The digital world isn't quite the land of the free, but it's getting there. According to a feature [1] in the current issue of Wired, the battle between premium web content and free web content is finally coming to a close, with the latter emerging victorious. Citing The New York Times' decision to abandon its premium archives, free music from pop artists like Radiohead and Nine Inch Nails, ad-supported casual games and free Google web services like Gmail and Picasa as proof of an irreversible trend, Wired editor-in-chief Chris Anderson writes "The rise of 'freeconomics' is being driven by the underlying technologies that power the web. Just as Moore's law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero."
Of course, producers and artists alike must derive income from somewhere, which is why The New York Times still publishes a daily newsprint edition and Radiohead still presses CDs and vinyl. But forward-thinking content providers are finally coming to grips with the realization that free digital content complements traditional premium content instead of cannibalizing it. In fact, a new whitepaper [2] released this week by consumer research firm Parks Associates and entertainment technology think tank Entertainment Technology Center argues that free mobile content is essential to promoting programming on traditional media platforms. Noting that fewer than 10 percent of Internet users are willing to download a premium film at present price points, Parks Associates exhorts Hollywood to employ Apple-like tactics and offer bargain-priced content to promote higher-margin programming, specifically by distributing free mobile content to advertise new theatrical releases, DVDs, primetime television series and even premium mobisodes.
The economics of mobile content evolved further this week when Sprint--reeling from a $29.5 billion fourth quarter loss [3], the fifth-largest decline among Standard & Poor's 500 Index companies since 1990--announced it will launch Simply Everything, a domestic pricing plan promising subscribers unlimited voice, data, text, email, web surfing, Sprint TV, Sprint Music, GPS Navigation, Direct Connect and Group Connect for $99.99 per month. While Sprint is the last of the four major U.S. operators to introduce an unlimited pricing plan, it's the first to roll mobile data and entertainment into such an offer, with CEO Dan Hesse stating during Thursday's earning call that "The new battleground will be around data. We want to put a flag in the ground that we are about data."
It's a bold move. But the Simply Everything initiative only makes mobile data cheap, not free--and as Anderson writes in Wired, "There is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you're in an entirely different business, one of clawing and scratching for every customer." Which is exactly the position Sprint finds itself in now, especially if Simply Everything backfires and sets into motion a pricing war the operator can ill afford to wage. So how much lower can mobile data pricing go? How much lower should it go? As futurist Stewart Brand once said, "Information wants to be free. Information also wants to be expensive... That tension will not go away." - Jason [4]
Links:
[1] http://www.wired.com/techbiz/it/magazine/16-03/ff_free
[2] http://www.fiercewireless.com/press-releases/how-hollywood-can-out-apple-apple-free-mobile-content-critical-future-success-mobile-?utm_medium=nl&utm_source=internal
[3] http://www.fiercemobilecontent.com/story/sprint-posts-29.5b-q4-loss-debuts-simply-everything-plan/2008-02-28?utm_medium=nl&utm_source=link
[4] mailto:jankeny@fiercemarkets.com