DRM News

Chris Anderson, Editor-in-Chief of Wired wrote a book called Free: The Future of a Radical Price which is really the long for of an article he had previously written. The short and quick of it is that if a company offers something for free, they’ll make more money. Historically this has proven to be true. How is that you say? Well lets take a look at DirecTV. Currently on their front page is an offer for ‘2 free upgrades’, a an HD-DVR and an HD Receiver, plus it also has Starz & Showtime for free for 3 months. Why do they do this? Because this brings in more customers they charge a monthly fee on. This is how they make money. You need to give people a reason to buy or they’re just going to find somewhere else to buy from.

Check out Chris Anderson explaining this using a number of different example from different markets: (its 37 minutes long, but well worth the watch.)

Now Cliff wrote an article just the other day detailing how Universal Music Group is slashing prices and hoping to bring in more sales. Now its not free but, this is pretty smart for a music industry company, because as a whole they’ve been fighting changing pricing and technology for years. In January Kathy wrote an article talking about Trent Reznor and how he offers cheap access to his music, but also more expensive packages of things his fans want, and he’s doing well with it. The music industry has some lessons to learn.

They are still years away from the video game industry that embraced the changing technology and went full force into digital distribution. For the video game industry this means far lower costs and far higher profits, basically the distribution portal takes a 30% cut and the publisher takes home 70%. The only sticking point, and going against Chris Anderson’s premise, is that pricing has not gone down. A game released at $60 in a retail store is $60 digitally as well. This is besides the fact that both Steam and GamersGate have proven that lowering prices actually bring in more revenue. This last year PC retail sales were only 20% of PC game sales, which may have publishers start thinking about their target market and concentrating their effort there. Reducing costs of digital sales would go a long way to selling more games and an increase in profits.

Now a midlist publisher sent a letter to Chris Anderson explaining how they used his ideas and how they worked. They offered a free ebook, the first in a series, on Amazon, and not only was it the #1 download on Amazon for the entire month of February, but it also increased sales of books two and three by rate of 20-1. They also saw an increase in print sales as well.

Free, or nearly so, does work to create higher profits, not only are companies doing this today, but all the way back to Gillette and Jell-O (You did watch the video didn’t you?). Its time the Music, Video Game, Movie and Book industries start to take notice.