Six Pixels of Separation - The Blog
December 12, 2009 8:25 PM

The Problem With Free

If you got everything for free, do you think you think you would feel the same way about it as if you had paid for it?

Here's a personal anecdote: for close to 15 years I was a freelance journalist in the music industry. Along with interviewing musicians and attending concerts, my gig also involved reviewing CDs (and for a time, it was mostly vinyl and cassettes). Over the course of that career, I had accumulated close to 20,000 CDs. Almost everything that the major, minor and indie labels released was dropped in my mailbox multiple times every week. From new releases to boxed sets, compilations and re-releases of entire collections. If you love music (like I do), that's a pretty sweet ride, but with it came a very interesting understanding of the value of free. Prior to this work, I was a music fan too. I would hear about a band working on a new album and would wait with bated breath for the release. Sometimes, I would wait in line on the day of the release and fork over my hard-earned money to hear what artistic majesty they had created. Then, when suddenly everything that comes out is being sent to me for free (sometimes even pre-release date as an advance), you start to lose perspective.

When you pay for something, you appreciate it more than when you get it for free.

That may sound counterintuitive, but it's true. When I would wait for a band to release their new album, then wait in line for a few hours to get it, pay for it, and then finally get home to listen to it, it was hard to dislike it (even it wasn't so great). The main reason is that you would feel a little stupid inside, and nobody wants to feel stupid, so we tend to look for the good in it (especially when we paid for it). It's also one of the main reasons why people get so vocal when it comes to reading negative reviews of bands they like. It's important to remember that most reviewers get their music for free (and tons of it), so they have no vested personal emotion in it.

Free is more disposable.

Mike Lipkin is a great motivational speaker, and one of my favourite lines from him that he uses onstage is: "I would do this for free, but I am going to make you pay for it so that you appreciate what you're getting." Touché. So, yes free is a great marketing strategy to drive interest and intent (for more on this, be sure to check out Chris Anderson's book, Free - The Future of a Radical Price), but it's not a long-term strategy to develop real relationships with your customers. The music, newspaper, publishing and movie industry is learning about this the hard way.

The bigger challenge is going to be in finding a consumer base that digs deep enough to understand that in a world where everything is free, there is also plenty of ambiguity and lack of loyalty.

By Mitch Joel


Comments Comments Feed
  • Posted by mr. tunes
    Mitch Joel

    yes these are some good insights. at one time i was able to hack a handheld gaming system so it would play free games. i noticed that i wasn't caring about any of the games i was downloading for free, so when i bought the nintendo ds, i decided to not go this route. every game i buy i have a sincere interest in learning about and playing.

    as a musician i recently came up with a new strategy. everything that is available for download is free, but i am going to make a club where you pay to join, and then a few times a year i send out a cd and newsletter to my members with my latest music and news (err like a blog on paper?).

    i used to sell my music on some big dance music sites, but since not many people knew my music already or my record label, sales were pretty grim. i'd rather not have such barriers for people to find my work.

    http://mrtunes.bandcamp.com

    Reply
  • Posted by mr. tunes
    Mitch Joel

    p.s. the book Free by Anderson is great because it questions the idea that things have value just because we paid for them. the next generation is definitely going to be viewing products and services much differently than the way we did. it's not all about us any more.

    Reply
  • Posted by Scott Bowman
    Mitch Joel

    I know it's not exactly the same, but Disney does something similar with their animated features. I know that when something from the Disney Vault is released, I need to get it now, or may have to wait 5 years for it to be released again. Comcast OnDemand has thousands of movies, many of them free, and I never bother to look. If Disney were to put their whole library OnDemand, even as rentals, their would be less urgency and pent up demand for those movies. The scarcity of these titles increases my perceived value in them.

    When everything is free, the perceived value often takes a nosedive. How many "free ebooks" have you downloaded, and haven't even read? I'm guilty too.

    Reply
  • Posted by Richard
    Richard

    The problem with pricing is nuanced too. What's the right price for a cd of music? When I was a teenager it was $30, 75% of a day's wage. Way too high. The music industry opened themselves up for slaughter after years of over pricing.

    It'll be interesting to see the evolution of price on Apple's App store - today the price of most apps are arguably too low and of course those that are payable are valued more highly.

    Reply
  • Posted by Tony Pantello
    Tony Pantello

    I think Mitch is right on here. Here's a parallel from the world of microfinance:

    The most common criticism of the practice of microfinance asks why these organizations loan money instead of charitably giving it away to some of the world's poorest individuals. Aside from meeting the costs of operation and sustainability, microfinance organizations loan money instead of giving it away because they have experienced that when individuals take ownership and are responsible for repaying a given sum of money, they feel more empowered and are often more motivated to work at their given endeavor the loan was intended to support. And in turn, their micro-business operations are more successful, have a bigger impact in their surrounding communities, and not to mention have very high repayment rates (90-95%). (See Hope International, Kiva, Acumen Fund) Do you think these same individuals would feel the same sense of entitlement, ownership, responsibility, pride, and empowerment if money was just freely given to them? I think not.

