Mon, May 11, 2009 page11

• Web’s ‘give-away’ culture here to stay

  IS TIDE ABOUT TO TURN? For a decade now, consumers have become accustomed to having free access to music, films, news and information thanks to the Internet

  • THE OBSERVER
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  In art, as in commerce, a price tag traditionally has magical powers. With the flick of a wand, a dollar sign confers desirability on an item that might be thrown away if it was handed out for nothing.

  And yet for almost a decade now, quality entertainment and culture, as well as mainstream sources of news, have been freely available on the Web. The arrival of the Internet has seen musicians, publishers and news organizations all slowly float off together into uncharted waters.

  Consumers who have grown up during the past 15 years are completely at home in a world where much of what they want to hear, see or read will cost them nothing. True, in the case of some films and TV shows, the practices involved may skirt around the law a bit. Generally speaking, though, culture has become a happy free-for-all. Now may be the time to pay the bill.

  

  News Corp chief executive Rupert Murdoch, left, and wife Wendi Deng attend a ceremony where actor Hugh Jackman places his hand and foot prints in cement in front of the Grauman’s Chinese Theater in Hollywood, Los Angeles, on April 21. Murdoch recently announced that he was considering charging for content on more of his Internet sites.

  PHOTO: REUTERS

  Chris Anderson, a leading US commentator on the Web and editor-in-chief of Wired magazine, puts the matter concisely: “Somehow an economy had emerged around ‘free,’ before the economic model that could describe it.”

  Anderson’s next book, Free: The Future of a Radical Price, will both celebrate and analyze the effect of all this giving away. The author of influential 2006 book The Long Tail, Anderson is to suggest that few of the conventional rules of commerce, such as “supply and demand” and “economies of scale,” apply any longer.

  While some suppliers, such as Sky Sports, might still get away with charging their audience, they would have to be pretty sure they offered a unique product.

  One of the biggest players in the game last week questioned the rationale behind the current give-away culture. Rupert Murdoch, head of News Corp, even went so far as to refer to it as a “flawed” business model when he spoke to reporters in New York.

  The media mogul — who owns the Times, Sunday Times, Sun and News of the World in Britain, as well as Fox News and the Wall Street Journal in the US — announced that he was considering charging for more of his Internet sites.

  “We are now in the midst of an epochal debate over the value of content and it is clear to many newspapers that the current model is malfunctioning,” Murdoch said.

  His volte-face followed background news that profits from News Corp newspapers were down year-on-year from US$216 million to US$7 million and that British newspaper advertising revenues were down 21 percent. The upshot was, Murdoch concluded, that within a year the Web would have utterly changed its financial model and his titles would be leading the pack.

  Earlier in the week, reports that the Guardian Media Group (GMG), the owner of British daily the Guardian and the weekly Observer newspapers, was thinking along similar lines had ricocheted around the globe. While GMG management have no plans to charge for content on its sites, chief executive Carolyn McCall did suggest that a subscription system was conceivable for some specialist areas.

  For Anderson, the changes that lie ahead are more complex than simply introducing entry fees at a few gates on the Web. Instead, he is predicting the twin birth of a “reputation economy” and a “time economy” to exist alongside the battered old “money economy.” As a result, value will be assessed differently by both providers and consumers.

  Free access to entertainment and information is inevitable on the Web, he argues, because there is still unlimited shelf space. Putting something up there, in a shop window, costs nothing, so the worth of the product alters. People are already making lots of money charging nothing, Anderson points out, and that is because it brings them other things they want.

  The dominant force in the Web market, Google, has now provided so much for free that it no longer has to worry whether it will make money. Free information is its very brand and that is why the advertising on its search engines is so lucrative. In some ways, it resembles the old business ruse of offering a “loss leader” or distributing complementary freebies — consumer interest grows and everybody wins.

  But what about the people who are providing the content that is being given away, the artists and journalists? Do they win, too?

  Anderson says yes. He gives the pioneering example of the Prince album that was handed out with copies of the UK’s Mail on Sunday in 2007. Although the singer lost money on the deal, his follow-up London concerts sold out. The newspaper lost money, too, yet its management could put no value on the huge business advantage of being seen as pioneers of the music scene.

