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Free Kills

Everyone is all excited about the idea of free. Free software, free content, and Chris Anderson’s book, Free: The Future of a Radical Price.

But it’s not always good.

When something is given away free, it kills the market for similar products.

iTunes is a very adequate music manager. But it doesn’t work well for large collections, multiple users, or home networks. By giving it away to almost everyone, there is no more market for music manager software.  No one is ever going to pay for it again, so no software developers have a reason to build something better.

RSS feeds would be very useful if you could get them from password-protected sites. But Google Reader doesn’t support password-protected feeds. And almost all the developers of RSS-reader software went broke when Google started giving it all away. The feature is gone for everyone.

You should be worried if you are someone who uses advanced word processor features (author) or spreadsheet features (investor, scientist). Free Google Docs could wipe out the financial incentive for companies to develop high-end products. Who works on improving the word processor when 95% of people will never pay for it? (We sure don’t want to go back to the early ’90s when you had to pay extra for third-party graphing, spell-check, and other add-ons for your word processor.)

The free-but-adequate solution kills demand and funding for the development of better solutions.

In international trade, we call this dumping — when a country sells products below the cost of production to take over a market and kill domestic production (to presumably raise the price when competitors are dead).

Something to think about.

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Comments

  1. Julie Gomoll February 9, 2010 at 10:48 am #

    Some good thinking here, for sure.

    In some cases, especially when the software is open source, it can inspire other, new markets. WordPress (free) has resulted in a robust premium theme market (same for Drupal and Joomla). On the other hand, it’s easy to argue that there’s plenty of room for improvement in the CMS area.

    Free Twitter apps haven’t prevented better, premium apps from being made (although they’ve no doubt taken a big bite of the market share)

    OpenOffice.org is absolutely trying to improve the spreadsheet and the word processor. And of course Linux continues to make OS improvements.

  2. Seth Godin February 9, 2010 at 11:29 am #

    Free doesn’t kill. Free raises the bar.

    Mediocre paid stuff disappears. Great stuff ends up costing more because it’s worth it.

    The secret in competing with free is to be expensive and a bargain at the same time.

  3. Vikram February 9, 2010 at 12:11 pm #

    Hi,

    Free is not dumping. Linux being free did not kill the OS market. Thousands of computer programmers work on open source software creating some of the best software. As Seth commented it raises the bar for everyone.

  4. Jonathan Salem Baskin February 9, 2010 at 4:26 pm #

    You’re right; “free” kills, and it’s one of those contrarian defy-common-sense-concepts that makes for entertaining reading and terrible business practice. The fact is that there’s no such thing, really: what’s offered for “free” is actually “paid” through some other means or interface, so the entire idea is about hiding or otherwise masking cost vs. actually reducing it to nothing. So your analogy to dumping makes perfect sense.

    There’ll always be improvements around the periphery of “free” but never in the core market. Free doesn’t raise the bar as much as freeze it in place.

  5. Rob February 9, 2010 at 8:53 pm #

    Well someone had to say it!

    Rupert Murdoch will be sending this around on his Facebook page, to support his strategy of introducing paid news on his online newspapers.

    However, I tend to sit on the side of ‘let the market decide’ – remember there were (are) entire cultures who don’t have a monetary system, where favors and services are exchanged. What’s to say that given today’s values, we’re moving to this model?

    I’m playing with an idea to develop a service which will earn me no income – what do i get? Personal / Professional Development. A new skill. Potential to build a following to help me share ideas in the future. My own brand. Ability to influence. Knowledge. Invitations to speak on my story – so how much is that worth?

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