Yesterday, Seth Godin took on Malcolm Gladwell over his review of Chris Anderson's new book, Free: The Future of a Radical Price. He said, "Malcolm is wrong." He went on to support Anderson's view that information will eventually be free, and that's a good thing. Wow, an intellectual battle brews!
The Twitter-sphere lit up, because it was a battle of the giants (mr blog versus mr mega-best seller). I tweeted that I would read both party's posts on Anderson's book, then step in. And I intend to, eventually.
Along the way, I was tripped up by something Anderson says in Free:
“In the digital realm you can try to keep Free at bay with laws and locks, but eventually the force of economic gravity will win.” To musicians who believe that their music is being pirated, Anderson is blunt. They should stop complaining, and capitalize on the added exposure that piracy provides by making money through touring, merchandise sales, and “yes, the sale of some of [their] music to people who still want CDs or prefer to buy their music online.” (snipped from Gladwell's review).
This is wrong at several levels.
Today I had lunch with the head of business affairs at a major record label. He told me about the new deal structure for recording artists and something called "360 deals." A 360 deal is when the record company controls and participates in records, touring and merchandise. This means that artists are only getting a slice of touring and merch. So, the idea that you give away the record and make it up on touring and T-shirts starts to crack, as the artist will not make enough to have a quality standard of living.
Furthermore, even if the artist were to get 100% of the touring/merch revenue, it isn't scalable or passive like record sales or paid downloads. For touring, there are only so many days you can play, and decreasing margins due to rising insurance costs, fuel, etc. For merch, the artist usually has to front production costs, hold inventory and except for the biggest ones, usually treat it like promotion. Now we are back to square one, again.
Finally, an artist can offer their music via MySpace (streaming, non downloadable) or through variations (live, remixes, etc.), generate interest and PR and STILL get paid via iTunes or Amazon. So making the product free isn't the only way to promote your music.
Anderson never takes any of these points into account, and the first one (360 deals) is clearly a research oversight on his part. 360 deals are common place and will eventually expand into affiliate or social media generated income for bands, etc.
Here's my final thought: It is up to the recording artist to make their music free, not some kid that decides to steal it and pass it around to his friends (offsetting sales via paid download). Radiohead decided to give away their CD a few years ago, and it led to great results. But it was their decision, not the public's. Seth Godin gave away The Idea Virus, and it was a moderate income/platform generator at the time. But it was his decision.
How would Anderson feel if someone obtained a digital (PDF) copy of The Long Tail and gave it away via Twitter, etc.? Pretty pissed off, I'd guess. I guarantee his publisher would unleash a legal team on the offenders and exert great energy getting the links taken down.
Why? A PDF of a book reads wonderfully on the Kindle's, especially the newest model. And transferring them from your computer to your Kindle DX is just the right price — free.
It would not be hard for anyone to get their hands on an unedited PDF of Anderson's new book, give it away and then tell him he should be happy because he can still make money with paid speaking gigs and DVD sales. I don't think he'd be very happy with it, because he wouldn't earn back his advance for his publisher – and his future advances would shrink accordingly.
(Why is a book's PDF easy to come by? Literary agents and publishers now send PDF versions of books to foreign publisher's for potential licensing deals. Many of these publishers have less than perfect track records of business ethics. Also, others see these PDFs including: publisher staff, publicists, book marketing consultants, independent copy editors, etc.)
I believe that ideas and unpackaged (amateur) content should be free. Well produced ($$$$), easy to buy content should be paid for if that's the business model of the content producer. Free may be the price for non-essential web services and blog posts by aspiring content producers, but the argument should not extend over all digitizable information.
I'm not saying that Godin or Gladwell are right or wrong. Anderson is wrong in one regard, but I still plan to read the entire book and comment on his bigger idea. Meanwhile, MP3 pirates of the world, you are still thieves.
