Chris Anderson on the Economics of 'Free': 'Maybe Media Will Be a Hobby Rather than a Job'
Part 2: Can Classic Journalism Compete?
SPIEGEL: If the audience goes online, will the revenues follow?
Anderson: Yes. It's all about attention. That is the most valuable commodity. If you have attention and reputation, you can figure out how to monetize it. However, money is not the No. 1 factor anymore.
Anderson: Attention and reputation are two non-monetary economies. The vast majority of people online write for free. We've tried paying some of our bloggers and they thought it was insulting. They're not doing it for the money, they're doing it for attention and reputation, or just for fun. For example, two years ago, I started this Web site called geekdad.com. It's about being a dad and being a computer geek. We're writing about how to do things that are fun for kids and fun for dads. It's a community project, everyone contributes for free but we now have an audience bigger than many newspapers. And there are an infinite number of sites like this out there.
SPIEGEL: Can classic journalism, which is obviously more expensive to produce, compete with that sort of thing?
SPIEGEL: You just published a new book, called "Free." Its central message is to give your product away for free ...
Anderson: ... and monetize it some other way!
SPIEGEL: How does this apply to the Internet?
Anderson: The online economy is about the size of the German economy. And it's based on a default price of zero. Most things online are available in a free form. We have never seen an economy this big with a default price of zero. I realized that we needed an economic model to explain how an economy could be based on "free." And we need to understand the psychology of that. We have the psychology of free, we're drawn to it, but we feel cheated by it. If something used to be paid for and then it becomes free, we think the quality is lower. But if something has always been free, and remains free, we don't think that.
SPIEGEL: Many companies would love it if your concept of "free" were to disappear from the Web as soon as possible.
Anderson: How could it disappear? Free is the force of gravity. If we decide to resist it then somebody else will compete with something that is free. The marketplace follows the underlying economics. You can be free or you can compete with free. That's the only choice there is. The Wall Street Journal, by the way, is very clever about this.
SPIEGEL: In what way?
Anderson: They use free content to attract large audiences and then convert some of them to paid content. The idea is: Don't charge for the most popular stuff. And never charge for exclusives because if you wall off the exclusives and other people report on your exclusive, they'll get the traffic and you won't. Instead charge for the niche stuff that some people will pay for.
SPIEGEL: But charging a minority of your audience won't fund expensive reporting on Iran or Iraq.
Anderson: Right. The curiosity is that, that is what is left for mass media -- it's the kind of stuff that niches don't do well. Politics, war, disaster, scandals, etcetera. You can't charge for it and advertisers don't like it. Unlike in the old offline-world, it turns out they would rather not have their ad for Coke be up against reports from the streets of Iran.
SPIEGEL: Conclusion: There is no convincing solution so far -- even from provocateurs like yourself?
Anderson: I think we will discover that whatever the business model of the 20th century was, it will be different in the 21st. Maybe we realize that selling ads is not the business we're in. Maybe we're into selling online content to audiences, or in creating communities or into selling events -- in a similar way to which parts of the music industry is making money from concerts. Maybe companies that were built around the old business model will go away and other companies will come up, in much the same way as old record industry labels may disappear but the Apples of the world, with their iPods and iPhones, will continue to do well.
SPIEGEL: One last thing, why isn't your book free?
Anderson: You only pay for the hardcover version. The marginal cost for the digital file is zero, so I'll give the digital text and the audio files away for free. However, if you want to have the abridged audio book in a 3-hour-version, then you'll have to pay.
SPIEGEL: Because time is money?
SPIEGEL: Mr. Anderson, thank you for this interview.
Interview conducted by Frank Hornig.
- Part 1: 'Maybe Media Will Be a Hobby Rather than a Job'
- Part 2: Can Classic Journalism Compete?
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