t a hearing on Capitol Hill in May, James Moroney, the publisher of the Dallas Morning News, told Congress
about negotiations he\u2019d just had with the online retailer Amazon. The idea was to license his newspaper\u2019s
content to the Kindle, Amazon\u2019s new electronic reader. \u201cThey want seventy per cent of the subscription revenue,\u201d
Moroney testified. \u201cI get thirty per cent, they get seventy per cent. On top of that, they have said we get the right to
republish your intellectual property to any portable device.\u201d The idea was that if a Kindle subscription to the Dallas

which the news was read, and just three dollars belonged to the newspaper, the provider of an expensive and
ever-changing variety of editorial content. The people at Amazon valued the newspaper\u2019s contribution so little, in
fact, that they felt they ought then to be able to license it to anyone else they wanted. Another witness at the hearing,
Arianna Huffington, of the Huffington Post, said that she thought the Kindle could provide a business model to save
the beleaguered newspaper industry. Moroney disagreed. \u201cI get thirty per cent and they get the right to license my
content to any portable device\u2014not just ones made by Amazon?\u201d He was incredulous. \u201cThat, to me, is not a model.\u201d

Amazon\u2019s offer might not have seemed quite so surprising. Anderson is the editor ofWi re d and the author of the
2006 best-seller \u201cThe Long Tail,\u201d and \u201cFree\u201d is essentially an extended elaboration of Stewart Brand\u2019s famous
declaration that \u201cinformation wants to be free.\u201d The digital age, Anderson argues, is exerting an inexorable
downward pressure on the prices of all things \u201cmade of ideas.\u201d Anderson does not consider this a passing trend.
Rather, he seems to think of it as an iron law: \u201cIn the digital realm you can try to keep Free at bay with laws and
locks, but eventually the force of economic gravity will win.\u201d To musicians who believe that their music is being
pirated, Anderson is blunt. They should stop complaining, and capitalize on the added exposure that piracy provides
by making money through touring, merchandise sales, and \u201cyes, the sale of some of [their] music to people who still
want CDs or prefer to buy their music online.\u201d To the Dallas Morning News, he would say the same thing.
Newspapers need to accept that content is never again going to be worth what they want it to be worth, and reinvent
their business. \u201cOut of the bloodbath will come a new role for professional journalists,\u201d he predicts, and he goes on:

There may be more of them, not fewer, as the ability to participate in journalism extends beyond the credentialed halls of traditional
media. But they may be paid far less, and for many it won\u2019t be a full time job at all. Journalism as a profession will share the stage with
journalism as an avocation. Meanwhile, others may use their skills to teach and organize amateurs to do a better job covering their own
communities, becoming more editor/coach than writer. If so, leveraging the Free\u2014paying people to getother people to write for
non-monetary rewards\u2014may not be the enemy of professional journalists. Instead, it may be their salvation.

Anderson is very good at paragraphs like this\u2014with its reassuring arc from \u201cbloodbath\u201d to \u201csalvation.\u201d His
advice is pithy, his tone uncompromising, and his subject matter perfectly timed for a moment when old-line content
providers are desperate for answers. That said, it is not entirely clear what distinction is being marked between
\u201cpaying people to getother people to write\u201d and paying people to write. If you can afford to pay someone to get
other people to write, why can\u2019t you pay people to write? It would be nice to know, as well, just how a business goes
about reorganizing itself around getting people to work for \u201cnon-monetary rewards.\u201d Does he mean that the New
YorkTi m e s should be staffed by volunteers, like Meals on Wheels? Anderson\u2019s reference to people who \u201cprefer to
buy their music online\u201d carries the faint suggestion that refraining from theft should be considered a mere
preference. And then there is his insistence that the relentless downward pressure on prices represents an iron law of
the digital economy. Why is it a law? Free is just another price, and prices are set by individual actors, in accordance
with the aggregated particulars of marketplace power. \u201cInformation wants to be free,\u201d Anderson tells us, \u201cin the
same way that life wants to spread and water wants to run downhill.\u201d But information can\u2019t actually want anything,
can it?Amazon wants the information in the Dallas paper to be free, because that way Amazon makes more money.
Why are the self-interested motives of powerful companies being elevated to a philosophical principle? But we are
getting ahead of ourselves.

\u2014storage, processing, and bandwidth\u2014has fallen so far that it is now approaching zero. In 1961, Anderson
says, a single transistor was ten dollars. In 1963, it was five dollars. By 1968, it was one dollar. Today, Intel will sell
you two billion transistors for eleven hundred dollars\u2014meaning that the cost of a single transistor is now about
.000055 cents.

