There has been a long history of giving away items for free as part of a business strategy. But can creators also benefit from this approach?
There has been a long history across many different sectors of giving away a product for free as part of a wider business strategy. Ranging from razors to videogames companies and individuals alike have explored the benefits that can be gained from an approach that doesn’t rely on making money from every element of their business directly.
When done well these efforts can yield great rewards. Trent Reznor’s Nine Inch Nails for example were able to gross over U.S. $1.6 million in revenue in one week alone from an album that was partially free. The first nine tracks of Ghosts I-IV are available direct from the official website, with the band using this initial overture to offer for sale the extra 25 tracks in the full album along with a variety of luxury additions. ‘Free’ can lead to big bucks.
When the free model is used poorly however this is not the case. An attempt to give away a free eBook with a digital ‘tip jar’ say author Steven Poole receive cash from only 1 out of every 1750 downloaders – a mere 0.057%. Simply giving the work away for free is not an instant path for success.
Key to adopting a business model with a ‘free’ component is an understanding of the underlying business logic behind the free offering. How, exactly, is a return going to be made? While the details may vary there are two overall approaches that can be taken: Using free offerings to build fame; and using them as part of a sustainable on-going sales strategy.
The first of these approaches is to use the free offerings to rapidly grow awareness of a product or brand. Free samples of soft drinks for example can be used quickly gain a large market of individuals who have tried (and hopefully liked) the product. A similar strategy can also be used by creative artists. Musicians can give away their early work for free to reduce the barriers to entry and encourage those who might be interested to listen to the band as they continue to produce new works. The potential audience for the artist expands bringing with it the potential for a stronger following in the long term that can be captured through sales of later works. A band based in LA – the Tony Pulizzi Trio – found for example that giving away sample CD’s of their music to the audience at a gig quickly resulted in a surge of interest that the band could capitalise on for future marketing efforts.
However while this offers the potential for future benefit it carries with it significant short term costs. Works must be produced and released at the artist’s cost without any guarantee of return, and skimping on quality to accommodate the lack of revenue can do more harm than good: poor quality work will likely drive people away rather than encouraging them to stay. While this can be mitigated to some degree by exchanging the ‘free’ work for something of short term value, such as demographic data for marketing or social media promotion, some artists have argued that pursuing a strategy of giving away lots of work for free is ultimately self-defeating as it creates an expectation of free that makes it difficult to charge in the future.
Giving entire works away for free is not however the only way to use free as part of a business model: it can also be used as part of a sustainable sales strategy. In addition to the freemium business model, discussed a previous blog post, creators have found success by limiting the free offerings to samples of a larger, purchasable, work. Authors such as the New York Times Bestseller Brandon Sanderson regularly release sample chapters of their past and upcoming books for free and several large newspaper websites have adopted a model with allows readers to view only a limited number of free articles before requiring a subscription.
This does however require that the underlying work is capable of being released in segments: releasing only the corner of a painting for free is unlikely to draw in purchasers for the full work!
While both approaches involve giving something away for free there are significant differences in the eventual gains and the costs associated with each approach. Giving away entire works for free will build awareness and interest in the product, but at a significant initial cost and with no guarantee of return. Giving away smaller amounts can generate an interest in the work without undermining its value, but ultimately still requires a purchase and is of limited use for some types of creative works.
So can giving away products for free benefit creators? For some at least it can. If used as part of an overall strategy free can capture attention, give consumers a taste of a work, and, ultimately, make money.