    On a similar but yet very different level, I think this lesson can apply to consumer products as well. When you know your own time, research, sweat, and money went into purchasing a product or service, wouldn't your appreciate it more? I think so.

    Reply
  • Posted by Luc
    Mitch Joel

    I remember a time (nearly 15 yrs ago) when we tried to sell online for all that it could do (advertising, sponsorship, promo, pr, loyalty, etc.). We thought a test for $25K would reduce risk and price of entry. But we finallly succeded succeeded with a simple selling proposition; "let's do billboards (banners) on computer screens, at $200K for 3 mths." We closed every second chance we got.

    Reply
  • Posted by David Jacobs
    Mitch Joel

    Generally agree with you here Mitch, but as Anderson implies in the Free book, free isn't really free as it must lead to something. Somewhere down the line, everybody must get paid. Baby's gotta eat as they say.

    Free will get you in the door, but the good stuff is in the back. Can't get back there without a toll. Once you have proved your worth, people should be happy to pay the toll.

    Free is a strategy not the end game.

    Reply
  • Posted by Mark W Schaefer
    Mitch Joel

    This is a timely post. My son fronts a rock band (Royal Bangs) who just completed their first European tour. They have played both SXSW and Bonnaroo and have a growing and loyal following. They are talented, work like dogs and embrace their fans.

    Yesterday I had lunch with him and asked him how his album sales were going. He said it didn't really matter because they would never, ever make money off of their music. He said that people expect music for free and they will get their music for free. Really the only way to monetize is to tour, sell merchandise, and hope a movie soundtrack picks up on a song.

    My point is that we can talk about relationships and customer value and lament what SHOULD be all we want, but that does not fix what IS. We are in a world of free and there's no going back. So let's figure it out.

    Reply
    • There is a paradox going on here and it's so curious. Music fans are die-hard... so loyal, so why don't they buy music - even if they can get it for free - simply to show/demonstrate the passion they have for these bands that they love so much? There's got to be some very fascinating insights into the human condition on this. Personally, even when I was sent CDs and books, I'd always go out and buy the artists that I loved and respected - simply to demonstrate my support. I have no idea why music fans don't do the same?

      Reply
  • Posted by Phil Simon
    Mitch Joel

    Good stuff, Mitch. I agree with just about everything that you write. SHAMELESS PLUG ALERT: I reviewed Chris Anderson's book a few weeks ago on my site:

    http://www.philsimonsystems.com/2009/11/free/

    I loved the book but really struggled with the same things that you do. I didn't think about the "appreciation factor" as much as you did, though. Interesting point.

    Am I a luddite or just, er, practical?

    Phil

    Reply
  • My husband experienced a different version of this mentality when he practiced medicine. There were patients whom he knew could not afford their medicines, and he bent over backwards to find them free samples and write off charges for their office visits. With few exceptions, however, these patients were not nearly as appreciative as those who paid for everything.

    In this day of information overload, I believe that a great deal of value is in the packaging of our offerings. If we can make things more convenient, more reliable, more interesting, or more fun, then we've added value that people will pay for, even if they can get the core product, service, or information elsewhere. David Jacobs has alluded to this.

    Thanks for this thought provoking post.

    Reply
  • Posted by Walter Levitt
    Walter Levitt

    Couldn't agree more, Mitch.

    One of the other challenges is re-training people to pay after they've received something free for a while. IMHO, that's going to remain one of the single biggest issues facing the digital space in the coming few years.

    Reply
    • Posted by mr. tunes
      Mitch Joel

      why do they have to be trained to do anything? merchants have to train themselves to work with customers better. back my original example of video games - look at how the manufacturers saw how customers were hacking their consoles and downloading games, so now the new generation of consoles have downloading capability where you can buy games for a few bucks. they saw what people wanted and worked with it - xbox 360, nintendo dsi etc

      Reply
  • Posted by Ian M Rountree
    Mitch Joel

    Seth Godin just did a brilliant post on this recently as well, specific to the idea of dynamic pricing. (For those who don't read: http://sethgodin.typepad.com/seths_blog/2009/12/the-magic-of-dynamic-pricing.html ) The basic premise matches up with the deceptive value of free.

    I've also mentioned that just about all of the music I actually listen to in my iTunes library - more than 2000 songs now - was purchased from the iTunes store. I thought it was incredibly weird when I did the numbers (disclosure, here's the post: http://ianmrountree.com/blog/life-at-the-scale-of-the-internet/ )

    Odd, the post was more about effort and scale than music, though it was the example I used. I think one of the key things people miss is at the end:

    "Convince me to care. That’s the internet scale in four words. Otherwise, I’ll keep racking up the play counts on things I already access regularly, and you’ll end up like the pirated music on my iTunes; neglected, discounted, and neither making money nor losing any."

    That's my two cents, anyway. Or would be, if you had a donate button.

