Dirt cheap: Techdirt bets on 'free' business models

Heaping criticism and scorn on media companies has worked well for Mike Masnick, operator of the popular blog Techdirt.

Mike Masnick thinks alternative business models for the music, film, and publishing sectors are out there. He wants to help find them.

(Credit: Dennis Yang)

Masnick is the firey commentator who blasts copyright owners and anyone else he believes has failed to accept that in the Digital Age most of the control now rests with consumers. He strongly maintains, however, that there are still ways for entertainers, artists, and journalists to make money. They just have to be developed. Plenty of people disagree with him of course.

Still, there's no denying that his brand of criticism has resonated with the growing number of techies, bloggers, and file sharers who believe art, news, and entertainment should be free. What separates Masnick, 34, from other notable old-media critics is that he isn't satisfied with just slamming music labels or Hollywood studios for failing to find alternative business models. He's gone looking for them himself.

Techdirt has begun experimenting with whether a content owner, such as himself, can generate meaningful revenue while giving away his main product. Instead of charging for his posts, Masnick offers fans a range of other items or services to purchase, such as a Techdirt T-shirt, spending a day with Masnick, or access to his stories before they're posted.

Over the past couple of years, the free model has drawn a lot of attention. For instance, Radiohead and Nine Inch Nails stirred a lot of fanfare with their attempts at music giveaways.

In an interview with CNET News, Masnick spoke about his tests at finding a new publishing paradigm, copyright fights, and rage.

Q: Do you see yourself as the spokesman for the free content or anti-copyright crowd?
Mike Masnick: I don't think so. I might take a slightly different perspective on some of these things than some of those folks. There are a lot of voices in this discussion. I think I'm one of the voices and I certainly do have an audience. But I try as much as I can to focus the discussions more on the business side of it and where the opportunities are.

I recognize that there is always some controversy whenever we discuss these things, but I try to focus on some of the economics of it. That comes from my background and my business school training and the economics professors in school who got me thinking about this stuff. If you understand the economics you start to see it as inevitable. The idea of trying to hold back against it seems kind of silly. When you recognize the basic economic principals, then you realize there are a lot of opportunities there.

Tell me about what you're doing with your experiments.
Masnick: Obviously, I'd been following what the different musicians have been doing and writing about it on the blog and talking about it at the various conferences, and we wanted to find how the different models were working and what's cool about them. The ones that we've liked and we've noticed are things like what Trent Reznor is doing but also what Josh Freese, and Jill Sobule, and some others have done with sort of setting up tiers of options.

So they really were focusing on connecting with fans in an interesting way but also offering different tiers of options so people can buy at different types of levels. We've seen that happen and we started to wonder what would happen if you applied that model to a publication rather than just the music business. We said 'Let's experiment with that. We've been calling it Connect With Fans, and Reason to Buy.

We didn't expect it to be our business model but we thought that we could learn something from it and understand the different issues that musicians have to go through and the media must go through in terms of experimenting with different business models and let's see what happens. That was the basic plan. We sort of took the Josh Freese and the Jill Sobule models as kind of the inspiration in terms of how we designed it. We set up tiers. I don't remember how many. I think it was 11 different ways that people could support us and get something of value back. We wanted to be clear that this isn't the NPR- or PBS-type model where we are begging for support. We want to make sure people are getting something of real value back. We wanted to make it fun, and cool.

As part of that, we got some different authors and musicians to take part as well. (One) of the different options is the Techdirt Book Club, which includes some books that we really like that really talk about these different issues, with all of the authors offering up signed copies. And the Music Club is four different musicians all agreeing to offer up something unique, that you can't get anywhere else. In some cases it's a signed book or CD.

We finally came up with this idea where Jill is going to take some notebooks and write out some lyrics by hand and then some doodles and drawings using up the first few pages of the notebook. And so for the people who buy the Music Club, they get a unique one-of-a-kind, hand-drawn notebook from Jill and also a signed copy of her CD. Some of the other artists, one of them created a CD that's just for this package that includes some tracks he's released before but also never-before-released tracks. (Note: most of the items Masnick referred to here were included in a $150 package called Techdirt Music Club. It has since sold out).