Anderson\u2019s second point is that when prices hit zero extraordinary things happen. Anderson describes an
experiment conducted by the M.I.T. behavioral economist Dan Ariely, the author of \u201cPredictably Irrational.\u201d Ariely
offered a group of subjects a choice between two kinds of chocolate\u2014Hershey\u2019s Kisses, for one cent, and Lindt
truffles, for fifteen cents. Three-quarters of the subjects chose the truffles. Then he redid the experiment, reducing
the price of both chocolates by one cent. The Kisses were now free. What happened? The order of preference was
reversed. Sixty-nine per cent of the subjects chose the Kisses. The price difference between the two chocolates was
exactly the same, but that magic word \u201cfree\u201d has the power to create a consumer stampede. Amazon has had the
same experience with its offer of free shipping for orders over twenty-five dollars. The idea is to induce you to buy a
second book, if your first book comes in at less than the twenty-five-dollar threshold. And that\u2019s exactly what it
does. In France, however, the offer was mistakenly set at the equivalent of twenty cents\u2014and consumers didn\u2019t buy

the second book. \u201cFrom the consumer\u2019s perspective, there is a huge difference between cheap and free,\u201d Anderson
writes. \u201cGive a product away, and it can go viral. Charge a single cent for it and you\u2019re in an entirely different
business. . . . The truth is that zero is one market and any other price is another.\u201d

Since the falling costs of digital technology let you make as much stuff as you want, Anderson argues, and the
magic of the word \u201cfree\u201d creates instant demand among consumers, then Free (Anderson honors it with a capital)
represents an enormous business opportunity. Companies ought to be able to make huge amounts of money \u201caround\u201d
the thing being given away\u2014as Google gives away its search and e-mail and makes its money on advertising.

Anderson cautions that this philosophy of embracing the Free involves moving from a \u201cscarcity\u201d mind-set to an
\u201cabundance\u201d mind-set. Giving something away means that a lot of it will be wasted. But because it costs almost
nothing to make things, digitally, we can afford to be wasteful. The elaborate mechanisms we set up to monitor and
judge the quality of content are, Anderson thinks, artifacts of an era of scarcity: we had to worry about how to
allocate scarce resources like newsprint and shelf space and broadcast time. Not anymore. Look at YouTube, he says,
the free video archive owned by Google. YouTube lets anyone post a video to its site free, and lets anyone watch a
video on its site free, and it doesn\u2019t have to pass judgment on the quality of the videos it archives. \u201cNobody is
deciding whether a video is good enough to justify the scarce channel space it takes, because there is no scarce
channel space,\u201d he writes, and goes on:

Distribution is now close enough to free to round down. Today, it costs about $0.25 to stream one hour of video to one person. Next year, it will be $0.15. A year later it will be less than a dime. Which is why YouTube\u2019s founders decided to give it away. . . . The result is both messy and runs counter to every instinct of a television professional, but this is what abundance both requires and demands.

There are four strands of argument here: a technological claim (digital infrastructure is effectively Free), a
psychological claim (consumers love Free), a procedural claim (Free means never having to make a judgment), and a
commercial claim (the market created by the technological Free and the psychological Free can make you a lot of
money). The only problem is that in the middle of laying out what he sees as the new business model of the digital
age Anderson is forced to admit that one of his main case studies, YouTube, \u201chas so far failed to make any money
for Google.\u201d

Why is that? Because of the very principles of Free that Anderson so energetically celebrates. When you let
people upload and download as many videos as they want, lots of them will take you up on the offer. That\u2019s the
magic of Free psychology: an estimated seventy-five billion videos will be served up by YouTube this year.
Although the magic of Free technology means that the cost of serving up each video is \u201cclose enough to free to
round down,\u201d \u201cclose enough to free\u201d multiplied by seventy-five billion is still a very large number. A recent report
by Credit Suisse estimates that YouTube\u2019s bandwidth costs in 2009 will be three hundred and sixty million dollars.
In the case of YouTube, the effects of technological Free and psychological Free work against each other.

So how does YouTube bring in revenue? Well, it tries to sell advertisements alongside its videos. The problem is
that the videos attracted by psychological Free\u2014pirated material, cat videos, and other forms of user-generated
content\u2014are not the sort of thing that advertisers want to be associated with. In order to sell advertising, YouTube
has had to buy the rights to professionally produced content, such as television shows and movies. Credit Suisse put
the cost of those licenses in 2009 at roughly two hundred and sixty million dollars. For Anderson, YouTube
illustrates the principle that Free removes the necessity of aesthetic judgment. (As he puts it, YouTube proves that
\u201ccrap is in the eye of the beholder.\u201d) But, in order to make money, YouTube has been obliged to pay for programs
thata re n \u2019t crap. To recap: YouTube is a great example of Free, except that Free technology ends up not being Free
because of the way consumers respond to Free, fatally compromising YouTube\u2019s ability to make money around Free,
and forcing it to retreat from the \u201cabundance thinking\u201d that lies at the heart of Free. Credit Suisse estimates that
YouTube will lose close to half a billion dollars this year. If it were a bank, it would be eligible forTA R P funds.