Mark Cuban pours cold water on the meme of the moment.

Let’s look at the rule that eventually KILLS all freemium-based content plays:

There will always be a company that replaces you. At some point your BlackSwan competitor will appear and they will kick your ass. Their product will be better or more interesting or just better marketed than yours, and it also will be free. They will be Facebook to your Myspace, or Myspace to your Friendster or Google to your Yahoo. You get the point. Someone out there with a better idea will raise a bunch of money, give it away for free, build scale and charge less to reach the audience. Or will be differentiated enough, and important enough to the audience to maybe even charge more. Who knows. But they will kick your ass and you will be in trouble.

When you succeed with Free, you are going to die by Free « blog maverick

And while you’re at it, Mark, please predict the end of Google:

For Google, who lives and dies by free, we don’t know who their Black Swan company will be. But we all know it will happen don’t we? The only question is when.

Look, I do agree that the Chris Anderson book that everyone is talking about is not an earthshaker. Give Anderson credit for putting his money where his theory is and making the book available free on Scribd. It’s also $17.19 on Amazon. Go figure.

There’s probably better economics in “almost-free” or “nearly-free” or “free-plus”. iTunes store has demonstrated pretty well that an efficient, cheap delivery system of content of reliable quality can compete with the crapshoot of piracy. Why iTunes isn’t doing the same with indie films, I don’t know. Amazon’s Unbox may not have them beat with Hollywood movies and t.v. shows, but definitely has them beat on indie content.

I’d love to see a Bandcamp-type site for indie films, where filmmakers can price as they like, run free promotions (buy the DVD, get a free digital download) etc. That’s definitely a hole in the market that could use a good digital business model.

Anyway, Google isn’t truly free. It has ads. It’s the same model as t.v. and free newspapers, except it has better economies of scale. So, as I see it, there are two things the market is still figuring out when it comes to online distribution.

1) How to get content to as many people as possible. This will naturally require the ability to deliver in multiple formats. Digital rental/digital ownership is a start. It may be that the optimum price is so low that rental isn’t even needed as an option.

2) How to price the content. Will it be offset with ad revenue? How many ads are too many? The number of ads is going to determine the price of the ads.

It’s a two-pronged attack. The more people who are demonstrably watching the content, the more the content is worth, whether it has ads or not. Systems that rely on giving away content for free to as many people as possible are counting on this, even if they don’t acknowledge it. They are subsidizing perceived value.

MORE:
Cuban follow-up post #1
Cuban follow-up post #2

UPDATE: Now having read Chris Anderson’s book in its entirety (hey, it was free), I must say that he definitely understands that free is a way of life when it comes to the digital realm. (I guess I’m one of those under-30 people who says ‘Duh’ about this.) One of his larger points, which I think addresses Mark Cuban’s criticism, is that free is inevitable when the market is on the web and the distribution costs are virtually free. This is what happened with music and newspapers. This is what is starting to happen with t.v. and film content. Rather than fight it, companies need to figure out how to make money in a related area or ‘monetize adjacent scarcities.’ Another lesson is that the industry can shrink in terms of dollars it brings in or people it employs and never grow back. Like it did with encyclopedias, which were first devastated by Microsoft making Encarta available cheaply, then Wikipedia making it available freely.

It never occurred to me that I might be in a fin de siecle industry. That there will simply less professional filmmakers making a living making films from now into the foreseeable future. There could be greater audiences, but the rewards of making films may be less monetary.

Until we’re living in a reputation/attention economy, it’s going to be rocky. Anderson plans to convert the reputation/attention he gets from making his book available free into speaking gigs. What could a filmmaker do? Private showing fees? Free shorts as a way to be hired to direct commercials?