    Reply
  • Posted by John LoFranco
    Mitch Joel

    People get stuck with the misconception that you get what you pay for. Someone going to a fine steak house, dropping a few hundred dollars expects the best experience. Yet why should a steak from a less than four star restaurant receive lower expectations? Price. So how are 'the best things in life free" if we can't appreciate them for their worth? The money we earn, the time invested into work, all goes towards that ultimate purchase. We get that feeling of satisfaction when walking out of a store, having bought that something you've had your eye on. Free is almost like a cop-out. It is less fulfilling due to the lack of work or effort on your side of the exchange. Free is not bad, but the reward of price provides perspective for consumers.

    Reply
  • Posted by Kathryn Segal
    Mitch Joel

    Free things can only get you so far. When you download music for free, or burn it from a borrowed CD you lose respect for the artist and the work itself. I agree that you appreciate things more when you've had to work for them. This applies in many aspects of your life. You appreciate the experience of University or College more when you've had to pay for it and work for it. In Public School you're more likely to take advantage of the education you are receiving than appreciate and learn from it. When you work for it, or pay for it, you have a deeper admiration for the item/experience and are more likely to take pride from it.

    Reply
  • Posted by Julia
    Mitch Joel

    I have to say that though this is a timely post, I don't agree with the premise. I think what's being described is devaluation through inundation. I too review music and a lot of it gets to me, but I also listen to a lot of music, go hear lots of live shows and I buy a lot of music. I'm also a downloader and I fit into the demographic that many studies have already shown to be true: the biggest downloaders are also the most loyal customers. I get the high-priced, limited edition DVD specials with all the extra stuff because, well, that's how much I want it. I'm not that exceptional either. As the debate over copyright continues, more and more studies show my style of consumption to be the norm. Never forget that cost does not equal "value". When I go to a store or website, I'm choosing the music I want out of everything being thrown at me. And while I disagree with overcompensating music companies for mass-producing plastic discs on which the art I want is encoded, I am more than willing to pay top dollar to artists for their creations. The fact that I can get something for free and do occasionally get things for free doesn't mean they're less "valuable", far from it. But the way our society measures things like "value" and "success" is as outdated as a business model based on cds and push sales instead of collaboration, sharing, cross-promotion and direct connection with the consumer. Devaluing is charging 99 cents for a song and only paying the artist 5 cents of that. I'd say in fact that by purchasing concert tickets, music (wherever possible) and swag directly from the artists and refusing to compensate a middle-man who in fact acts as a gateway, is extra-valuing the art work, and truly appreciating where it came from, like any truly loyal customer.

    Reply
  • Posted by Amalia
    Mitch Joel

    Your post raises some important questions about the relationship between value and cost. I agree that working and saving up to buy a CD creates a personal relationship; whenever you hear the music you'll be reminded of the effort it took to earn that CD. Of course you will be more likely to appreciate it when you have spent hard-earned money on it. However, I think that it is still possible to assign value to something without a price. In fact, when something is free, it has to be appreciated for its own merits and not just the dollar cost associated. I think it's also important to remember that a dollar cost is not the only kind of price. We may not pay a dollar amount when we stream a song for free on MySpace, but we do pay in time and attention. As more and more becomes available to us for free online, I think we are moving towards an attention-economy where we pay with our free time. I think that this trend of free prices is not going to go away anytime soon. Once the cost of music has been set at $0.00, as file-sharing programs have done, there will always be people who refuse to pay more. We need to start re-evaluating the ways in which we determine value.

    Reply
  • Posted by Megan Moulton
    Mitch Joel

    Great post!

    I completely agree with your concept of ‘free.’ As kids, free is great. But as we get older, if the things we love most come easily to us, the more apt we are to take advantage of them, and the less we value them. Whereas those things we have a vested interest in and work for, are those things that we care about and appreciate more.

    That being said, many organizations may offer something for ‘free’ as a form of gratitude for loyalty. Which is great, and generally always well received. But it’s not all the time. Which ultimately secures customer appreciation when they do receive whatever it may be.

    The moral of the story is that a balance is needed. Too many things for free can take away the value of something. And not receiving anything for free can leave someone feeling unvalued. Creating a balance is something we may have to develop for ourselves, but in the end it will help maintain perspective on the things we enjoy the most.

    Reply
  • Posted by Peter Osborne
    Mitch Joel

    Great points within this post, but I wonder if you have any second thoughts in light of your participation in Seth Godin's What Matters Now project and how you think the reception it's getting would have changed had people been asked to pay for it? Like many, I've added the free download to my blog and am working on a posting that focuses on the word Simplicity, which surprised me by its absence in the project (although I recognize that as a quibble in an otherwise outstanding project).

    Peter
    www.posborne1.wordpress.com

    Reply
    • Two thoughts on this:

      1. I think people would have paid for it, because the high level of quality is there.

      2. I think that Seth's strategy to use "free" to promote these ideas (and the people who wrote them) helps everybody with the halo effect of the popularity.

      Reply
  • Posted by Mark Gresham
    Mitch Joel

    I have been trying to tell people these same things for a loooong time.

    Goes for the printed music industry as well.

    Another thing: A "negligible number" is not zero. A multiple of zero is zero, but a sufficient multiple of a "negligible number" can turn out to be a very significant number, and it may only take a few instances among those to have a real impact.

    Otherwise, the "long tail" would not work at all.

    Reply
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