What made you attempt this?
Masnick: Partly it was to get the experience. It's an experiment and we wanted to see what happens. At times people would complain "Oh, you can't talk about any of this stuff because you're not doing any of it." We said "OK, let's see what happens. Let's find out what we learn." It's a little bit different than being a musician but we figure there's always going to be something you can learn from it.

How long will you keep this going?
Masnick: We don't know yet. We launched it and said let's see. One of the things we've been doing is running one-off promotions. We may keep doing that. We'll start shutting some of the tiers down and replacing them with new tiers. We'll do that for a while and see what happens.

Do you consider yourself a journalist, entrepreneur...?
Masnick: Well, there is a lot more to the company beyond the blog. It's not just me. We have eight full-time employees. The part that really pays the bills is the Insight Community. What we did is basically build up the community around Techdirt and have set it up so companies can tap into that community to generate insightful conversations, either for internal purposes--things like market research--or for external purposes such as branding.

"Some of our basic assumptions we've learned were wrong but in a good way. We sort of naturally expected that least expensive levels would be the top sellers. That hasn't been true."

--Mike Masnick, Techdirt

Are you profitable?
Masnick: We are profitable. The project itself has definitely been profitable. We didn't want to set too high of expectations ourselves, we kind of wanted to see where it was going. Some of our basic assumptions we've learned were wrong but in a good way. We sort of naturally expected that least expensive levels would be the top sellers. That hasn't been true. To date, the top seller has been the package called the Approaching Infinity Package, which is a book based on a series of Techdirt posts about understanding the economics and business models. We took those posts and expanded on it a little more. People are buying that package, which also comes with a T-shirt. It is our best seller so far.

Who is your reader? Tell me about him or her?
Masnick: It is mostly him. There are definitely female readers and some active as well, but there is definitely a majority of male readers. It's a pretty broad mix. Most are from the U.S. We have a pretty decent-sized audience. We do have a pretty good international following, especially in English-speaking countries; Canada New Zealand, England. In the U.S., we're pretty spread out. A lot of our following is not Silicon Valley-based. We're not considered, I don't think, as a Silicon Valley blog. It's due partly because we don't talk about the latest start-ups. We talk more about economics and policy and lot of things that touch on different areas. We have less of a focus on the Silicon Valley scene even though we're based here.

What's interesting here, we've done a couple of reader surveys and stuff and the readers are sort of bi-modal. There is definitely a group of younger, late-teen, early 20s reader and another crew that's late 30s and early 40s. Those are the two high points. There certainly are a bunch of IT folks, and a lot of media folks, and a lot of policy and government people. We get a fair number of readers from the Washington, D.C. area. We get lawyers, a lot of patent lawyers like to get upset about what I say about the patent system. It's a broad mix because we don't get that deep into the tech aspect of it. Slash-dot is a heavy techie audience.

Why are you so full of rage? You seem to think that the content owners are sticking their head in the sand. That also appears to really tick you off?
Masnick: I try to not think of it as rage. It's kind of funny, I actually think of myself as optimistic.

What I find frustrating is when I think people or companies are trying to hold back what the technology allows. Those are my concerns especially when we're holding back the opportunity. That's where a lot of this comes from. I've been writing Techdirt in one form or another since 1997. So it was started when I was in business school, looking for a way to keep myself in touch with what was going on with technology and business world and it was a good way of paying attention.

It kind of grew from there.

[sanenazok]

I think he has a point about old media control. Nobody charges for blog posts and nobody would pay him if he demanded it. His blog consists of "articles" that are rarely a few paragraphs long. It might take him a few minutes to write this stuff. Once he starts giving away something that takes months to work on, and that people would actually pay money for, then he can talk.

Hi Saneazok,<br /><br />Thanks for your comment, though I have to question some of it. First, most of the examples we give on the site involve content creators who take months working on their content, but still embrace the free business models. Trent Reznor. Corey Smith. Jonathon Coulton. All of them spent a tremendous amount of time creating their content. All have found that free business models work better.<br /><br />Separately, I've written over 40,000 blogs posts, and (as was mentioned in this very interview) put together an entire book based on some of them. Those posts and that book took a tremendous amount of work -- yet we give away all the content for free.<br /><br />So, while I can see where you're coming from, I believe both that I've addressed the questions you've raised and have "done the work" to show that I should be "allowed" to talk.

