How About Free?

One day all software will be free, and so will lots of other things.

We’ve posted often on this subject, but nothing like as well as Knowledge@Wharton in this post How About Free

Here’s a summary of the conclusions:-

“Companies have experimented and struggled with a wide spectrum of pricing strategies. Some see hope in the “freemium” model, giving away a basic version of a product, but charging for premium features. Yahoo lets tens of thousands of fantasy football players participate in its online leagues for free every season, then lures them into paying for real-time game statistics or player scouting reports. Every tax season, companies — including H&R Block and Intuit — offer free basic online tax filing, but charge for more complicated returns. Newspaper web sites have grappled with the question of what content to give away and what to lock up in areas that readers must pay to see.

Some businesses have been especially creative. In 2007, the rock band Radiohead offered its album In Rainbows as a download for a “pay what you want” price. Research firm ComScore estimated 38% of people downloading the album paid an average of $6. A later release of the album as a physical CD sold more copies than the band’s prior two CDs.

“A business needs to adapt its revenue models to new technology,” says Zhang. Not everyone can compete against free, but there are still creative ways — more ways now than ever — to employ the strategy.

“The problem is in thinking the business model of your industry is ordained forever,” says Werbach. “Business isn’t static, and it’s less static today than it’s ever been. The great challenge the Internet poses is that it makes it possible to very quickly shift the allocation of money in certain industries. It’s not easy to go through that kind of transformation, but that’s life. Successful companies are the ones that appreciate that.”