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July 27, 2009

Filed under: culture»pop»trendspotting

Open Bars

Previously, on Cost.

Part 4: Free-conomics

Chapters nine and ten--digital media and free economies, respectively--are the strongest points of Chris Anderson's Free so far. That doesn't mean I'd put them up for a Pulitzer by any means, but I have relatively little to debunk (that or this book has finally overwhelmed my snark reserves, thus proving that even seemingly-inexhaustible resources do have limits). So we'll deal with them quickly, then take a break for some lighter fare: Anderson's motley collection of sidebars, and his reaction to the infamous New Yorker review by Malcolm Gladwell.

Anderson begins chapter nine with the heading "Free Media Is Nothing New. What Is New Is The Expansion of That Model to Everything Else Online." Indeed, if by that second "new" you mean "more than a decade old." He's like someone who waits until 1970 to declare that "the automobile is going to be a very influential technology." Good call, man! Hit us with another far-out prediction!

For the most part, though, this is a perfect example of Anderson's weak hypothesis: yes, advertising and alternate revenue streams can sometimes pay for a loss-leader free service. He spends much of this and the next chapter cataloguing (yes, again) all the different models of advertising that are possible online: from video game billboard placement to premium extras to gold farming (you may note, incidentally, that per Anderson's usual M.O. several of these are not really all that free). Anderson sees gaming in particular as a roiling pot of brand-new revenue models, even though most of them (like Second Life's virtual real estate) are just variants on very old models (in Linden Labs' case, the venerable lease). We are not, in other words, seeing the Internet charging ahead. We're seeing it catch up.

I feel compelled, since I'm familiar with it, to mention that Anderson's view of the gaming market is somewhat skewed. He concentrates primarily on massively-multiplayer titles, but he does also raise the transition from physical to digital distribution without spending much time on it. And it's just as well he doesn't, since to do so would be to point out that this is a booming digital content market that is assuredly not free. The cost of making a game, after all, is not primarily in printing CDs and boxes. It's in paying programmers, artists, designers, and writers to churn out an astonishing amount of material in a relatively short amount of time. Moving games to something like Steam or Impulse hasn't lowered their price to zero, as Anderson seems to argue should happen, because distribution was never the bulk of the expense in the first place. And I have seen no explanation from him, so far, on how to reconcile that fact with his predictions.

Of course, no book on Internet economics would be complete without a fawning section on Radiohead's In Rainbows, which was given away for free, then made a ridiculous amount of money for the band. In my opinion, this indicates more about the flaws of the studio system than it does about the viability of digital distribution, but it does (for once) make the point that Anderson wants it to make. Or does it? His other examples are Nine Inch Nails and Prince--all of which are big-name brands that can afford to A) drop the money for recording out of their own pockets and B) have a large fan-base built via a not-free revenue model. Of the struggling bands with free tracks on MySpace that Anderson loves to mention, what proportion of them have actually emerged as new superstars?

The answer, of course, is not many. But it's a shame that Anderson has insisted on sticking to either generalities (MySpace) or well-trodden examples (Radiohead) because there is innovation occurring in the free/premium music space. Take, for example, Steve Lawson and Matt Stevens, two loop-oriented instrumentalists who are using "free" tools like video-sharing service Ustream to broadcast online concerts, then networking with fans over free social media to arrange shows. Here are people who are, as far as I know, making a decent living using hybrid "free" models, many of which are much more interesting than simply giving away tracks online. But then, that would require more research than Anderson seems to have invested in this book.

If he or his editors had been thinking clearly, chapter ten would have been one of the first chapters in Free, not buried more than halfway through. In it, Anderson gives a rough estimate of the size of the free economy, if that's not a contradiction in terms. By doing so, he answers the burning question that most readers should have been asking from the start: So what? But in a bizarre turn, he writes (location 2645):

Let's quickly dispense with the use of "free" as a marketing gimmick. That's pretty much the entire economy. I suspect that there isn't an industry that doesn't use this in one way or another, from free trials to free prizes inside. But most of that isn't really free--it's just a direct cross-subsidy of one sort of another.
"Let's quickly dispense" with it? It's one of Anderson's four "free" business models from the start of the book! It's behind most of his examples, including the game market on which he's so bullish! Dispense with it? Why not throw away most of the book? Good question.

As always, while totalling up the GDP of this free economic zone, Anderson can't keep his story straight. He wants to use Facebook as an example of the "attention" economy, even though he admits that "Facebook is still unable to find a way to make money faster than it is spending it." Likewise, he wants to include the open-source consulting market, such as the enormous Linux division at IBM, even though (apart from the initial software) those services are at the center of the transaction, and they are very much not free. He wants to include free music and content in the value of networks like MySpace, although he's unable to assign them a value. And then to top it off, he figures the total cost of the Internet, based on an estimate of one hour of work for each individual URL indexed by Google, to be a conservative $260 billion. What are we to do with these numbers, all of which are either wild estimates or utter flights of fancy? Absolutely nothing, as far as I can tell. Primarily, they tell us that you can use the Internet to make money, or to share your hobbies. If Anderson had written this a decade ago, it might be noteworthy. Instead it's just kind of sad.

