I'm already doing this. My content (www.winterspeak.com) is up and free for all to crib from, link to, think about, use, abuse etc.
I charge my employers for hiring me. I look for employers who, after checkout out my thoughts, will hire me for more money. My time is an excludable good. If I work for one person, I can't work for another. My thoughts are non-excludable, if I tell one person what I think, I lose nothing. Distributing my thoughts online is a much better way for me to make money than walking up to people and telling them (which uses up my limited time). Besides, no one would ever pay to listen to me.
I can get GNU/Linux for free. I can also buy it on a CD from Red Hat. Why do people choose Red Hat? It's a better, easier experience to install. And they're doing OK.
And remember, I'm not arguing for giving away experiences for free. A subscription Napster is OK by me. I'm saying they should think about their material not as content to be protected at all cost, but as experience. A Napster with tethered downloads or metered pricing provides a terrible experience customers will reject. Introducing crippled CD media will create a terrible experience customers will reject. Instead of fixating over material as "content" and placing ever tougher access restrictions that will turn a customer off, use each channel to generate the best experience and maximize overall sales. This does not mean throw away your business model, or give away excludable goods (like pets.com etc.) Nor does this mean online-only content companies "should" professionally survive (Feed, Suck, etc.) It just means that if you want to play the digital game, understand the medium and how your customers use it. Phil Greenspun, Seth Godin etc. etc. have their books available in their entirity online, but have had success in selling them offline also (books provide a better reading experience than computer). Loss leaders are old hat in the business world.
I would even go so far as to say that many web businesses did NOT package their services as experiences. They certainly created bad websites that did not sell things. Content companies never thought about how to create good experiences for their readers (subscriptions and micropayments create bad experiences, intrusive advertising creates bad experiences, begging does nothing to improve the experience either).
Using a free product in a primary market to grow a profitable secondary market is a time honored way to make money. AOL, and every other ISP runs on (OSS) TCP/IP. Free TV (primary market) creates valuable consumer attention (secondary market) to sell to advertisers. Cheap razors (primary market) grows the profitable secondary market for razorblades. Radio and MTV grows album sales. There is sound business strategy built into these examples, it does not excuse the reckless profiteering that marked the Internet boom. And it's just stupid to spend alot of money generating content you can't make money off of (Napster costs record companies nothing in that sense: no staff, no server time, nada).
Consumers will ignore digital music alternatives that create a bad experience (this does not mean music has to be free). Draconian access controls create a bad experience. Publishers can copyright their material, and prosecute offenders, but they should not be able to stop a band distributing its music for free online and trying to make money off touring, if that band so chooses, just as Microsoft should not be able to ban coders giving away their own software.
Look at it this way: retail shoplifting runs at around 1.5% and the record company allows retail stores to exist. Yet they're requiring Napster to have a 0% theft rate. This is clearly an issue of control and right of access, not merely "stealing content."
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