I never got a chance to write about this yesterday, and of course today has throw several roadblocks up, preventing me from writing more on this subject, but I wanted to get you the link at the very least.
This starts off, as usual, on a Mac site--Cult of Mac--to be exact. This post to be even more exact.
I am always intrigued by Malcom Gladwell. I haven't read his books, but I'm familiar with some of his theories and the fact that he's a HUGE sports fan certainly helps.
What CoM was doing was "fact-checking" a review he wrote in The New Yorker (there's that damn magazine again!) of Free: The Future of a Radical Price by Chris Anderson.
Anderson's basic (I'm dumbing it down here in a major way) premise expands on the Stewart Brand idea that "information wants to be free," and that the Digital Age is making it easier and easier to sell us "ideas" rather than "stuff," and because of that, everyone (publishing houses, record companies, etc.) will need to get over the fact that the old model is dead and adjust to the new one. Quickly. Here's one example he gives of how the trend started:
The cost of the building blocks of all electronic activity—storage, processing, and bandwidth—has fallen so far that it is now approaching zero. In 1961, Anderson says, a single transistor was ten dollars. In 1963, it was five dollars. By 1968, it was one dollar. Today, Intel will sell you two billion transistors for eleven hundred dollars—meaning that the cost of a single transistor is now about .000055 cents.
Anderson also uses, as an example, a really interesting study by Dan Ariely:
Anderson’s second point is that when prices hit zero extraordinary things happen. Anderson describes an experiment conducted by the M.I.T. behavioral economist Dan Ariely, the author of “Predictably Irrational.” Ariely offered a group of subjects a choice between two kinds of chocolate—Hershey’s Kisses, for one cent, and Lindt truffles, for fifteen cents. Three-quarters of the subjects chose the truffles. Then he redid the experiment, reducing the price of both chocolates by one cent. The Kisses were now free. What happened? The order of preference was reversed. Sixty-nine per cent of the subjects chose the Kisses. The price difference between the two chocolates was exactly the same, but that magic word “free” has the power to create a consumer stampede.
This is where Gladwell comes in. He doesn't think "Free" is quite the revolution that Anderson thinks it will be--for the most part.
First, using YouTube, a company that is yet to make any money for Google, as an example, he points out that far too many people are willing to round .000055 cents down to "Free," which is reckless:
...an estimated seventy-five billion videos will be served up by YouTube this year. Although the magic of Free technology means that the cost of serving up each video is “close enough to free to round down,” “close enough to free” multiplied by seventy-five billion is still a very large number. A recent report by Credit Suisse estimates that YouTube’s bandwidth costs in 2009 will be three hundred and sixty million dollars. In the case of YouTube, the effects of technological Free and psychological Free work against each other.
Also, there's been plenty of distributors of "Ideas" willing to stick with the accepted business plan:
The Times gives away its content on its Web site. But the Wall Street Journal has found that more than a million subscribers are quite happy to pay for the privilege of reading online. Broadcast television—the original practitioner of Free—is struggling. But premium cable, with its stiff monthly charges for specialty content, is doing just fine.
What Gladwell seems to be more in favor of--and he uses Apple's App Store as an example--is that in the future, the "Stuff" (iPhone) will only serve a vehicle to get us to purchase the "Ideas" (Apps), and I can get behind this notion somewhat. The App Store doesn't require nearly the same type of investment from Apple that thinking up, developing, manufacturing, and marketing a product like the iPhone requires. And while it's hard to believe that Apple would ditch a product that has sold over 5 million units in a little over a month, as costs drop and bandwidth gets cheaper, it's impossible to foresee what the future will bring, or even scarier, what we will bring the future.
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PS: I don't think there will be a Sunday Review this weekend, as I'll be gone most of the day for some work-related activities.
Enjoy it without me, or better yet, let me know what I'm missing.
More soon.
JS
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