The final session of Nielsen's 2010 Consumer 360 featured a lively and informed debate between Wired Editor In Chief, Chris Anderson the New Yorker’s Malcolm Gladwell on the topic of "free." This intellectual "cage match" (as Anderson called it) was moderated by Nielsen’s President of Media Product Leadership, Steve Hasker.
Malcolm Gladwell was first with opening remarks, jousting that Anderson has built a "cottage industry" around the subject of free (Anderson literally wrote the book on it). He joked that while Anderson had been tweeting about the debate, he had been keeping it quiet, painting himself as a sort of Don Quixote to Anderson’s "windmill."
Gladwell based many of his opening remarks on the excerpts from Anderson’s book that reference a 2008 Dan Ariely book, Predictably Irrational. Ariely, a professor at Duke, conducted experiments on cost sensitivity using chocolates: one a high-end truffle and the other a popular milk chocolate treat. Ariely found that participants would choose the truffle over the chocolate treat when the truffle cost 15 cents and the milk chocolate was priced at a penny. When the cost of both came down one cent, though – making the truffle 14 cents and the milk chocolate free – participants switched allegiance and opted for the free chocolate. Gladwell agreed it's possible to build a business off of free, citing Google, but what scares him is how the notion impacts the marketplace and ultimately promotes "irrational" consumer behavior.
For effect, Anderson took to the opposing platform for his remarks, even pointing the difference in attire between the two (casting Malcolm as truffle and Anderson as free chocolate -- interesting how both presented themselves as the underdog).
Where Gladwell opted for candy to make his point, Anderson went to Gilligan’s Island -- a show he watched routinely as a child. The strong TV ratings and pre-teen share of that program in its heyday, Anderson said, had more to do with the lack of viewer choice than program quality. For Anderson, a free ecosystem broadens the range of content, allowing entertainment to reflect the individuality of consumers and producers as opposed to a one-size-fits-all model. Quality, he argued, is not always about production value, but can also be about relevance, as evidenced in the explosion and virality of consumer generated media. Hasker asked Anderson who would pay for a Gilligan’s Island in a world where consumer-generated videos of adorable cats took over. Anderson rebutted: this presumes a show like Gilligan’s Island was a product worth it to begin with.
Anderson then turned to a key topic of his book – the idea of freemium, where the few subsidize the many. In addition to ad-supported free content, Anderson argued that a free content economy will create an opportunity to sell more premium content direct to consumers, as promoted by free slices of that content.
Anderson concluded by saying that time is the true scarcity today, and that if content providers can win a consumer’s time, they’ll win their money.
Gladwell landed an early jab in the back and forth that followed opening remarks when he asked Anderson where this "free revolution" was, noting he'd written a lot of checks to his cable company over the years and he'd like to start saving some money. Gladwell argued that it was not the concept of free that expanded content options as Anderson argued, but consumers paying for premium content and the rise of things like cable TV. Well, that would be a good observation from the 1990s, Anderson jabbed back.
Gladwell argued that Anderson’s story of free works only when you remove a large chunk of history or crop out many of the ancillary costs of content production and delivery.
An audience question noted that much of the “free” news content consumed through Google comes from established news sources. Gladwell noted that while he likes many sites that aggregate content, he blunty noted that many were "parasites." Anderson took the flipside, noting that such free content drives considerable traffic, awareness and search engine "link love" to the original content provider.
Anderson was challenged by an audience question regarding Wired's iPad app -- priced currently at $4.99. Why not "free?" Anderson noted the Wired team was working on a number of models, from free to freemium to premium and other bundles.
So who won the debate? Here's Anderson's take.