Freeconomics

 

I was supposed to write a post on the movie industry: this is not yet the post I had in mind, but it’s still got something to do with it.

The entertainment industry is currently struggling for its own life: it produces content that costs big bucks, yet its consumers have become accustomed at getting it for free. And they don’t want to go back to the old days where you had to pay about 19$ for every record you’ld have in your music library, or (gosh!) 7/8$ for each and every movie you’ld watch.

Broandband + Peer2Peer have resulted in millions of consumers getting and sharing all that content for free, and not seeing much wrong in it.

In the last issue of Wired, Chris Anderson offers a broad view on the economics of free: how the digitalization of many industries is at the same time forcing and allowing companies to give away products and services for free, and how it’s still possible to make (loads of) money out of it. (If you were wondering, yes, you can read the article for free)

Anderson also offers a list of 6 possible free-marketing strategies, with examples of successful activities.

Though noone can deny that so many industries must sort out the contraddiction between suppliers that are determined to get paid, and consumers that are not willing to pay, it’s still unclear whether some of the examples provided only succeeded because they were attractive, new experiments (Prince, Radiohead) or if they can evolve into sustainable business models.

 All in all, Freeconomics promises to be a concept that we’ll have to spend thoughts and time over and over again in the future.

Final Burp: “Every economy that becomes digital, eventually becomes free” (C. Anderson)

Radiohead’s “In Rainbows”: the ultimate price discrimination

 

Pretty much everyone knows that if you want to get Radiohead’s latest record you can either buy a luxury box for 40£, or download it from the web for as much as you’ld like to pay for it, from zero upwards. 

Now the first figures are coming, and supposedly 68% downloaded it for free,  while some 17% paid 1-4$, 6% paid 4-8, 12% paid 8-15$, and the remaining 4% paid more than 15$ (but Radiohead are denying these figures)

This sounded good enough for some people to call this experiment a failure, but the real news is not the 68% of (allegedly 1.2 million so far) people who got for free something that was out there for free.

The real news is that 32% that decided to pay the same thing that they could have for free, in the very same form, at the very same time, the very same way. Same music, same mp3 format, same time for downloading…

This is really the ultimate price discrimination.

If you look at other forms of price discrimination, the product is never quite the same. Take air travel: yes, you move from point A to point B leaving at the same time and landing at the same time, whether you travel business or economy. But the service, the food, the comfort of the sits, they’re very much different, because otherwise there would be no legitimation for the different pricing.

Radiohead’s ”In Rainbows” is different, in a way that is very 2.0: the consumer is setting the rules, and this means that the producer has no need to legitimate the price. It’s all up to us, and some 400.000 people have responded by paying for something that the rational consumer from “first-year microeconomics course” would never consider paying for.

Final Burp: it’s an example of art stepping backwards in time from business to patronage, and sometimes stepping backwards is not necessarily a bad thing