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November 12, 2009

Want a good product? Pay for it

Freebies have nearly killed the newspaper industry. Now, demands for free Wi-Fi and other services could have a terrible effect on the technology industry

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37 Recommendations

I wish my landlord realized that housing should be free. And why doesn't that excellent restaurant in my neighborhood understand that French food should be given away? Also, how come I have to pay to get on the bus? Sure, that sounds silly, but is it any sillier than a prominent blogger's whine that Wi-Fi should be free in airports?

Writing at PCWorld.com (our sister publication), the normally sensible David Coursey says, "Having to pay for Internet access in airports and other public places is simply stupid." Sorry, but that's a really, well, stupid opinion. I don't really care what Coursey thinks, but I care a lot about the future of the technology industry -- and I don't want to see it make the same dreadful mistake that has damn near killed much of the publishing industry.

[ InfoWorld's Robert X. Cringely looks at Fox News' latest war: ending the Google-powered free news market before there are no newspapers left. ]

Newspapers and magazine management made plenty of mistakes -- arrogance, money-grubbing and lack of imagination,  to name just three -- that had nothing to do with digital technology. But the very worst mistake was to give the consuming public the idea that content should be free. As a result, hundreds of millions of people read the news for free, with no thought that it cost real money to produce. I'm no free-market capitalist, but I firmly believe that companies need to make a profit; without profits, there won't be much innovation.

No free lunch, no free Wi-Fi
News and Wi-Fi service are commodities, just like cars, housing, and food are commodities. Labor and raw materials, as well as the capital to buy them, are the essential ingredients of most any good or service we might care to own or consume. No money, no commodity -- that's a basic economic principle that the digital revolution has done nothing to change.

Google, which sits on billions of dollars, can afford to make a magnanimous gesture such as its recently announced free Wi-Fi at some airports for the holidays, though I bet it will recoup at least some of the cost by placing ads on the service. This giveaway will also enhance the value of Google's brand, a hard-to-measure but very real economic benefit. Few providers are in that enviable position. They need to charge.

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16 of 16 comments
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Elfish 12-Nov-09 7:25am
While you're at it, shouldn't you be working for free?
gdbartle 12-Nov-09 10:53am
For a much more in depth and less emotionally charged examination "Free" and it's myriad costs, benefits and implications, I highly recommend the book "Free: The Future of a Radical Price" by Chris Anderson (you can still download the full, unabridged audio version for, you guessed it, free). I have no affiliation with Chris whatsoever, but I recently listened to this and it helped open my eyes to all that free truly means for the consumer, the business, and society at large. I highly recommend it to anyone interested in better understanding and being able to leverage the power of free in their own lives.
TimF 12-Nov-09 11:30am
Is it an entitlement? No, could it be a good business decision? Sure. Pay toilets used to be common in the US, but have gone away. I'd agree everything has a cost, but direct charge isn't always the only way to recoup that cost. Do you think paid subscription is the only answer? Seems odd coming from an ad-supported magazine (If Infoworld should have been paid for, why did you keep sending it to me for free?). Maybe there was an uproar about how Infoworld was unfairly hurting paid publications when it first came out - maybe not.
Hard-Driver 12-Nov-09 2:12pm
The water fountain is free. So are the lights and heat. And what about those TV's around the place showing the airport channel. And like swas said, so are the toilets. So while I see the point about how everything can not be free, the truth of the matter is that the cost of internet access is low, and it is a calculated bet that if it is provided free of charge, then it will attract paying customers. For example, my local coffeehosue has free wifi. They don't do it for charity, they do it to attrack customers who can buy stuff. I agree that the expectation that it should be free by the other columnist is wrong. But I flew out of Manchester NH the other day and they had free public wifi, and I thought it was nice. Makes me want to fly out of that airport again and it problably cost them 3 cents to provide that for me.
DaveN 12-Nov-09 2:40pm

IMO the problem is monopolistic abuse of a captive audience. I have no objection to paying for Internet in an airport - it's clearly a cost that should be borne by those who use it, rather than the travelling public in general. What offends me (and keeps me from using the wireless in most airports) is paying $12.95 for 15 or 20 minutes of usage during a layover. If hotels and other facilities can provide 24 hours of service for $10, and AT&T gives you a whole month for $30, the airport should be able to provide an hour or so for a few bucks, as they would be forced to do if there were any competition.

