Consultant Shelly Palmer writes about new media at his Media 3.0 website. Last month Joe Mandese at MediaPost Publications wrote a column about Shelly's views on free content.
What Shelly has to say is relevant to the advertising supported downloaded music discussion. I am reprinting Joe Mandese's column here annotated with my comments:
In the End Is freedom just another word for nothing left to lose?
by Joe Mandese
It's been said, there's no free lunch. But how many people know where that phrase originates from? It comes from a time when bars and taverns would put out sumptuous free lunches to entice the working crowd in for a midday pint or two. The practice, not unlike the more contemporary "happy hour," appeared to give something away for free, but it was really just an early example of grassroots promotional marketing.
Nowadays, the term "no free lunch" is used broadly to describe any kind of value exchange where someone appears to be getting something for free, but - knowingly or unknowingly - pays an implicit price. The reality is there is also no such thing as free media. It may seem free to a user, but somewhere, somehow, someone is funding the cost of producing and disseminating it.
"There are only three ways to pay for media," consultant and author Shelly Palmer declared last year while moderating a discussion on the subject at the OMMA Hollywood conference in Los Angeles. "I pay, you pay, or someone else pays." The pronoun in Palmer's model depends on who the speaker is, but assuming it comes from the point of view of a media content owner, the economics work thusly.
>> I pay: The media content owner eats the cost of producing and/or distributing content for free, because doing so generates other economic benefits (This approach cannot scale.)
>> You pay: The consumer pays directly for the cost of media content either via subscription services or à la carte purchases
>> Someone else pays: Typically, sponsors or advertisers who want to associate their brand or brand message with media content provided free to the consumer
"No matter what economic formula you use, media content comes with a price," says Palmer, "And ultimately, it comes down to one of those three models, or some hybrid version of them." (Magazines are the best example of a hybrid approach. Without advertising subscription rates would be much higher.) As such, Palmer says the notion of free media isn't really all that new. Obviously, the commercial media marketplace has long provided content for free, or been significantly subsidized by advertising.
But even seemingly free forms of media content, such as public broadcasting, comes with a price. Public television, for example, exploits at least two of the models. Consumers pay directly by making contributions to public broadcasters. Someone else pays - both government tax dollars and corporate underwriters - to provide content to the public.
Palmer scoffs at the notion that Radiohead's "pay-what-you-want" album sales model is at all a breakthrough. While a third of consumers who downloaded the band's latest album paid something for it, the real point of the model was to get the band's music heard to generate residual sales in the form of concerts and merchandising.
"It's really the Jerry Garcia model," says Palmer, referring to the late lead guitarist of the Grateful Dead, who encouraged deadheads to record the band's live performances and distribute and share the recording for free, because it would generate a broader marketplace for the band's music and concert tours. (
See my post: The Fallacy of the Concert Savior.)
As far as media content formats go, the music industry has been the canary in the coal mine of free media models. The incursion of illegal and illicit peer-to-peer file sharing networks has essentially killed the "you pay" model and has sent record label executives in search of new economics. One model that seems to be working is the "someone else pays" version.
Free, ad-supported music download sites like SpiralFrog are popping up to offer an economic solution in which everyone seems to win. Music labels and performing artists get paid by a cut of advertising revenues. Advertisers get valuable advertising impressions and goodwill from consumers. Consumers get free music and clean consciences.
Ultimately, the "someone else pays" model works because consumer attention has an intrinsic economic value for advertisers, sponsors and corporate underwriters. (This is the fundamental point underlying ad-supported downloaded music and is the inspiration for our motto: Don't Sell the Music; Sell the Time Spent Listening to the Music.)
In its extreme, some developers have even tried paying consumers directly or indirectly for their attention. During the late 1990s, PeoplePC gave personal computers away to consumers who agreed to look at advertising on their desktops, while NetZero gave them free Internet access in exchange for advertising exposure. The most aggressive example of the pay-for-attention model, perhaps, was Nat Goldhaber's Cybergold, a company that was founded on the premise that it would pay consumers cash for their attention to advertising messages.
(This is what SpiralFrog and RCRD LBL are doing. They are paying you with downloads for spending time on the site.) None of the pay-for-attention models tried so far have been successful, but companies continue to explore new variations on old themes.
(These models haven't been successful because they separate the content from the advertising.
This approach cannot work and history indicates that SpiralFrog and RCRD LBL will fail.)"Some people think free is not a model, but it is a perfectly valid one," says Palmer, who circulates his own newsletter and video series to 50,000 subscribers daily - all for free. "All the things that come with that notoriety are the spoils of the cost," he says, noting that the provision of free media content has boosted sales of his book, as well as his demand and fees as a speaker and a consultant. Invite him out for happy hour and maybe he'll tell you all about it.
I couldn't have said it better myself.
Paul McGuiness, the manager for U2, made a speech at MIDEM that sent the music blogoshpere into a tizzy.
Reading this left me thunderstruck. Consumers' time is also a valuable asset? Are you kidding? Consumers' time is the most valuable digital music asset, yet the writers of this report treat it as an afterthought.
