I was reading something on wired.com called Free! Why $0.00 Is the Future of Business and found something interesting.
One of the Free business models is called the “Freemium” model. Basically you give the basic cut down version to 99% of people and the 1% of people who upgrade to the premium version pay for everyone.
Now if you look as music I’d say consumers are saying they want that model because thats how they are treating music.
Who are the premium users? People who attend concerts and get to interact with the artists in ways that you simply can not with an mp3 copied from someone else.
I guess the idea is that the free version allows other people to be compatible with your premium version increasing it’s value.
For instance Adobe Reader is free and the program which you use to create PDFs isn’t. Meaning that if people couldn’t get the reader then the value of the PDFs you create are diminished because very few people could read them.
When you look at music the idea is that the more people whom know of an artist the more value that artist has to their premium fans. Whether it’s other people liking the artists music or people detesting the artists music or just simply people knowing of the artists music.
The reason this works is because it costs virtually nothing for every free user due to the negligible costs associated with bandwidth. Esp if everyone is downloading your music via p2p, BT or a site which pays you to list your music so they can make money via advertising.
And what about people reselling music for a profit?
Really if someone is stupid enough to resell something that can be obtained for free you’ve either got a previously unknown market for premium services or a market which would cost you more to exploit than you’d get in revenue. Either way you’ve found a new way to make money or someone is subsidising your premium services.