Peter Imes: The challenges of 'free' to business

July 8, 2010 10:44:00 AM

Peter Imes - [email protected]


A couple of weeks ago, I noted the way the Internet has flipped the movie rental business on its head. This week let''s look at the ways the Internet has taught us to expect to receive stuff for free. 


The World Wide Web was launched in 1990 as a way to share information in an easy-to-read way and as an easy way to link different "web pages" of information together. It worked so well that now anyone can create a web page that displays text, photos, movies and music. (Yes, even you.) This ease of use has led to a massive amount of free stuff that is changing the way long-established companies are doing business. 






Around 1990, file sharing services like Napster and Gnutella made sharing music extremely easy. Using their service, you could save and entire CD to your computer and then share that CD with anyone else who was using the same service. As a result of this easy sharing, worldwide CD sales started a downward trend and the media started forecasting the death of record labels. In an effort to slow illegal sharing, the Recording Industry Association of America went so far as to sue several hundred individuals for copyright infringement. 


Around the time of these lawsuits, legitimate services like Apple iTunes and Rhapsody started allowing people to easily purchase music using their computers. Despite the growth of these legitimate services, illegal file sharing remains extremely popular. Polls reveal that a large percentage of people who believe that stealing a CD from a store is unacceptable also believe that downloading a CD for free online is acceptable. 


Matthew Schumaker -- son of local author Deborah Schumaker -- works in the music industry in San Francisco. On a recent trip to Columbus he noted that artists are relying more and more on live concert ticket sales rather than CD sales for income. Some artists are using the Internet to bypass record labels altogether and selling directly to consumers. CD sales will continue to decline in favor of digital (legal and illegal) alternatives.  






On top of more and more people abandoning traditional home phone lines for cell phones, phone calls over Internet are quickly rising in popularity. With nearly half a billion registered users, Skype is one of the largest Internet phone services. Once you create a Skype account, you can call any other Skype user in the world for free. If you have a webcam on your computer, you can even video chat. Your friend doesn''t have a Skype account? Don''t worry: you can also call phones and cell phones too. Skype now accounts for nearly 10 percent of all international calls. 






Free software has really exploded in the past decade for two primary reasons: 1) it is as easy to share software online as it is to share music and 2) in many cases major software manufacturers are out of touch with what consumers want. Groups of computer programmers collaborate to create software that- in many cases- is as good as commercial software. Many times, these programmers offer their software for free. Can''t afford Adobe Photoshop? Try Gimp. Can''t afford software to remix music? Try Aviary. Can''t afford Microsoft Office? Try OpenOffice or Google Docs. In fact Microsoft has realized the trend toward free alternatives, and they now offer a free online version of their popular Office software called Office Web Apps. 


Why are these programmers and companies offering free software? First of all, the costs to distribute software are now negligible. If you are smart enough to program some software, you can certainly figure out how to sell it online. This has created a flood of software that has driven down and the price of software to either next to nothing or nothing at all. The quality of this free/cheap software varies, but don''t be afraid to experiment. You''d be surprised by the quality of some of it. Many companies who offer free software make money by selling support packages or by selling "add-ons." Others distribute free software to promote another (paid) product or service they provide. 






Movie sharing did not take off as quickly as music sharing because movie files are so much larger than movies. It simply takes longer to share a movie. As Internet connection speeds increase and better methods of compressing movies are developed, movie sharing will become a major problem for studios. The final straw for studios will come when you can conveniently access the Internet directly from your TV. 




...and more 


You may note that I''ve left out the print industry. I''ll address that in detail in another column. The online version of this column provides links to all of the services and software I mentioned, plus links to a few other resources you may find helpful. 


Before I wrap this up, let me address the strange design at the top of this page. It''s called a 2D barcode. Smartphones such as iPhone, Android and Palm can read this barcode once the proper (free) software is installed on them. If you have a smartphone, visit to download the tag reader. Launch the reader and scan the barcode below to be automatically taken to this story online. These 2D barcodes are a little gimmicky, but they are trendy right now and you will be seeing them more and more in ads and marketing.

Peter Imes is publisher of The Dispatch. You can email him at [email protected]