The recession is not going to put an end to the online free-for-all

IF you have spent most of your working life championing the web, it must be hard when it turns against you. But type the name &ldquo;Chris Anderson&rdquo; and &ldquo;plagiarism&rdquo; into Google, and it provides 50,000 results, most of them from the blogsphere. It seems the editor of Silicon Valley bible Wired and author of cult hit &ldquo;The Long Tail&rdquo; took the meaning of his latest book &ldquo;Free&rdquo; a little too literally, copying huge chunks of it from Wikipedia and other sources without attribution. Anderson says it was an innocent mistake, and there&rsquo;s little reason not to believe him, but it was also an ironic one that has overshadowed the launch of &ldquo;Free &ndash; The Future of a Radical Price&rdquo;.<br /><br />When Anderson&rsquo;s previous book &ldquo;The Long Tail&rdquo; was published in 2006, it captured the zeitgeist by describing how the demand curve was changing to the detriment of blockbuster Hollywood studios and mainstream record labels, instead favouring the never-ending long tail of niche products that could be distributed online. With &ldquo;Free&rdquo; he intends to do the same, and chronicles a phenomenon which has seen previously paid-for content like music and journalism become free on the web.<br /><br />Unfortunately, the book has been launched in the middle of a huge wave of revisionism. In the media industry, journalism especially, there is a feeling that the free experiment has gone horribly wrong. Many media executives believe that when newspapers decided to give all their content away for nothing online, they were holding hands, closing their eyes and jumping off a cliff.<br /><br />Now they are desperately trying to find a way back, led by News Corp mogul Rupert Murdoch, who has recently pledged to charge for access to all his newspaper websites. In a nod to this, &ldquo;Free&rdquo; was published with a coda, entitled &ldquo;Free in a time of economic crisis&rdquo;. Although this four page section feels like a hastily-written apology for the 240 pages that precede it, Anderson is adamant that it wasn&rsquo;t added an afterthought. &ldquo;It was just the last chapter I wrote.&rdquo;<br /><br />The self-styled b&ecirc;te noir of the so-called &ldquo;dead-tree press&rdquo; seems to be in a mood for revisionism, or at least conciliation. Famous for refusing to use the words &ldquo;journalism&rdquo;, &ldquo;media&rdquo; or &ldquo;news&rdquo; in an interview with Der Spiegel (because they don&rsquo;t &ldquo;mean anything anymore&rdquo;) Anderson&rsquo;s absolutism isn&rsquo;t on display when we meet in the bar of The Gore hotel in Kensington. The softly-spoken San Franciscan is contemplative, pausing after each question to think and often struggling to make himself heard in the huge oak-panelled room, a fact that isn&rsquo;t helped by a family of American tourists shouting coffee orders at one another.<br /><br />Anderson concedes that the strength of the free business model he champions in the book has been pressurised by the recession. &ldquo;When I started out on this two and a half years ago, the main presumption was the internet was free and you would just give away stuff. You didn&rsquo;t have to think very hard about it. You&rsquo;d just monetise it with advertising. The recession has revealed the limits to that model and, as a result, people are having to be a lot more clever. So, as I say in the last chapter, the recession has basically shifted the emphasis to the freemium model of free, where you have multiple products, some of which are free and others which are paid-for.&rdquo;<br /><br />He warns against hastily erecting so-called pay walls for short-term financial gain, however, especially when it comes to social networks. &ldquo;Facebook could become profitable tomorrow, with a flick of a switch. It could just say &ldquo;you wanna keep using Facebook?&rdquo; That&rsquo;ll be $4.99 a month. Would that be ultimately good for Facebook or would that break something in its contract with its users? The same is true with Twitter. The problem is they don&rsquo;t know how strong their tie with their users is. One of the problems with free is that your ties are entirely emotional, psychological, habitual &ndash; not financial. So you haven&rsquo;t really tested them using price.