MarcHausman 12-Nov-09 2:53pm
Amen...I wrote a blog post early this year about why services like Facebook and Twitter must charge users for access. If someone receives value from a product or service, they should absolutely pay for it. Check out the comments. Most readers found me misguided. http://strategicguy.blogspot.com/2009/02/facebook-twitter-and-legion-of....
digitalflack 12-Nov-09 3:18pm
Bill: Stick to technology reviews. The things you don't know about pricing and distribution of products is amazing! Newspapers have been providing information for free nearly since they were invented. The $0.10 you paid as a lad or $1.50 you pay on Sunday doesn't even cover the cost of paper, ink, distribution trucks, gas or union drivers. Just like Infoworld the advertisers pay for the content collection and "analysts" like you. I guess if I wanted a good product like "InfoWorld" I'd have to pay for that too..... sorry I've gotten it free in print and online for twenty years. BTW: The radio you thought was free when you were growing up, let me clue you in - it was paid for by the advertising. Oh yes, and the TV? You thought that was free. Do you even understand the media industry you are in? BTW (From a person exiting the newspaper industry) They are dying because their distribution system (paper) is being replaced and they didn't change fast enough. They are encumbered with the costs of their old system and their shotgun approach to distribution. Take the Sunday paper for example, it has twenty sections: news, sports, books, food, real estate, finance, wine, autos, fashion, travel, comics, etc.... Nobody wanted all of them, but it was economical to put a pound of paper together and shove it at all the different target markets (just like junk mail) even though most subscribers probably read way less than half of the content. Amazingly advertising rates were based on circulation (!) not the number of eyeballs that saw any given ad (i.e. the Web model) There are plenty of components in a pricing structure, 'free' has always been one very useful option. I'm not going to ask you to review my business plan.... Flack
sasamat 12-Nov-09 4:25pm
You are confusing bits and atoms. The real-estate comparison (your landlord) is a category error. Read and understand Kurzweil. The 'race to the bottom' only applies to information: itself and technologies based on it. Free wifi is like free computing, neither of which are like free rent or free bananas. Thus said: it does not bode well for a magazine styling itself as 'INFOworld'
tcurl 12-Nov-09 9:10pm
I have to agree with digitalflack regarding what is "given away", in this case as an an inducement to maintain a large readership, and what is charged for.
I am a paid subscriber to magazines providing quality information that I value, e.g., Linux Format about $190/year. LF has apparently found a balance point between charging advertisers, and charging subscribers that works for them.
I can only assume the Information Week has done likewise. If they have not, that's a management problem. It's certainly not a problem that will not be solved by articles (rants) such as this one.
This article, IMHO, provides no useful information to anyone in the IT field, and therefore does not enhance the value of the publication to its intended audience, and thus to its advertisers. In other words it is non-relevant.
Even so, as was so well pointed out by the author, it did have a cost to produce, and a cost to publish.
In my view, costs, without corresponding returns, are clearly management opportunities.
gtomr 13-Nov-09 1:16am
I think your error is that assuming paying gets you a good product. In many cases it doesn't. The free ones in many cases are better the one you pay for. Sometimes with better support. I agree with your thoughts on a conceptual level, but on a practical level there is a need to make the paid stuff much better than the free stuff, or why bother
rg2 13-Nov-09 6:41am
OK maybe the title of the article is wrong. Maybe it should read "Want a valuable product? Pay for it". But let's not misunderstand the idea. I read the post by MarcHausman and responses from his blog post. I couldn't agree with him more. This is about value and the amount you are willing to pay for your perceived value. It is also about supply/demand. It is the rock on which capitalism is founded. Should wi-fi cost as much as it does at the airport? Maybe not - and if you don't think it's worth it don't pay it. Maybe you complain that it is a monopoly that only one provider exists so therefore they can charge whatever they want. That’s the airport’s fault not the provider. I would probably say the next time the contract rolls around for wi-fi service at the airport you can bet that it will cost less to the consumer. Why? Because they will find a provider(s) that will be able to come up with business model that allows them to charge less (or nothing) and still make money. But remember, most of the time "free" does come with a price - it's just not monetary. You can complain about the article not being in your "target" interest and you have every right to state your opinion. Just remember you don't pay for the magazine but you did choose to read it. So your cost was your time. If you feel your time was wasted that is your fault not the magazine's. Would I subscribe and pay for InfoWorld if it were not free. No. There isn't enough value to pay. But that doesn't mean there is no value. If there were no value it would not exist. But I do scan for articles that interest me and read a few here and there. And don't get me started on the Facebook/Twitter gazillions that say they would leave if they suddenly had to pay. My guess is that it means that they don't see a real value - either that or absolute arrogance that all the time effort and money to develop and maintain such a platform should be an entitlement. They could always go build a similar system themselves. At that point I would like to see how they value their effort.
