In the Future, Everyone Will Work for FREE
In Sunday's NYTBR, I review Chris Anderson's new book, Free: The Future of a Radical Price
Fifteen years ago — before Google or Wikipedia or blogging or Craigslist or podcasts or YouTube — the technology investor and pundit Esther Dyson wrote an article analyzing the business of "creative content" in a future where the Internet made distribution essentially free. "Creators will have to fight to attract attention and get paid," she predicted. Enforcing copyrights won't be enough, because creators "will operate in an increasingly competitive marketplace where much of the intellectual property is distributed free and suppliers explode in number. . . . The problem for owners of content is that they will be competing with free or almost-free content."
That future is today, and it is the subject of Free: The Future of a Radical Price
Despite its subtitle, the book is less about the future than the present and recent past, which Anderson surveys in a cheerful, can-do voice. "People are making lots of money charging nothing," he writes. "Not nothing for everything, but nothing for enough that we have essentially created an economy as big as a good-sized country around the price of $0.00."
Driving the trend are the steeply declining prices of three essential technologies: computing power, digital storage and transmission capacity. Reproducing and delivering digital content — words, music, software, pictures, video — has now fulfilled the prophecy once made about electricity. It has become too cheap to meter. "Whatever it costs YouTube to stream a video today will cost half as much in a year," Anderson writes. "The trend lines that determine the cost of doing business online all point the same way: to zero. No wonder the prices online all go the same way."
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.
Read the whole thing. Unlike the typical journalist's review, this one isn't just a tantrum.