Feb 22 2009

Fear of Free

By Jane • Ebooks • • Tags: ,

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I’m continually amazed at the number of people that fear free digital content, believing that free digital content now will ultimately lead people to believe that all content is without value, that all consumers of books will somehow refuse to pay for digital content. The conflation of free and digital is one that is tossed around frequently, often based on the decreasing revenues of print newspapers and their inability to leverage or monetize their digital content.   However, I don’t believe that the format defines whether content has value.   The format might change the amount of the value expressed in monetary terms but I don’t necessarily believe that the digital form of content equals free.   

Nigel Farndale, in the above article, suggests that the iPod has killed the music industry, never mind the billions of dollars of revenue that digital sales have contributed.   According to a 2005 PEW study, teens are as likely to purchase music as they are to participate in peer to peer sharing which means that even if there is free content out there, people are still making purchases.

At least one report suggested that over 39% of teens participate in file sharing, but more Americans have purchased music in 2008 than ever before. However, the music industry is despairing because total revenue has declined. US consumers apparently would rather purchase individual songs than entire albums.

According to the Nielsen Co.’s year-end figures, music purchases -’ CD, vinyl, cassette and digital purchases of entire albums (grouped together as total albums), plus digital track downloads, singles and music videos -’ attained a new high of 1.5 billion, up 10.5% over 2007.

More than 70% of those transactions were digital track downloads, a record total of 1.07 billion that swamped 2007′s previous high of 844.2 million by 27%. Last week’s track downloads set a record of 47.7 million, and 71 songs exceeded 1 million downloads this year, compared with 41 last year (and just two in 2005). Track downloads outsold albums by a ratio of 2.5 to 1.

The model of the music industry used to be that concerts would drive album sales. Now, because of iTunes and the ability to buy individual songs, some in the music industryhave changed to remonetize its product by capturing value of the music through  higher concert dividends.    But the move to digital is not creating no market, but rather new markets.   The album sales market might be diminishing, but digital music is still creating revenue.

The music industry isn’t losing revenue because there is free content out there, but because the business model underpinning the music industry is changing from albums to singles; not because people don’t value digital content.

Television shows have always been free but the studios are recapturing value through selling DVD compilations, online streaming, digital downloads via iTunes and other venues. In recent numbers, the 4th Season of Battlestar Galactica, a television show that showed for free on Cable, had $5,472,209 in one week of sales. Lost, a series on ABC, has a total of $36,171,263 in DVD sales. I have purchased television shows via iTunes based on ease of use and convenience.   There’s nothing more blissful than a dinner out with the family and having your daughter entertained by a couple of cartoons while the husband and I are sharing a desert and coffee.   In the case of television shows, digital packaging is creating new streams of revenue.

Even if free = digital, existing signs point to free leading to an increase of sales, rather than a complete loss.   The most recent example was the decision by Monty Python to upload high quality videos to YouTube which led to an increase of 23000% in DVD sales.   

What content providers must realize is that a  changing business model wherein revenues are no longer captured  in the same way does not mean that content is not without value or that people will not pay, in some way, to use that content.   I think many people recognize that in order to have worthwhile content, we must pay in some way for it.   Consumers have reduced the value of the album, but have not determined that music itself is without value.   Consumers might believe that digital books have reduced cost given the costs of production, distribution and warehousing; but it is not our belief that books are without value altogether or that all books must be provided for free.   I think what consumers are looking for is a fair trade.   Content creators provide the best content they possibly can and for a fair price allow the consumers to utilize it in the way that it fits into their lives.

  The idea that all content in the future will be free or that digital content is equatable with free is very puzzling to me.   I need someone to explain it to me.     Do you readers, authors, editors, other folks believe that all content should or will be free in the future? If not, why?   If yes, how will content creators be compensated?   How can we capture the value and monetize it in a different way than direct payment via the consumer?

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