HowardL 13-Nov-09 8:32am
I actually find myself in agreement with many of the diverse comments already posted. I am not opposed to paying a few bucks for airport wifi. It doesn't need to be free! But it certainly doesn't need to cost well over $10 just for a few minutes of access. I certainly don't understand why (though) the whole ISP model has to stay the way it is. I buy internet access at home - why can't my provider share the access with those at other public places. I can log on to my home ISP. Why can't I log in to it anywhere? That way, those who want access can pay for what they need. The ISPs could offer one rate (for instance) for home only and a slightly higher rate for mobility. My cell phone does that already - why not the rest of the networking options? I most certainly agree with the statements made about advertising being the real method of payment for all of these services on the internet. No, I don't claim to fully understand how that model works (for everything). I pay for my own business advertising, that I do - though. And that in turn provides other media/solutions to be provided. But I do rail against getting 3 or 4 pop-ups every time I open an online magazine or newspaper. Even reading this article caused my popup blocker to ring twice - and no I didn't look at the popups before I shut them off altogether. If the idea was to generate emotion and hit hot buttons it appears that Bill's done a good job. He certainly help me better understand that demanding free service - as in making it similar to entitlement - is not necessarily a great idea, but still it makes sense where the financial model can be made to work (and it can in a lot more situations that you'd think - as several people have pointed out here).
RandomMan 13-Nov-09 4:52pm
If your so against free then why is your content available for free? Its about WHAT you get paid for and WHEN to charge for something NOT to charge for EVERYTHING. If your so against everything being free then throw up a paywall for every article on your site and watch how fast you LOSE money.
kamen 16-Nov-09 12:37am
You are right. There are crooks and jerks that try to get things that they don't deserve. Such people need clear message: they have to pay. More examples 'Financial psychopaths' wreak havoc http://money.cnn.com/2008/12/12/magazines/fortune/madoff_dreier.fortune/ Why Wall Street could go to jail http://money.cnn.com/galleries/2008/fortune/0812/gallery.parloff_quotes....
PrometheeFeu 16-Nov-09 10:22am
Your column is offered here free of charge. Should I conclude then that it is not a good product? That aside, I think you are missing the point. The idea behind free is not that people should not get paid. The idea is that the trivially simple revenue streams do not function. There are alternative source for revenue and that goes beyond just advertising. MySQL is possibly the best database management system out there. And yet, it is provided free of charge. Why? Not because of some moral imperative. Because that way, Sun can gain market share in DMS and sell servers optimized for MySQL. Giving things away for free makes perfect sense and is not a new idea. Businesses for a very long time have offered things such as use of their toilet or free parking in order to attract customers. Free is not THE business model, it is an important part of just about every business model. Free communication protocols can allow developers and manufacturers to interact with your devices and make your product more valuable. Many companies offer free wifi to attract customers to their establishments. Free news content can be a great way to bring customers to your website and make them pay for premium services. (I have a subscription for a major news website just because it allows me to comment on news articles and participate in the forums) Blaming free content for newspaper failure is nonsensical. Many companies that charge for their product have failed miserably while many companies that provide free products have succeeded beautifully. The issue is always the same: How much should I charge for my products? Sometimes the answer is 0, but sometimes it is not.
jambug 16-Nov-09 12:53pm
Hmm. I think you're mistaken when you conclude that good products create value which aught to be paid for. If you look at things you've paid for in the past, isn't it a basic trend that the longer you pay, the more quality diminishes? How's your cellphone/cable bill looking these days?

What creates "value" in our economy is scarcity. It doesn't even matter whether the product, service or item in question is any good or not just so long as it remains rare and hard to obtain. And the fact of the matter is that any blockhead with a 5th grade education could tell you after visiting any supermarket or WalMart that there is no such monster in America as "scarcity". Look around you: how many people do you see at this very moment who have computers, cellphones, iPods or nice clothes? Nothing scarce there, ehy? That's why cellphone service providers give them away; they're a dime a dozen. That's why wifi service is available for free at any coffee shop: ubiquitous availability - good, bad or otherwise.

If you want to be valued in your little, pay-for-everything world, be scarce. Be rare. Be elitist. It makes no difference at all whether the quality is up to scratch or not - just take out a big, flashy ad and I guarantee you'll be a hit.

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