The always thoughtful ReadWriteWeb blog has an excellent piece about the true price of free. Free as in free beer, not free speech.

The main idea is that when companies are giving away services for free, there is always a hidden, shall we say ‘anoptical’, price to pay. For example, the free services of Google are predicated on the advertising they sell for their search service, but this in turn destroys the viability of many other business models of their competitors. Think of the Walmart-Starbucks-Amazon effect of local businesses. In particular, and I sympathize with the complaint and the critique, media publishers no longer have any basis to be independent of advertizing.

This being said, the fact that more and more things are ‘free’ has a reason, and namely that we are essentially dealing with non-rival resources that can be distributed at marginal cost. The economic arguments for the inevitability of the free model, both from the economic and quality point of view, are explained here in the Ed Techie blog. So, unless we outlaw free services, there will always be a competitor in the immaterial field who will say: I will give my service for free, and in the end, this business will out-compete the others. It’s pretty simple really, when a good becomes abundant, there is no longer any real tension between supply and demand, and the market logic collapses. Of course, as the cost of first production may be high, you still need to pay people to produce the information for the first time, there’s the cost of maintaining the infrastructure of servers, etc… So, as the article correctly argues, it ain’t really free. So companies are naturally seeking other venues.

Nevertheless, when the article laments the old business models, or that the new generations of youth are no longer willing to pay, and sees that as a negative, it is essentially misguided, perhaps guided by a scarcity mentality. We can not go back to scarcity models in a field of ‘abundance’ and marginal reproduction, but what we need is to find other ways.

And many people are working on those!

Amongst those are schemes for a universal income for creators, as in the Blur/Banff proposal, global Voluntary Collective Licensing.

Even more ultimately, in an age where it is social cooperation that creates value and wealth, most of it being commercialized and monetized by corporations without any return, we need to start talking about the basic income as a necessary primary income which recognizes that creative input. There is simply no way to day, that we can say that ‘value’ is created within the space and time format of the corporation and the paid wage, but rather, such value as may emerge there, is the result of a constantly interconnected and cooperative life of collective learning. This form of free could also be termed a form of evil, as the business world is profiting for free, of this immense value-generating social creativity. The basic income should therefore not be seen as a handout, but as a primary income for each citizen’s contribution to the social good.

These, and other proposals like it, is what needs to be discussed. While the basic income may be a while off, the time to discuss the partial solutions proposed specifically for creators is now.

Nevertheless, a good article which I recommend reading in full, and here are excerpts on why ‘free can be evil’.

IBM

“While it is not clear that a lot of businesses in an economy can be supported only by advertising, we already know that free can be a powerful weapon in the hands of big companies. Consider this recent example: IBM used free to practically destroy the Java software tools market. One day, someone at IBM was likely sitting around and thinking about how to sell more of the company’s Blade servers. In a single eureka moment he figured out that by giving away the integrated development environment (IDE), IBM could kill its competition, open all doors, and sell its most expensive product.

Eclipse and the surrounding set of tools for debugging, testing and profiling Java code are not great. But they are good enough because they are free. Companies could no longer justify paying for products from, for example, Borland and as a result, IBM’s strategy worked beautifully. All of this was executed over the course of just a few years, under the mantra of open source, so practically no one could see IBM’s ploy. The sad consequence of IBM’s victory is a lack of innovation in the software tools space. After all, who wants to compete with free? ”

Google

“The king of the web, Google has been expanding its sphere of influence using exactly the same strategy. In a stroke of brilliance, Google made their web’s best search algorithm free to consumers, by supporting their search engine with advertising. Elegant and fair, we all get access to the world’s information for free. Thanks!

The next move, is slightly less elegant, but still legitimate – GMail. Google wanted us to have better and simpler email. The solution was to deliver it with advertising. It is strange to see ads next to our email, but we learned to ignore them just so that we can use the software. Fine.

But the next move – Google Office – is unfair. In its endless quest to organize the world’s information, Google is also looking to kill off its archrival Microsoft. Just like Microsoft is going after search, Google is after one of Microsoft’s juiciest markets – Office. And to play, Google is giving it away for free. Well, almost. For consumers, Google’s online office software is free, and for businesses, they have made the software so cheap that it is practically free (Google can’t make enterprise tools completely free because companies would freak out).

The point is that Google can afford to give away everything for free because of its success with search. This is being done openly now and it is just plain wrong. It is a dangerous poker game, where Google can raise stakes because it has a huge pile of cash. What happened to fair competition and not being evil? This is an evil way to break into the market. Of course, we all prefer the light Google Docs to Microsoft’s heavy desktop software. This is not the point. The issue is that this kind of free is absurd. If Google wanted to break into eCommerce, it could afford to put Amazon out of the book business by giving away free books. How would we react to that?“