I’ve been thinking about Free lately. NoiseTrade offers a service that costs money. Similar services with more flexibility but fewer features (and no way to make money yourself) are available for free. In the middle of thinking about his, @jasonfried linked to an old Mashable article where Pete said “…I do think moving to a paid-only model is a supremely stupid business decision.”

Oh Really?

No offense to Pete, but I’m of the opinion that NOT having a pay service is stupid.

Ultimately if people aren’t willing to pay money for what you’re doing, then you don’t have a business. Hell, you don’t even have customers. You have users that will fall into one of three categories, none of which make you money:

• Pay Nothings who want your service but wouldn’t pay for it no matter what. They only use you because you’re free. Fortunately in the web world, they only cost you bandwidth. In the physical world, they cost a lot more.
• Do Nothings who have a lot of time on their hands. They’re looking to burn some time and that is all. They’ll be gone shortly.
• Care Nothings who aren’t interested in what you’re doing. They’ll sign up for anything and everything free, just because it is free. Do they care about sharing photos online, uploading trail waypoints, or whatever? No. Not at all.

The Conclusion

If you aren’t creating something that people are willing to pay for, then what are you actually trying to accomplish? If you’re giving away something that isn’t worth buying, you’re wasting everyone’s time.

Creating something worth buying and then giving it away doesn’t make a lot of sense either, but as part of an overall marketing and customer acquisition strategy, at least it has a shot at being sustainable.

While I was editing this brief article, another relevant article from Good Experience presented itself in Google Reader. “If you can’t get people to pay for what they love, we’re all out of business.”

Aside: I do not have an iPhone, I am the last of my friends to be stuck using a internet-less, regular-toothed, rotary-dial, steam-powered, hand-cranked flip phone. This post is not about about why that is ($$) or a revelation that I am caving (again, $$).

Disclaimer

I know nothing about the Mac Business Unit within Microsoft, I don’t know anyone at Microsoft anymore, and have no inside information related to the topic of this post.

January 2007: Apple Announces the iPhone

What a fateful day it was. A cell phone. From Apple. That ran “Mac OS X,” whatever that meant. Then thousands of voices cried out in unison, “No Third Party Apps!” A sentence which most reasonable people knew was succeeded in Steve Jobs’ mind by the word “…yet.” [Press Release]

October 2007: Steve Jobs Announces iPhone SDK

Steve shares in an open letter that there will be an SDK, third party apps!

March 2008: SDK Released

SDK, App Store, much rejoicing. [Press Release]

July 2008: App Store is Open for Business

The biggest orgy since the iPhone hit the shelves.

February 2009: Still No Word, Excel, or PowerPoint for iPhone

It’s been nearly a year since the official release of the SDK, and even before that it was clear that the iPhone was a smash hit and likely to be the standard against which mobile handsets would be judged for a long time to come. Microsoft had plenty of warning.

I don’t know who at Microsoft has a black turtleneck phone that connects straight to Steve Jobs’ old office, but if I was that person I would have spent a lot of time on it between October 2007 and July 2008 making sure that iPhone Office Companions were some of the first apps out the door.

Instead, Office is not represented on the most influential OS in the most coveted market with the most projected growth in the technology industry. That’s crazy. People are downloading iPhone-Ocarinas and farting applications, yet there is no Microsoft Office.

Microsoft could sell 1 Million copies of a $0.99 app that did nothing but sync and view Office files with no editing capabilities at all. Throw in basic editing and charge $10, or just include a code for a free license when you buy Office for the desktop. This isn’t rocket science.

The iPhone economy, as they call it, is instead slowly developing replacements and workarounds. It won’t be long before this won’t matter because no one will need Office for the iPhone. Which is good for users, but bad for Microsoft. Considering Office 2008 for Mac wasn’t worth buying, I don’t know how they’ll be able to hang on to any customers.

