Everyone wants to go first because you get recognition and you get a head-start on your competition. You establish a gap in quality that acts as a buffer against other companies who are trying to steal your customers.

In the news business, nobody wants to go first.

The first objection I hear from newspaper staff when I talk about new business models or new products is “nobody else has done it yet.”

Given that the whole industry is flailing at the moment, I’d say originality is a good thing. The companies that succeed in the news business over the next five years are going to be the ones willing to try things that no one else has tried yet. Or even better, try things that others have already dismissed as failures.

It’s scary to try something new. But this industry can not reinvent itself by sticking to the beaten path.

Unfortunately, both Pogue and Poole then use this to bash the entire concept of free-based business models, with Poole getting unnecessarily offensive in his response:

“I’ll call it, for short, “the Slashdot argument”. It says that books, music, films, software and so on ought to be freely distributed to anyone who wants them, simply because they can be freely distributed. What is the writer or musician to do, though, if she can’t earn money from her art? Simple, says the Slashdotter: earn your money playing live (if you’re one of those musicians who plays live), or selling T-shirts or merchandise, or providing some other kind of “value-added” service. Many such arguments seem to me to be simple greed disguised in high-falutin’ idealism about how “information wants to be free”. Perhaps it’s not empty pedantry to point out that “information” doesn’t want anything in and for itself. The information in which humans traffic is created by humans. And most information-creating humans need to earn dollars or yuan to survive.

While I’m sure there may be some Slashdot-types who may make this argument, it doesn’t mean that it’s an accurate representation of the more important discussion of these business models. The main problem is his use of “ought,” as in people saying things “ought” to be free. It’s not that things ought to be free because they can be free — but that things will be free because that’s just basic economics. Price gets driven to marginal cost in a competitive market, and the reason it happens is because others do learn to put in place business models that work, and then if you’re the lone holdout, people start to ignore you.

When you unpack this, I think there are really two claims that Mike is making:

1. When the marginal cost of something becomes close to zero, economic forces will make it impossible to charge money for it.
2. Digital goods qualify as “something close enough to zero” that economic forces will make them free.

I’d agree with those statements if humans were “homo economicus” (rational beings that always behave in their best interest), but we’re not. The value of something is what people will pay for it, which is based largely on what people feel it is worth.

People will pay for digital goods. What’s the marginal cost for Flickr to add a new Pro account? Zero. What do people pay? $25/year.

Almost free and free are totally different things, and if you take the cost of almost nothing and multiply it by millions, you end up with a big cost. You need to be able to sell a lot of other stuff to make up for the cost of giving things away free.

You’re especially in trouble if your product goes rotten (old news), and it requires scarce goods (work) to create the abundant goods (digital news).

If that’s your production method, the real cost of your “free” product isn’t all that close to zero after all, which throws a huge wrench into the idea that market forces will force the market price to $0. It won’t do that if at a $0 price point, all news companies go out of business.*

Again, it’s not a matter of “should be free,” it’s a matter of economics; if the real cost of producing it turns out to be noticeably higher than zero (and I’d argue that it is), then it won’t be free.

The really scary thought is that even if the news business can make good money selling people’s attention to advertisers, partners, and data companies, then the business isn’t about selling news anymore.

And, well, there are much cheaper ways to build an audience that will support the real business (selling ads, events, who knows what else), and then the need for news as a method for building an audience goes away.

Worse than that, those organizations that try to use news as an audience-building method will find themselves at a terminal competitive disadvantage to those organizations that use cheaper audience-building techniques.

In a sense, the news industry has been using “free,” for decades, since subscription fees barely factor into print revenue - the real killer is that the cost of a newspaper’s true product (reader attention) has plummeted as the supply of attention-grabbing-material has blossomed.

What’s the answer? You change tactics and build a business model selling digital goods. If you really care about the news and not just the ads, then forget large audiences. Build a product that appeals to a smaller number of people in such that they will pay for it.

“Give it away and pray” is not a working business model. But for the news business, neither is “give it away for free and make money on the ads.”

To get more opinions on the future of the news business, subscribe to the Eat Sleep Publish RSS feed - always free!

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* I’m well aware that many content producers on the internet are making money by selling ads against free-to-the-consumer content. That seems quite possible for small operations, but I don’t think it will ever scale well, and I do think that a significant portion of the news necessary for democracy requires a certain amount of scale to produce. ( return )

It used to be that you just needed copy editors, because typos were embarrassing. But now typos are stylistic. Blogging mogul Jason Calacanis of Weblogs, Inc. (and now Mahalo) once pointed out that he doesn’t fix typos on his blog posts because it helps convey the immediacy of his thoughts.

Once again the internet surfaces niches where mass audiences once ruled. There’s a subset of people who want clean copy, and there’s a subset of people who don’t care, and there’s a subset of people who find clean copy pretentious.

Which audience do you want?

It used to be that experts were often certified or obvious. You were an expert if you’ve published on the subject. You were an expert if you’ve been through enough school. You were an expert if you were widely recognized as an expert.

Broadly speaking, “are you published?” is no longer a useful metric. You might argue successfully that I should shut up and go home, because all I’ve ever done is post my opinions on Eat Sleep Publish.

School seems to be lagging behind the times now, too. It’s still the cutting-edge place for expensive scientific research and any kind of progress that requires huge institutional resources, but what about software development and network effects? What about social media?

Becoming a real expert is just as hard as it ever was. You need to acquire real knowledge and real skills by putting in the time and work to get there. But faking expertise is easier than ever.

