing free services. Anderson mentions Google’s free 411 service where, by letting people make free phone calls, Google is developing voice recognition systems.
Anderson believes the way to go is to adopt the “fremium” business model, where companies provide basic services for free but charge for premium services. Think of the Wall Street Journal, the Straits Times newspaper's website in Singapore or WordPress.com.
Anderson says providing free services attracts users and builds up the numbers, but companies have to figure out how to make money from them.
And there’s the rub.
The New York Times problem
Take the case of the New York Times. It is the fifth ranked news website, which attracted 20 million unique visitors last October.
But it is drowning in a sea of red ink and could default on $400 million in debt in May, writes Michael Hirschorn in the Atlantic Monthly. The good, grey Times faces problems raising capital because its $1 billion debt pile has been downgraded to junk status. It had just $46 million in cash reserves as of last October.
The problem is the New York Times isn’t making money online while “its printed product is sold to a mere million readers a day and dropping, and the Sunday print edition to 1.4 million (and also dropping)”, writes Hirschorn.
Everything may want to be free, but someone still has to pay to keep them in business.