Monday, August 24, 2009

Linux Monday: The Economics of Free

Linux Monday: The Economics of Free

On the net, the default price is zero, and Linux and open source fit well into that ideology. Old media, not so much. Journalism and the music industry are struggling. They face much the same dilemma: when the product is free, how do you make money?

Journalism is adapting from a pay model that's as old as the printing press, and digging in its heels with ridiculous plans like the Associated Press' scheme to charge bloggers $12.50 for a five word excerpt. And the music industry has yet to accept that recordings are no longer the money making product, but have become a promotional item that sells concert tickets and t-shirts. Instead, they prefer to sue their own customers.

The Linux community, 18 years in, is dealing with the economics of free much better than the old media. In part that's because open-source has always been about free.

"In the past, the media was a full-time job," says Wired editor Chris Anderson. "But maybe the media is going to be a part time job. Maybe media won't be a job at all, but will instead be a hobby." And indeed, that's how it started for me, as a just for giggles pastime that got serious and eventually (for a year and a half) turned into a paying gig.

That's sort of how Linux grows and grows: a geek needs a driver for one odd piece or hardware, and learns some marketable skills in the process.

But still, doesn't somebody have to feed the beast with some $$$ at some point?

"Basically it's a sophisticated variation of a loss leader, like giving away razors so you can sell blades," writes R. McDougall at Climbing The Hill:
No matter what you make, someone will always either manage to break it; or find some flaw they would like improvement in -- especially as time and market conditions change. So you sell support and contract upgrades.

But since everyone else can just take a copy and distribute it themselves, won't you have endless competition?

Well yes, but the hard truth is that's probably in your own long-term best interest. There is collective benefit to having competition.

As the creator of the software you have competitive advantage amongst any pretenders; you know it best, and your superior skill will tend to win out in the end. So the only people you are really competing against are other experts.

"Decide what it is you do that provides value to someone with money," McDougall concludes. It seems that if the main product is free, the money is in the niches.

Which is part of why I believe that ultimately it will be political interest groups that finance journalism. Just as software has expanded from the either/or Mac/Windows "choice" to the plethora of Linux distributions, TV has expanded from the Big Three to hundreds of channels.

That means there's no market for namby-pamby neutrality anymore. The indifferent and undecided aren't watching news at all anymore. Walter Cronkite's avuncular that's the way it is has been replaced by the open advocacy of Olbermann and Maddow, Limbaugh and O'Reilley. When they get the facts right, it still functions as journalism. It's still the traditional model of advertiser support, though the ads are more niche-oriented. But perhaps the model will shift to the more overt partisan press we see in other countries.

That model it makes us, the sudience, do some of the work of weighing the competing ideas, just like we Linux users have to do a little of the work on our end. You may not have to compile the whole package, whether that package is a story or a program. But you'll be expected to play at least some active role and be informed about what you're using.

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