Thursday, April 07, 2005
A nice post looking at various pricing tactics with free components - the comments are worth a read as well. Thought-provoking in tracking the evolution of 'free' models.
I enjoyed this comment, from this guy:
"...This discussion is rather pedestrian. It seems people are trapped in some naive 20th century, transaction-oriented time warp. The exploitative tone is unsettling� Relationship economics accounts for a growing percentage of value. The discussion may be leaning in that direction, but is way too cluttered and obtuse to be of much use.
A good example of relationship economics are the legendary 'mic farms' found at Grateful Dead concerts. Tacit endorsement of recording and sharing of concerts led to the group routinely ranking in the top $$$ grossing category for years. Why would a supplier allow/encourage widespread capture (recording), duplication and sharing of its product w/o direct economic gain? Simply to encourage the psychological self-determination of individual stakeholders, and to nurture relationship with its customers, which, of course, is the source of all value and wealth creation.
In this case, the enterprise enjoyed many-fold increase in revenue from new customers, merchandise, album sales, more sold-out concerts, personal projects, etc., etc., for "giving away stuff for free." Too many people confuse the evolutionary purpose of altruism with the social science of economics.
The traditional/academic preoccupation with scarcity has been supplanted with economic conditions of unlimited abundance. When shared, these monetizable assets increase dramatically in value, turning contemporary transaction-cost economics (TCE) and this discussion on its head."
OK, the argument has many holes, but the sentiment and points are well-taken - there are gains to 'free', or sharing, and the analysis it outside the bounds of neoclassical econ (but TCE is exactly what can explain it).
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