[sanenazok]

A book from blog posts, where did you ever come up with that idea! Looking at the blog posts, they're mostly commentary on the news...stuff that doesn't take that long to do. It's just like this response. Putting it together in book form is the work of editors, not creators.<br /><br />A lot of mid-lifers, like Trent Reznor, who made a living selling records, may want more control over their works. Their success entitles them to it. It's hard to take seriously people who made all their money on the system and now that they don't need it, seek to abolish same.<br /><br />Everyone benefits from your type of commentary, just don't think too highly of yourself.

Hi Sanenazok,<br /><br />Thanks again for your comment, but the book itself was not commentary on the news. I would suggest that it would help to take the time to actually look at what it's about before you mock me for it. And, you seem to ignore the fact that it DID in fact take quite a long time to write. Why do you insist you know how long it takes to write compared to me.. who actually wrote it?<br /><br />Separately, why do you only discuss Reznor? I named three artists on purpose -- all with different success stories and levels of fame prior to them embracing such models.<br /><br />Furthermore, no one is looking to "abolish" any system. I'm not sure where that comment comes from.

[sanenazok]

I don't mean to get into a big argument with you, but my point is that you're generously giving away access to your blog all the while, virtually all blogs are free. You may have put together a book from the posts, but still it's not exactly something you would be selling for tremendous profit in any event. You're applying new methods of raising revenue to new media and that's very important, but not exactly surprising. Were you expecting a publishing contract to put your blog together? Maybe a contract from a Hollywood studio? The implication in this interview is that you want to replace or abolish those things with your methods.<br /><br />Regarding the artists, I've only heard of Reznor. The other two guys, Jonathon Coulton and Corey Smith are professional musicians and seem to make money from concerts and selling CD's, not exactly following the free mantra although granted they may release their music sans DRM. Given their limited appeal and career goals that may work.<br /><br />I just looked at today's contents - it's commentary on press releases and news items - many of which are gathered by your readers. It's all well and good, but again it's not that time consuming and so it's fine that you get paid from the sales of t-shirts and ebooks, but that can't fly for everyone.

[MadLyb]

I applaud him for trying to find solutions and not just raging against the machine, but this whole attitude that the loss of corporeal form should instantly negate rights of the content creator is just utter foolishness. <br /> <br />There will be give and take and it will end up somewhere safely between the everything digital is free views of people like Mike and the milk the content for every dime attitude of industry. <br /> <br />And as @sanenazok states, there is a huge difference in digital properties both in terms of actual content and creation investment and many properties may simply never work in a free model.

[bthoefer]

MadLyb,<br />If you read tech dirt you might understand that he does not think digital media negates the rights of the content creator. It simply makes the value of digital media (an infinite good) lower in the eyes of the consumer. Content creators have the right to set their prices at whatever they want, but they do not have a right to get paid for it if consumers do not think it is valuable enough to pay for it.<br />He is right that content creators should focus on creating value in the eyes of the consumer.

[contentcreator--2008]

digital media takes a lot to create, promote, and often support. Consumers are not obligated to purchase, but neither do consumers have a right to take it if they do not approve of the price, which is what is happening far too often. It's either pay the price and consume, or don't pay and don't consume. Negotiating over price is a market, taking without paying is theft and anarchy.

Hi MadLyb,<br /><br />I've never said that it should negate the rights of the content creator. In fact, just the opposite. You may be confusing me with other commenters on the subject. My point is merely that content creators themselves are better off learning to embrace free business models.<br /><br />Thanks for your comment.

[danielj1987]

Ok, let's see.... Overpriced movie tickets because the people "in charge" are trying to "compensate" for all the "piracy" and the money "lost" because "every time a movie was downloaded, a sale was lost" Utter B S. How many times will a movie on a computer be near as good as in theater? Sorry, debunk, I might download, watch, like, then go to theater to get the full effect. Same with CD's. Example, Daft Punk. I downloaded all his cd's, now going to buy them to get the best quality as soon as I get my pay check. I download to sample without the commitment. How many times has someone bought a CD cause of a song on the radio, 20 tracks, that is the only one you like? COME ON!!!!!!! Lots of music being distributed today is horrible. Why buy a CD for 20ish bucks when you think it's worth a nickle? That is what it is all about?! Worth, value, not stealing, listening, gauging, deciding. Should everyone pay more for a food item in a store to "compensate" for the free samples being passed out because every sample eaten is a lost sale? GET REAL!!! Same diff, except we will continue with the albums of that artist. Times change. Business models 20+ years old are not going to work in today's society. That's just the way it is

