Canadian Magazine Industry News
16 May 2008,     TORONTO
The double life of Chris Anderson and the economics of free
Chris Anderson

In a speech delivered yesterday, Chris Anderson described the two worlds he simultaneously lives in as the editor-in-chief of Wired. The first world—print—is one of scarcity. This is the world of top-down structure, where Anderson must play a paternalistic role of command and control. In this world, “everything is forbidden unless it is permitted.” The second world—online—is one of abundance. In this bottom-up, egalitarian, “out of control” world,  “everything is permitted unless it is forbidden.” It’s a world Anderson describes as, ”glorious, and also very scary,” and it’s also the world of an emerging economic model that has and will continue to have a dramatic effect on the business of media—the economy of free.

This strange new economy is the subject of a cover story Anderson published in Wired in February, as well as the subject of his new book, which will be released next year (and yes, the book will be free). Anderson elaborated on some of his concepts and theories on free yesterday at the Interactive Marketing Conference, hosted by Infopresse at the Metro Convention Centre in Toronto.

We have reached a point where bandwidth, storage and processors are “too cheap to meter,” Anderson said. When this fact is combined with the basic economic law that “in a competitive market, price falls to the marginal cost,” we get a digital economy where producers must offer their main product—content—for free.

Is there money to be made in this economy? Of course, Anderson said. Traditional models, such as advertising-supported businesses, will continue to gain ground. But there are also new models emerging. For example, in the past, producers would give away 1% of their content and charge for the 99%—the free sample. Today, however, the reverse is true—producers can give away 99% of their content and make money by selling just 1%. Yes, revenues will shrink, but so have costs. If you’re product is worthwhile, the 1% of your audience that’s willing to pay will support the 99% of your audience that doesn’t. Anderson calls this the “Freemium” model.

Another currency in this new economy is labour exchange. User-generated content is a prime example. Consider that Anderson’s first book, in which he presented the now-ubiquitous Long Tail theory, was developed in part through a free-to-read online blog. In exchange the content Anderson provided, readers offered him their own opinions and leads, freely providing Anderson with a depth of sources he never would have received in the more scarce economy of print.

For (much) more on the free economy, click here to read Anderson’s original article.

Yesterday’s event was the first hosted by Infopresse, a media-focused publishing company based in Montreal, in English Canada. Stan Sutter, the former editor of Marketing magazine, who has resurfaced as the vice president of English content for Infopresse, played host.

— M.U.
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