The old hacker motto used to be “information wants to be free”. This was the driving philosophy of the 80’s and the 90’s when the Internet was going through it’s awkward onset of puberty, and turbulent teenage years. We currently live at a peculiar junction in history where information is truly free. And it’s all thanks to advances in communication technology, ubiquitous broadband access and ever growing transfer speeds. Information is no longer scarce – it is a commodity much like water, or electricity. It’s obviously not worthless, but it’s relatively cheap in the grand scheme of things and it’s plentiful. For a modest monthly fee you have unlimited access to all the water and electricity you want.
In the very same way for a flat monthly fee you get unlimited access to the Internet which contains most of the information you will ever need. Every song, every movie, every book or piece of software ever made is out there for the taking. All you need is a torrent client and a little patience. Sure it’s not entirely legal but the odds of getting caught are incredibly small – not much bigger than the odds of winning the lottery. And there is just nothing that can be done about it right now. Neither the lawsuits and aggressive take downs of p2p networks nor the copy protection and ever more restrictive DRM have put any dent in the overall p2p traffic. Anything that is in digital format can be copied – no exceptions. Anything that can be copied will end up on the internet. Anything that is not in digital format, but can be digitized, will also end up on the internet. For free. And unless we completely change the fundamental rules of electronic communication this trend will only escalate.
Naturally the cost to produce these digital goods (movies, songs and software) is nonzero. It is actually quite expensive make them – both in terms of investment capital, and labor. But thanks to internet, their effective market price approaches zero. You either sell yourself cheep, and loose money or sell high, and put up really tough competition from p2p. This competitor is different though – he cannot be thwarted, legislated away, sued into oblivion or absorbed via hostile takeover. You are competing with the basic human nature. There is nothing – and I repeat, NOTHING that can be done against this. Unless of course you can figure out a way to turn back the clocks, and cripple the internet to where it reverts to it’s slow and non-threatening form you remember from the 80’s. For better of for worse, you are stuck with broadband internet as the most efficient distribution system, and the fiercest competitor you will ever encounter.
How do you compete with free? Obviously you can’t cut the price, unless of course you are willing to pay your customers to use your product. The only thing you can really do is to add value to your product. Believe it or not, but people are always willing to pay for a superior quality. Think about this next time you are shopping for a new cell phone. You provider probably offers a fully functional free phone with the service, but a lot of people opt for the sleek looking $200-$300 alternative which has extra features, bells and whistles. You have to do the same – you have to add bells and whistles to your product – and once you do, people will eagerly hand over their money to you, even if a free version is available.
The only problem here is that you can’t add value to information by combining it with more information. Adding bonus tracks, or blooper reel to your album or dvd doesn’t do anything because these things will end up on the internet as well. You need to add something that cannot be easily digitized and sent over a wire.
Kevin Kelly in his excellent article Better than Free identifies 8 value adding features you can use to make your digital product more desirable to customers. I highly recommend reading his piece in it’s entirety but if you are to lazy here are the 8 things he proposes:
- Immediacy – ie. the ability to ship the product to the customer before 0-day crack comes out
- Personalization – tailoring your product to customers specific needs
- Interpretation – lifetime support, warranty, 24 hour helpline, etc..
- Authenticity – genuine article is bound to have highest bit rate, sharpest picture and no embedded trojans
- Accessibility – pay once, download from anywhere and in any format
- Embodiment – no mp3 can beat a live concert, and no ebook is as nice as a beautifully bound hard cover edition
- Patronage – fans usually buy original cd because they want to support their favorite musician – not because they can’t find the mp3’s of the songs it contains
- Findability – iTunes are more user friendly than bittorrent – even with the DRM – you can capitalize on that sort of thing
So there you have it. Kevin goes into much more detail there, but I don’t want to steal his thunder. Read the article and see if you agree. All you need to do to make money on the seemingly free data, is to implement one or two things from this list above. And most digital content producers are already halfway there. They are just to set in their old ways to develop their strengths and capitalize on them. They still think it terms of distribution and scarcity. But this is a dead end.
Internet is the most efficient distribution channel you can imagine. You can’t get your data faster to your customer than over a high bandwidth fios connection. And if you try to use a slower channel or introduce artificial scarcity, into the equation to drive the price up the consumers will simply pick the free (illegal) alternative. If you concentrate on adding value in one of the 8 ways listed above however you can easily rise prices without scaring away or alienating the customer.
The funny thing however is that information is not the only thing that is becoming a free ubiquitous commodity. Even the physical products that were once scarce are heading that was as the technology improves and the prices fall due to normal market mechanics. Just go and read Kevin’s Technology Wants to be Free essay. I don’t think I can explain this concept any better than he does. But he is right – and his vision of future is certainly bright for us as consumers.
[tags]copyright, copyfight, digital distribution, freedom, information wants to be free[/tags]