How likely would you be to pay a $2.50 monthly fee — which would be a 50% discount for home delivery subscribers — for continued, unlimited access to nytimes.com?

Nobody really knows the answer to that question. And most people would say “very unlikely,” even if they would pay it, because they might listen and it might stay free.

The NYT should be asking questions like “do you feel any special affinity to other NYT print subscribers?” and “what is your favorite online feature at the nytimes.com web site?” because these are questions that will produce valuable insight for the marketing copy they’ll need to sell their online subscription system.

If what you produce is worth $5/month, then charge it. Focus on selling the benefits of your content — the feeling of community, clarity of information, video and interactive components that make one feel informed.

If they’re looking for a data-backed excuse to start charging for access, they won’t find it. You have to know you have a product worth money, and you have to assert it confidently. Selling your site is a whole different business than giving it away for free.

In a community where there are dozens of passionate, skilled citizens who are actively building their own news following online, what’s the best move you as a legacy news institution can make? I’ll give you a hint: “compete with them” is not the right answer.

Embrace and extend.

Offer complimentary services so that you both win. Bring them into the fold. Neighborlogs provides technology infrastructure for individuals who want to start a neighborhood blog, and it just takes a little off the top. Good model.

Why not offer technology or network advantages to good neighborhood blogs in exchange for a revenue sharing agreement?

We’re past the point where blogging is a novelty, where good writing happens for free (trust me, even free blogs make money now). The benefit to a publisher in the new market is that you don’t have to promise a salary, you can promise a cut of the winnings.

Malone said he didn’t think that an advertising model made sense on Twitter, but there was some hope for a subscription model. “Sooner or later people will be willing to pay for these services,” he said.

Of course, ads and subscriptions aren’t the only models available for online services. Companies like Twitter produce an incredible amount of valuable data that could be sold to third parties.

The thing about ads is that they’re kind of a cop-out, because you don’t actually have to sell your “core” product to an audience, you just have to sell that attention to an advertiser (which is often easy to do; advertisers are looking to buy attention, you just have to meet the right price point).

It’s a great arrangement when the price point is high. But now it might be time for newspapers to develop a product and sell it the old fashioned way.

And don’t worry about Twitter, they’ll be fine

They all have specializations, and they all cost money. A full salary. Benefits.

Neighborhood blogs have newspapers shaking in their shoes not because those blogs are real editorial powerhouses, or because they have the resources to compete on citywide coverage, but because they can do so much more with so much less.

I’m about to move to Eastlake, where former P-I staffer Curt Milton runs the Eastlake Ave blog. He keeps a part time job, makes tons of local connections, writes his posts, edits them, and shoots and edits and uploads video and pictures.

One person.

How can you compete with that?

On the internet, where the money you make is often measured in the pageviews you serve, being first can seem to be of paramount importance. After all, Google ranks its search results by (among other things) how many different sites give you credit.

Of course, First comes with some problems, too. It’s unpolished. Sometimes you look stupid. You don’t have time to make it engaging.

First isn’t the only way to get credited, though. You can also do things Well. You’ll come “late” to the game, but you have a chance to be interesting, to provide real analysis, to put some work into the delivery and make it yours.

Would you rather do things First, or Well?

They’re both valid models. Which one do you want to use?

When you go into business, you ignore the people who are least likely to buy your product. The number of people you ignore is much, much larger than the number of people you have or work to earn as customers.

As we move forward, the news business is increasingly a business to serve the news-enthusiast subset of the general population. Social pressures and scarcity of information used to twist the newspaper and cable news company business into a more ubiquitous product, but the internet and small news entrepreneurs have changed that.

People seems to have gone nuts with this idea of all these millions of people who want stuff (like news) for free. Screw ‘em. You’re a business. You’re only interested in the people who want news for money.

Free is the name of Chris’s new book, and it’s going to be wildly misunderstood and widely argued about.

The first argument that makes no sense is, “should we want free to be the future?”

Who cares if we want it? It is.

The second argument that makes no sense is, “how will this new business model support the world as we know it today?”

Who cares if it does? It is. It’s happening. The world will change around it, because the world has no choice. I’m sorry if that’s inconvenient, but it’s true.

Nevermind the fact that Gladwell didn’t raise either of these wishy-washy points. Nevermind the fact that there’s stunningly little evidence that we’re in an inevitable race towards a new business model of free.

The problem with Chris’s new idea is built into the concept itself: that costs will grow close enough to zero that you can round down.

Seth should know better. He runs a whole business based on the idea that you can take the exact same concept, and round up. 900,000 people making pages on Squidoo, handing 50% of their “couple of dollars” of ad revenue over ads up to a good $500,000 or so.

I have to read Chris’s book (Chris, can I have a free copy?) before I’ll feel qualified to really dig into it, but I think that he’s describing a fad. No product, not even an informational product, is free to produce. It is nearly free to copy it, but that is often theft.

Just because it’s easy to do doesn’t make it legal. Or right.

If we are to have a digital based economy (and this, I think, is the inevitable truth), then we need to have more digital goods that cost money, not more digital goods that are free.

Free is, ultimately, an impotent business model, because you cannot make money. Even in these scenarios where you “make money on the surrounding businesses,” those surrounding businesses are not based on Free. They are independent business models in their own right, and if they’re bringing in revenue, that is in fact your primary business. Everything else is marketing.

The truth in this case (however inconvenient) is that if you want to make money, someone has to give you money. And they have to give you more money per item than it cost you to create it. Even if your cost is 0.0000002 cents per article, you’d better make at least 0.0000003 on it, or you’re in trouble long term.