Free content makes money

by Shannon Paul on October 12, 2008

It may seem counterintuitive, but a growing body of evidence supports the argument that free content shared online leads to more people buying your stuff.

In the music industry, this realization is finally beginning to take hold, showing even the most frugal bean counters that content distributed free of charge generates more revenue.

For years, the music industry has been operating under the false (yet once true) assumption that music was its core product. Social media, file sharing and changes in how content is distributed changed that.

Earlier this year, Seth Godin wrote a blog post outlining the lessons businesses could glean from music industry woes. The lessons Seth oulines still hold, but another important realization is beginning to surface: Free content makes money.

A recent post in Digital Music News by Paul Resnikoff outlines some of the lessons learned regarding the leveraging of free content in the music industry.

In Paul’s article, he quotes Scott Cohen, cofounder and vice president of International at The Orchard. The Orchard is a music licensing and distribution company that facilitates the delivery of audio content to hundreds of digital stores and mobile carriers. During a panel discussion at Popkomm earlier this month, Scott shared the following observation:

“It used to be that you gave away a free track to sell the other stuff, like the album. Now, when we give away a track, that track sells more.”

This realization is huge. Giving stuff away for free is risky business to consider but, as Paul points out, savvy musicians, promoters and investors in the music industry are beginning to understand the benefits of including free content in their business models.

Benefits of shared aka “free” content include:

  1. More engaged consumers
  2. Permission in the form of registration information and feedback
  3. Increased merchandise sales
  4. Increased music sales (really)

If you apply this lesson to other businesses, it ends up looking like David Meerman Scott’s example of Brand Journalism. But, what about other types of businesses, like those in B2B sectors? What are other benefits of giving away free content? How can businesses be convinced that free content actually increases profits? Are there examples to the contrary, pitfalls to be avoided? Please share.

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October 12, 2008 teamclermontrocks

Hello,
I enjoyed reading your article about free content making money – well written! I am both a business consultant and Fitness Trainer/Nutritionist and find that it is really important to give free information. Short E-books on pertinent topics, some free workouts, and short talks all help build credibility and trust in a professional and give the consumer the ability to work long-term with the professional and refer others. I am at http://Awinningway.wordpress.com and http://TeamClermontrocks.wordpress.com

October 12, 2008 Jamie Grove - How Not To Write

In my day job, we implemented a customer retention strategy based on the same principles you list under benefit (except for #4). Not only does it work, but the numbers are pretty astounding.

I suppose this isn’t surprising though since the concept of ancillaries has been around forever. What’s changed is the distribution medium. Since delivery via email is free (or close enough), it only serves that some of the content should be free and we should focus on selling something different. This is the heart of Chris Anderson’s new book “Free.”

Going totally free is not in the cards for us, but the abstract concept of a cost efficient distribution medium changing the fundamental nature of a particular business is sound.

October 12, 2008 shannonpaul

@teamclermontrocks Glad that’s working for you. I can see how sharing your expertise helps win clients.

@Jamie, thanks so much for sharing this. I would love to see a case study when you’re finished with the analysis.

October 13, 2008 Lisha Sterling

Whenever I read things like this, my mind goes to the creative work that I do and to the technology oriented work that I do. I never think, “Oh, yeah, this applies to my skating!” (probably because these days I think of coaching as my “hobby” — I only teach about 4-5 hours a week now.)

@teamclermontrocks reminded me that this is *exactly* the sort of thing that I do to draw in new ice skating students. At my previous rinks it was a part of the skating school business plans to provide free help from coaches on certain public sessions. At my current rink, I had to fight the management to stop from getting in trouble for giving that kind of help for free. They came around, though, when they realized that they were getting more return customers AND more requests for classes and lessons on the sessions where I gave help and advice like how to stay upright, how to go backwards or how to do a two foot spin. Now, on busy sessions they try to have at least two guards on the ice — one to keep an eye out for problems and one to help newbies get the hang of things. It’s just good for business.

October 13, 2008 Ari

This goes back to the age-old concept of giving away samples to get people hooked on your product and wanting to buy more.

The biggest complaint I have with the new on-line version of this is when a “free” download is nothing more than an excuse to contact me for a sales pitch. If you believe in your product, let me try it out and, if it’s as good as you believe, I’ll be back. Don’t turn me off with the hard sell.

I always tell my public relations students, “If you have to sell your story too much to a reporter, there’s probably not a story there to begin with.” The same principle applies to any product you’re pitching.

October 13, 2008 Scott

Radio has been giving away content since the beginning. Sure, we sell ads, but the cost to the end user is zilch. Radio has also worked with record companies to give away music via on-air giveaways of CD’s and concert tickets.

The idea is simple – if they give us (the station) concert tickets to give away we talk about the show. A listener attends the show and you can bet they’ll tell more friends. At the show they might buy a CD or t-shirt.

The same applies to playing music. The record companies supply the song to the station, the station plays it and the listener hears it for free.

If a listener hears something they like you can bet they will try to find out more. Trust me, not a day goes by that I don’t get an email, IM or phone call about a song we’ve played.

Why is online any different?

October 13, 2008 Mind Booster Noori

As a musician, I give my music for free, and all of it is licensed with a Creative Commons license. Not only this creates awareness to my band, but also lets people “try before buy”, which led me to 1) more sales, and 2) being able to get revenue from “ad-supported free” services like the ones ReverbNation and Last.fm provide.

But this isn’t new. Picking the example of a big band: do you know Marilyn Manson? Of course you do, everyone heard about it. But did you know that while he got signed in 1993 to release the first album in 1994, he grew a huge fanbase and got his deal thanks to a big number of free demo tapes he used to give to anyone who wanted them? That’s right, free is the way to get fans, and more fans give you more money.

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