[vidanuevatx]

I'm not associated with Dirt Cheap, but have a comment. <br /> <br />There's a big difference between consuming a sample that's offered for free--whether in the grocery store or online--and going into a supermarket and eating everything you want without paying for anything. If the supermarket is not offering free caviar samples, but you open a can and eat the contents without paying, it's theft. That has nothing to do with whether the caviar is worth the price being asked, nor with whether you think the big caviar distributors are cheating the fishermen (or the fish). <br /> <br />I write a blog. It's freely available. I allow people to reproduce the majority of what's there legally, within certain parameters, but that's my choice. People don't have an automatic right to reproduce every digital item in the world just because it's in digital form.

[rdupuy11]

@vidanuevatx <br /> <br />I don't disagree with you, they currently don't have the right, because by law, you have a limited monopoly on the content that you create. <br /> <br />But, these articles are in the context of how society should be, rather than necessarily a laundry list of current laws and regulations. <br /> <br />When copyright expires, and they do, even your blogs, at that point people do have the right to copy freely. <br /> <br />That copyright expiration can occur much sooner, if Congress so chooses, or even eliminated entirely. <br /> <br />I don't advocate eliminating it entirely, but I also don't advocate having laws that 50% or more of the people break either. <br /> <br />It seems to me, that if people are 'voting' with their actions...as opposed to actually voting, we still need to account for it. A democracy should not be in the uncomfortable position, of having a minority viewpoint being dictated to the majority of people. <br /> <br />I don't think piracy raises to that level, yet. However, I think the majority of people do expect increased right to copy. <br /> <br />I think Congress should write laws to the effect that you should have no expectation to copyright, in certain formats...and leave it up to the content producers to decide whether they want to participate in those formats. <br /> <br />I will lobby my congressman to change the law such that there is no expectation of copyright on the general internet. Blog there....and its public domain. That, it seems to me, would be having the law just reflect reality.

[rdupuy11]

I was talking to a guy the other day about the e-book phenomena, about 1 million readers sold in 2008. The pace is 2 million for 2009, expected to double again next year. <br /> <br />He said something that opened my eyes. He said, once everyone owns ebook readers, then they'll start pirating newspapers, and put the final nail in the coffin of the newspaper industry. <br /> <br />Wow... how ready he was to put the blame on the death of newspapers on some future piracy, that hasn't even begun yet! <br /> <br />The fact is, newspapers have been dying for years, and it has nothing to do with piracy. <br /> <br />We never question whether CD sales were going to die, and it has nothing to do with piracy. <br /> <br />If you look at the successful, tier business models...you begin to see the FREE tier, is essential for wide distribution. <br /> <br />Piracy, has not been killing CD sales, but the opposite...its been the quite unintentional free tier, that has been propping up CD sales, in a time, when they could have slumped even further.

[rdupuy11]

If you look at newspapers, they weren't pirated, because of their form factor and existence on traditional paper, that wasn't feasable. <br /> <br />But, they went up against free content on the internet nevertheless, in terms of competition for a readers attention...and they lost, year after year after year. <br /> <br />What would happen if you eliminated piracy, is the paid music would just lose to the free music, year after year after year...slow, of course, but the 'industry' would lose its grip on music. <br /> <br />And this phenomena would have occurred much faster. <br /> <br />But, piracy, unintentionally mimics the free tier...that free tier that is absolutely essential for competing in the new economy. <br /> <br />The person above who said they sampled some music, and are going to buy the CD when they get their paycheck, he should not be ignored. <br /> <br />That is real.

[blastjacket]

Corey Smith and Jonathan Coulton, where do they work and what do they do?

[sanenazok]

They're musicians, they work playing music in different venues:<br />Places to hear Corey Smith: http://www.coreysmith.com/shows.cfm<br />Coulton: http://www.jonathancoulton.com/shows/