The BBC presents a review of the new phenomenon of free product made possible by the digital age. Digital product can be given away or at least made available for free. This is not the advertising gimmick of “buy one get one free” or similar, it is product given away free such as openoffice.org productivity suite, or mozilla internet software or linux operating system, or Wikipedia the on-line encyclopaedia, or even advice and information on websites such as astraea.net. This low pricing is achieved in various ways: a low marginal cost of production, it is paid for by advertisers, or it may be paid for by donations made by users.
This trend signals the rapidly lowering cost of technology and information. This is a positive sign that we are moving to a more natural capitalism and economics will reflect the biosphere’s dynamic, rather than a primitive values of greed and fear.
Here’s an extract from the article:
“Digital economics changes our thinking about this. Everything that Google does is free to the consumer and yet Google is an extremely profitable company,” he says.
“You’ve got open source, you’ve got Wikipedia, you’ve got the blogosphere, Craigslist. You’ve got all these strange free phenomena which have global scale and yet are free to the consumers.”
This new model still uses cross-subsidies – the idea that someone is paying – but in this case, Mr Anderson says, it’s not you.
In the digital world, a very few paying customers can subsidise everybody else.
“The new form of cross-subsidy is one where a tiny minority of people who really appreciate the product, really get value from it, can subsidise everybody else, because the underlying cost of doing things online, in digital, is so low that you can give away 90% of it for free.”
For example, open-source computer software is free to users who can then alter and build upon the system, as long as they make it freely available to everyone else.
One of the best known examples of this is the Linux operating system, a free rival to proprietary systems such as Microsoft- a company which has been wrestling with free competition for some time now.
This is, of course, extremely tough for traditional businesses to cope with.