21st century economies will be powered by smart growth. Not all growth is created equal. Some kinds of growth are more valuable than others. Where dumb growth is unsustainable, unfair, and brittle, smart growth is sustainable, equitable, and resilient.

-Umair Haque on HarvardBusiness.org

I’m glad someone else is talking about this. I mean, besides my paranoid, raving tirades on Porch Night en Studio (Hi guys!).

The Problem Is…

The ingrained business culture in America is based on rules for a system that hasn’t existed for a long time. We manufacture very little, outsource a lot, subsidize too much, and send (for all practical purposes) all our raw materials overseas.

As long as this makes financial sense it will happen, but that doesn’t mean it is good for our economy in the long-term. We’ll soon have “too many chiefs” as they say; if we eliminate the domestic intellectual, creative, and skilled-worker “classes” who will be left to afford college, go out to eat, and buy the things we manufacture and ship back from Taiwan? There is a limit to this growth that in my mind is approaching faster than we think.

The Solution Is…

We can change direction, restructure large segments of our economy, or realize too late that we were being short sighted and foolish. I personally think the last option is the most likely.

The Reality Is…

Culture, regulation, and “mindsets” are always years behind fundamental changes in the way we do things. Just as the average American harkens all civic and scientific knowledge back to primary education, despite intermediate progress in those fields, the average business person harkens business understanding and operations back to their “formative” years in business. Changing ingrained knowledge, understanding, and practice is very hard. This a phenomenon I call “Being a Human.”

This weekend in the course of a discussion of piracy, copyright, intellectual property and the future of content creation with my brother-in-law (and by conversation, I mean: “I talked at him for 20 minutes after which he said something very poignant I hadn’t thought of yet”) we together came to an interesting idea.

Copyright, I lectured, was intended to provide content authors with protection of an idea for a “limited” (c.f. The Constitution) period of time to encourage creative work. That is, to ensure one could be the exclusive financial benefactor of your creation for a limited period of time, after which it would pass into public domain for the good of culture, and to force the creator to move on to other work and continue creating. Read your Lessig for detail on this.

I had also belabored the difference between creation and copy in a physical vs. digital world—read your Negroponte for more on that—which lead to a discussion of the fact that the production of a an entire album of music used to be necessary because no one would buy an cassette, album, or CD with just one track on it for a price agreeable to consumers and producers.

At which point he offered, “Why does it make sense to create an album for months or years, sell it, and then ‘Do Nothing’ for a long time.” Of course, “Do Nothing” isn’t meant literally, but the brilliance of the statement is still opening to me 48 hours later.

The album is a construct forced upon us by the old way of selling music. There’s got to be a better way. Barriers to entry are falling fast–you can make a pretty damn good song in a few hours using Garageband, and distribute it for a fraction of a minutia of the cost. Some people are already looking for a different model, but no one is doing this: What if instead of buying an album every 18 months, I could “subscribe” to artists for $20 or $50 bucks a year, which got me tons of premium content—blogs, music, videos, interviews, documentaries, whatever—all delivered digitally all the time. Every month a few songs, a few videos, some articles, etc.

If 20,000 fans who would buy a CD for $10 or $15 could convert (and who knows if they would) to 10,000 fans who would “subscribe” for $20 a year, well, that’s a more engaged (read: evangelizing) fan with more content to enjoy (and share), and an artist that can capitalize on a smaller fan base (with higher margins) and churn out more types of content (Shakespeare didn’t only write plays). And what if you had 50,000 fans? Or a million?

I only claim participatory credit for this idea. And it may be crazy—I can’t decide if this is just a “fan club” or not—but sometimes crazy ideas work.

“There has grown up in the mind of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest.”

-RA Heinlein in his short story, Life-Line, ©1939

This is why science fiction—and I mean serious science fiction, not the ridiculous Star Trek novels and such—should be read in schools.

Life-Line is published in the Expanded Universe collection. Buy it today at your local used bookstore or from Amazon.