&rdquo;<br /><br />At the heart of &ldquo;Free&rdquo; is Anderson&rsquo;s economic theory, based on &ldquo;atoms&rdquo; and &ldquo;bits&rdquo;. &ldquo;Atoms&rdquo; are the things that make up the non-online economy, the lorries that distribute goods, the paper on which books and magazines are printed, the plastic used for CDs and so on. He argues correctly that the cost of these &ldquo;atoms&rdquo; has been rising pretty steadily for years.<br /><br />With &ldquo;bits&rdquo;, the story is different. The cost of processing power, storage and broadband connections has been falling at a constant rate for decades, says Anderson, making the cost of distributing content online increasingly inexpensive. Eventually, the cost of &ldquo;bits&rdquo; will be so negligible, that companies will be able to give away content for nothing and still make a profit from online advertising revenues.<br /><br />The problem with his theory is that the &ldquo;atoms&rdquo; and the &ldquo;bits&rdquo; don&rsquo;t exist in separate worlds. While the cost of computer hardware and internet connections might be dropping, media firms still need to buy &ldquo;atoms&rdquo;, with people &ndash; journalists, musicians, writers etc &ndash; being the most expensive. In fact, some media organisations &ndash; especially newspapers &ndash; have spent huge sums on new staff, or &ldquo;atoms&rdquo;, just because they understand &ldquo;bits&rdquo;; web designers, flash programmers and bloggers don&rsquo;t come cheap.<br /><br />When I point this out, Anderson gets visibly irritated. &ldquo;If you&rsquo;re suggesting that the fixed costs rise at a more than linear rate with the audience size, I see no evidence of that,&rdquo; he says. &ldquo;If you&rsquo;re doing it right, your costs grow more slowly than your audience.&rdquo; But whether a firm&rsquo;s costs are growing more slowly than its audience isn&rsquo;t really the point. No one is suggesting that newspaper websites, along with the likes of Facebook and MySpace, haven&rsquo;t attracted a staggering number of users. The real question is whether a company can keep its costs lower than the amount of revenues it is making from its audience. So far, virtually no one has managed to do this with a free website, which is why the whole notion of free content is in the dock.<br /><br />Anderson is convinced that when Murdoch says the days of free are over, what he really means is that most content will still be free, but the most valuable will be priced. &ldquo;Murdoch is very smart. I&rsquo;ve spent some time with the head of the Wall Street Journal website and they&rsquo;re big believers in free. They&rsquo;re still going to give away a lot for free, but once you dive into subject-matter speciality stuff like commodity trading it becomes paid. So Murdoch is misunderstood as believing in paid versus free. He believes in paid and free.&rdquo;<br /><br />While Anderson says he&rsquo;s on the same page as the media mogul when it comes to free content, his comments are at odds with some of the noises that Murdoch has been making recently. One of the things the News Corp boss intends to charge for is celebrity scoops, largely because they attract huge numbers of eyeballs to the Sun and News of the World websites.<br /><br />Pointing to the huge amount of traffic celebrity website TMZ got when it broke the news of Michael Jackson&rsquo;s death, Anderson warns against this. &ldquo;When TMZ reported that Jackson had died, it could have charged $5 for access. But if it had done that, it would have got the $5 once and other sites would have reported on what TMZ was saying; those sites would have got all the traffic and advertising revenues.&rdquo; Because reporting on what someone else has said is absolutely fine, Anderson points out. Just as long as you remember to acknowledge your sources, of course.<br /><br />&bull;&nbsp;Chris Anderson&rsquo;s Free, published by Random House, is out in hardback priced &pound;18.99<br /><br /><strong>CV </strong> CHRIS ANDERSON<br /><br /><strong>Age:</strong> 48<br /><br /><strong>Career:</strong><br />2001&ndash;Present<br />Editor, Wired US<br /><br />1994&ndash;2001<br />The Economist<br />Several positions, including Technology Editor and US Business Editor<br /><br />Previous<br />Writer on Nature and Science, two science journals<br /><br /><strong>Education:</strong><br />Degree in physics from George Washington University<br />Researcher at Los Alamos National Laboratory<br /><br /><strong>Personal Life:</strong><br />Lives in Berkeley, California with his wife and five small children<br /><br /><strong>Publications:</strong><br />2006<br />The Long Tail: Why the Future of Business Is Selling Less of More <br />2009<br />Free: The Future of a Radical Price