Wrap-up

How “free” is subsidized, how it works, and why it matters

John Maynard Keynes

• “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else.”

- John Maynard Keynes

F. A. Hayek

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - F. A. Hayek, economist

Stuart Brand

“On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.”

- Stuart Brand (1984)

The Language Game

• Open vs. free• Free vs. subsidized• Open vs. sample• Free vs. enticement

• “The culture of free”

Is Free Really New?

• Free as a model of making revenues from one thing while doing another is not new– “Throw-aways” in newspapers, magazines– Free razor, paid blades

• Mozilla is free to us, but charges Google $15M per year for first rights to its search box in the upper right

• Free Google search, paid Google ads

Free Can Be Perceptual

• One person can perceive a resource as free when in fact it’s paid for by another person

• Newspapers are a great example of work subsidized by advertising– Journalists hired to fill the spaces between ads

• Open Access – free to reader, not free to whoever paid

• “Subsidized free” seems more accurate to me

First Half of the Day

• Most striking common thread to me?– All three have incredibly complex, well-studied,

well-conceptualized business models– “Free” is a driver, and a well-studied part

• Both NAP and FlatWorld are driving down expenses while also lowering overall price points for consumers

• Free has a price

Books Are Changing Fast

• Both NAP and FlatWorld Knowledge are gaining business advantages through efficiencies– Print-on-demand– Warehousing efficiencies

• iPad and other channels are pulling books into the online pricing wars– Macmillan v. Amazon, 2010

Channel Management

• Is a new device a new channel?• Is a new format a new channel?• Are people paying for information,

convenience, appeal? Or some subjective combination of all three?

• Channels will proliferate• Having a strategy to deal with that will be

important

“Free” to Explore Adjacencies

“When a layer gets commoditized, value is created through proprietary services in adjacent layers.”

- Clayton Christensen

Sunk Costs vs. Fixed Costs

• Note about something Chris Anderson was quoted as saying, “Once that sunk cost is paid . . .”

• Sunk costs can include variable costs – basically, it’s money you can’t recover

• Fixed costs don’t vary by volume produced, but they can be recovered

Flat World Knowledge

• “Although Flat World Knowledge describes itself as, ‘open source,’ its business model is in no way, the free ‘open source,’ most of us are familiar with. Flat World Knowledge, offers several pricing options. Students and professors can either read the book online for free, download a printable version for around $20 dollars, or purchase a black and white soft-cover for about $30 dollars. Professors can also modify the textbooks if they feel the need to do so. As we all know, these prices are significantly cheaper than the usual $100-200 dollar texbooks plenty of students have been forced to pay for in the past.”

- VatorNews, March 24, 2009

Customer Focused

• Choice is important• Lower initial, entry prices are important• Study aids are important– Students want the fastest path to success

• Getting the right thing is important

Is “Free” a Side-Effect?

• Has e-commerce brought customers to a more retail-like point for publishers, allowing them to adopt more sales strategies, enticements, and sampling approaches?

• Is “customer free” different from “morality free”? Can we satisfy both?

Interesting Concepts

• “Page view annuity” = vacuum cleaner video• Disposable vs. keepsake content• Viewing your best customers as the ones you

can get the most money from• Channel management vs. bundling• “Overchoice”• “Good enough” = bad

User Perspective

What matters to suppliers and consumers of information

Lady Gaga

“I want your ugly,I want your disease, I want your everything,As long as it’s free.”

- Lady Gaga

Professor Gaga via Diane Harley

“I don’t want your ugly,I don’t want your disease, I don’t want your everything,Even though it’s all free.”

- Lady Gaga, PhD

Diane Harley

• Importance of:– Peer-review– Not getting ripped off– Prestige (clear hierarchy)– Accessible to the “right audience”– Filtered information

• “It’s free to you. It wasn’t free to me!”

Christina Pikas

• Things we don’t want to pay for– Don’t want to pay twice (that’s so NOT free!)

• Areas where to tread carefully– Irrelevant advertising– Clumsy offers– Locked content you can’t really use

• Things that are worth the money– Discovery, UI for scholarship, portability, workflow

Christina Pikas

• Blogging at ScienceBlogs• Revenue sharing is common at ScienceBlogs• Free to users, but advertisers pay• Again, free drives traffic, talent drives traffic,

and advertisers pay for traffic• Perceptually free, but “subsidized free”• Essentially a modern newspaper model

Christina Pikas

• Value of adjacencies to content– Metadata, discoverability, aesthetics

• “It should be all about the content, but it’s not. It’s absolutely not.”

Blowing Things Up vs. Better Place

• Suggestion: Do less of the first, and you axiomatically do more of the second

Phil Davis

• “Property” metaphor inadequate– Information non-depletable, non-rival

• Is “Labor” metaphor more applicable?– What about continuity, brand, designation?• Do those fit the “labor” model?

• What do publishers provide that is non-labor?• Is it a “labor-plus” model (ala, “cost-plus”)?• Is it something else?

“Free” vs. “Open”

• “Free” as in “free beer,” not “freedom”– Access is a privilege, subsidized by someone else

• “Open” vs. “closed”– Access is a right– Who pays for your other rights?

Should Data Be Free?

“The Open Data Foundation (ODaF) is a non-profit organization dedicated to the adoption of global metadata standards and the development of open-source solutions promoting the use of statistical data. We focus on improving data and metadata accessibility and overall quality in support of research, policy making, and transparency, in the fields of economics, finance, healthcare, education, labor, social science, technology, agriculture, development, and the environment.”

Even “Open” Data Costs Money

“. . . it costs money to make existing data open. That sounds like an excuse, and it’s often used as one, but underneath is a very real problem: existing procedures and datasets aren’t created, managed, or distributed in an open fashion. This means that the data’s probably incomplete, the document’s not great, the systems it lives on are built for internal use only, and there’s no formal process around managing and distributing updates. It costs money and time to figure out the new processes, build or buy the new systems, and train the staff.”

- Nat Torkington, O’Reilly Open Source Convention

Even Gov’t Data Requires Investment

“There’s value locked up in government data, but you only realise that value when the datasets are used. Once you finish the catalogue, you have to market it so that people know it exists. Not just random Internet developers, but everyone who can unlock that value. This category, “people who can use open data in their jobs” includes researchers, startups, established businesses, other government departments, and (yes) random Internet hackers, but the category doesn’t have a name and it doesn’t have a Facebook group, newsletter, AGM, or any other way for you to reach them easily.”

- Nat Torkington, O’Reilly Open Data Convention

Organizing and Ordering

• What is the value of having an addressable community?

• What is the value of having an orderly information dissemination world?

• What is the value of sustained arcs of scholarly publishing?

• What is the value of adaptability to emerging communities of expertise?

“Free” = “subsidized free”

• Every example today talked about “subsidized free”

• Free has a cost – opportunity cost, actual cost, or forgotten cost

• Free can have a benefit to businesses – sampling, lowering barriers to purchase, enabling subsidization

• “The culture of free” is a pretention

John Maynard Keynes

• “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else.”

- John Maynard Keynes

F. A. Hayek

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - F. A. Hayek, economist

Stuart Brand

“On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.”

- Stuart Brand (1984)

Thank You