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Bill Gurley on the “Free” Business Model « abovethecrowd.com July 25, 2009

Posted by hruf in Multimedia.
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I have been intrigued by the back and forth between Chris Anderson, Malcolm Gladwell, and Mark Cuban on the topic of “Free” as a strategy and business model. For those that haven’t read the articles and posts, I highly reccomend them all. Here they are in a list:

1) Back in February of 2008, Chris Anderson wrote the original cover story for Wired Magazine, title “Free! Why $0.00 Is the Future of Business.” Recently he has expanded this into an entire book. I have felt for the  past year or so, that Chris’ first article is quintessential reading for the entrepreneurial set.  More on why later.

2) In the July 6, 2009 edition of the New Yorker, one of my favorite authors, Malcolm Gladwell, took issue with Chris’s book in an article titled “PRICED TO SELL“. In this article, Malcolm does a good job of disputing some of the core pillars of Anderson’s thesis. Basically, there is always a cost to delivery, even if its really low on a marginal basis, and in volume it can get quite expensive on the cost side. He also, appropriately highlights that “Free” is not a panacea of a business model. It doesn’t always work.

3) Mark Cuban then chimed in with not one but four posts: “Free vs Freely Distributed,” “When You Succeed with Free, You are Going to Die By Free,” “Google Is Learning the Reality of Free,” and “A Quick Ditty on Free.” Mark, like Malcolm highlights many of the dark elements of the Free model. Namely, it is risky, it can be costly, and that the “freemium upgrade model” may be create a lead that is temporary.[…]

Lastly, agreeing with Mark and Malcolm, I do not believe that free is a universal truth. I don’t think that content has some kind of destiny to be offered for free. Even though the marginal cost may be zero, if you have highly differentiated content, there is no reason to adopt a free business model (assuming the government will stand behind your intellectual property protection). HBO’s hit shows should not be free. The NFL has no need to offer free access to all games. The Wall Street Journal is doing the exact right thing, and I find it peculiar that the New York Times is not executing the same strategy. I would also suggest that over the next two years you will see the majority of high-quality video content move behind a subscription wall, even at sites like Hulu.

The key question for anyone in business is, “Can someone do what you do for free?”.  If the answer is “yes” you have a problem.

via Bill Gurley on the “Free” Business Model « abovethecrowd.com.

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