A Sidebar About Sidebars

Throughout the text, Anderson includes a bunch of sidebars, each titled in the format "How can X be free?" Once or twice they manage to be relevant. Most of the time they are disturbingly inane. For example:

  • "How can a DVR be free?" - Apparently by charging a fee for it every month, which is not really very free.
  • "How can silverware be free?" - By giving it away a piece at a time with a daily newspaper, which is both a stupid way to get your silverware and the yuppie equivalent of Cracker Jacks.
  • "How can a music CD be free?" - By (again) giving it away with a newspaper. This is a lot easier to swing if the musician in question is Prince. I'm guessing the Guardian isn't dying to distribute my debut album, Songs from a Blog.
  • "How can trading stocks be free?" - By only allowing a low number of trades, or requiring a large initial investment. Besides: trading stocks? Why is it that rich people get the free stuff, when they need it less than the rest of us?
  • "How can everything in a store be free?" - By charging a monthly entrance fee, which would seem to be not free either (this is the SampleLab example from chapter three).
I don't hold anecdotal sidebars against Anderson--they're a staple feature of this kind of book--but I'd prefer he did a better job with them. For example, William Easterly's White Man's Burden uses anecdotes in between chapters to talk about life in poor communities, or to discuss development projects that have done poverty reduction right. They back up the main text, and provide a light break from a book on a relatively heavy topic. Anderson's are basically just examples he couldn't shoehorn into the text, with at least one simplistic chart each. Far from giving me a break from his topic, they actually just depress me even more: by trying to highlight "free" products in the real, physical world, he paints a picture of a grim future in which consumers spend much of their time hunting through a sea of wasteful promotional gimmicks in order to furnish their homes and tend to their basic needs.

Sidebar the Second: Editorial Review

Malcolm Gladwell's New Yorker review of Free deserves some attention, not just because it's hilarious to watch one pop trend guru flame another, but because it's actually dead-on. Several tech blogs have noted that his numbers for YouTube's bandwidth costs may be based on an inaccurate report, but the point remains: like many of Anderson's pivotal examples of free revenue, YouTube is not actually profitable. Gladwell also raises valid points about research, infrastructure, intellectual property, and scale. And he shows off why he's the king of this genre, with equally-unscientific but far fresher counter-anecdotes scattered through the review. But what seems to have struck home is his comment on journalism. Gladwell writes: is not entirely clear what distinction is being marked between "paying people to get other people to write" and paying people to write. If you can afford to pay someone to get other people to write, why can't you pay people to write? It would be nice to know, as well, just how a business goes about reorganizing itself around getting people to work for "non-monetary rewards." Does he mean that the New York Times should be staffed by volunteers, like Meals on Wheels?
Anderson focused primarily on this passage in his retort, titling it (in a fit of projection) "Dear Malcolm, Why So Threatened?" He has no good answers for the ailing newspaper industry, Anderson writes, but his personal model is (I am not making this up) Wired's Geekdad blog.
About three years ago, I started a parenting blog called GeekDad, and invited a few friends to join in. We soon attracted a large enough audience that it became apparent that we couldn't post enough to satisfy the demand, so I put out an open call for contributors. Out of the scores who replied, I picked a dozen and one of them was Ken Denmead [...] Ken is, by day, a civil engineer working on the BART extension in the SF Bay Area. But by night he an amazing community manager [sic]. His leadership skills impressed me so much that I turned GeekDad over to him entirely about a year ago. Since then he's recruited a team of volunteers who grown the traffic ten-fold, to a million page views a month.
Two things: first, if you are not a parent, reading Geekdad is like being trapped in an elevator with a new father--one who expounds proudly on every single aspect of life with their progeny, as if they are the first parents in history of the entire world, except it's ten times worse because the parent in question is a giant nerd. Second, it's a parenting blog. Of course it's free: you'd have to pay them to shut up about their kids! There's nothing wrong with that, although it's not high on my reading list. But to compare this with the act of journalism--of investigating stories, poring over data, putting in phone calls, fact-checking, etc.--is foolishness.

Good journalists are content experts. They're excellent writers who know what questions to ask, and where to dig. They put in a lot of time doing very unglamorous, tedious work in the service of small glories, like a front-page story or the feeling of a truth well told. For good journalism, you have to pay people. Now, you can certainly pay them based on ad revenue, and you can take advantage of crowdsourced labor to distribute some of the grunt work--Josh Marshall's Talking Points Memo has been a great example of new media reporting--but you don't get good, quality journalism for free. And I would argue, based on the downward spiral of quality in 24-hour TV news, that we should be extremely wary of outlets dependent on audience eyeballs for all funding. Viewers may find that they get what they pay for.

One of Anderson's defenses, as a trendspotter, is that he's not advocating for "free" but merely showing the direction that the market is headed. And it's in cases like this, where he suggests that the news should be run like a niche parenting blog, that I find his approach most reprehensible. It allows him to make arguments about the future but present them as facts, the futurist equivalent of the passive voice. It denies us agency in choosing a future--like it or not, he's saying, you'd better get used to this "free" stuff, because it's inevitable. There is, of course, nothing inevitable about it, and there's nothing neutral about Anderson's position. He's practically salivating over this new, free world, where journalism is run like one of the press release-mills that Wired calls a blog. At the end of his response, Anderson peevishly asks "Malcolm, does this answer your question?" Yes, it does--and we should find that answer terrifying.

Future - Present - Past