  It is the music business that has been caught struggling in the Web the longest. The decline in profits in the industry has been dramatic. Last year, 95 percent of the music that was downloaded from the Internet was illegal. The future, many believe, now lies in music-streaming Web sites, such as Spotify.

  Launched out of Sweden last year, the site has offered free accounts for Britons since February and now allows a million European music lovers to select from more than 2.7 million tracks. Most fans choose to use it for nothing in return for receiving radio-style commercials, but the site also offers an ad-free service for £9.99 (US$15.20) a month.

  The fact that a leading site such as Spotify is still searching for traditional commercial traction is a sign of troubled times. Mike Smith, managing director of Columbia Records, believes his industry made a “fundamental error” in letting people think music was free.

  “When you listen to streamed music through Spotify, somebody is still being paid,” Smith said. “These things are only free as a way of selling their site to you, or their newspaper, or their brand. Unfortunately, a mentality has grown up in our society that believes an album is free.”

  It is unfortunate, Smith said, because in the aftermath of the credit crunch the creative industries represent a key, robust hope for the British economy.

  “What we do now is crucial. It is crucial that we challenge the idea that these things are free and one way of doing this is to make sure we make the best-quality entertainment,” he said.

  Smith said high creative standards would lead the public back toward the pleasure of owning an original CD album, or going to the cinema to see a film.

  “We are doing this with the new Manic Street Preachers album, Journal for Plague Lovers,” he said.

  The CD has been designed around the manuscript that Richey Edwards left to his band mates before he disappeared in 1995.

  “It is a fabulous thing to own and other record companies are doing the same sort of thing. God knows, though, it is not a cure for this problem on its own,” he said.

  Web evangelist Bill Thompson, who helped to design and launch the Guardian Web site in 1995, acknowledges the difficulty of getting music fans to pay for downloads.

  “I asked a group of senior media executives the other day how many of them used Spotify. Lots of hands went up. Then I asked how many of them paid and all the hands went down,” he said. Thompson believes those who can pay will pay, as long as they are getting something faster, better or more easily.

  “The paid-for business model is quite hard, though I am a fan of the TV series Battlestar Galactica and so I downloaded the US version because I didn’t want to have to wait even a short while to see it,” he said.

  Relatively wealthy customers will also pay, he argues, for the reassurance of not breaking the law, as long as the process is simple enough. Apple, for example, has benefited from making buying easy. It is done in one click. For other businesses, though, “micro-payment” remains a fiddly problem, with customers paying as little as US$0.15 to view a page.

  Thompson said the solution is to stop expecting Web industries to match one another just because they inhabit the same medium.

  “It all depends what a company is doing. The motivation behind the business will dictate the right model. There is no point in, say, the news or entertainment industries diminishing their audience by charging. We really don’t need convergence,” he said.

  He said that Murdoch’s comments betray the fact that the newspaper magnate does not understand the Web.

  “He doesn’t appreciate the dynamic that comes from disseminating information for free and providing data that can be perfectly copied by anyone. This brings the price of content down so low that it is almost not worth charging,” he said.

  Thompson’s view is echoed by fellow Web pundit Jeff Jarvis, who also sees charging as anathema.

  “Charging for content reduces audience, which in turn reduces advertising revenue. Putting a wall around content keeps it out of the conversation and devalues brands,” he said.

  This is a danger Jarvis describes as “loss of Googlejuice.”

  It is worth noting, too, that opposing political ideologies are at work here, not simply commercial forces. While the libertarian impulse to “free the Web” is claimed by hippy counter-culture, it is also aligned with far-right thought. Pirate Bay, the Swedish bootlegging site at the center of a legal storm this year, receives financial support from right-wing politician Carl Lundstrom.

  Thompson knows the Web is developing fast, but is not convinced that this year will prove critical.

  “I don’t think we will look back at 2009 and think that was when it all changed,” he said. “We might look back, though, and see that this was the moment when several senior executives realized they needed to change.”

  The mechanics of the Web are shifting too, with new search engines and linking algorithms likely to make their presence felt soon. One thing is certain though — the public’s search for “something for nothing” will go on forever.

  In the words of the Roman poet Juvenal, one of the oldest pundits available on the Web: “All wish to possess knowledge, but few comparatively speaking, are willing to pay the price.”
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