We’ve spilled a lot of E Ink projecting that 2012 will be the year that Amazon starts giving away the Kindle as they realize that there’s more money to be made from the content than from the gadget it’s read on. (See Kindle Wants to Be Free) We took our eye off Kindle’s rival, Barnes & Noble’s Nook, but it looks like the younger warrior has stolen a march on Goliath. The Nook is being given away, at least in one instance. But if there’s one instance, more are probably more on the way.

“When customers subscribe to The New York Times ($19.99 per month), they get a Nook Simple Touch for free,’ writes Dara Kerr on CNET.

Can B&N, Amazon, or any other e-reader manufacturer afford to give away its hardware?  Sure.  Because as time goes by, the value of the gadget declines and the value of the content bundled on it rises.  And in the case of the free Nook Simple Touch, it’s a way of giving away an e-reader that may be a bit of a drug on the market anyway.  Sales of black and white dedicated reading devices like the Simple Touch or the original Kindle are sagging as consumers opt for the color and hyperactivity of tablets.  This was confirmed early in January when E Ink holdings reported an 84% drop in sales. E Ink is the print technology that powers black and white reading devices.

Read Barnes & Noble offers free Nook with NYT or People subscription

Graph by Silicon Alley Insider

Years ago it became clear to us that we were heading for a Gillette Event.  That day may be only months away.

The Gillette Event is the day that the price of e-readers drops to $0.00.  The above chart shows that since 2007 the price of a Kindle has slid sharply from $399 to its current $79 (at least for one model). The slope is so steep it’s hard to avoid any other conclusion than that Free is inevitable.

The Gillette Event is named after King Gillette, the inventor of the safety razor and marketing genius who conceived the scheme of giving away the razor and selling the blades.  The analogy to e-readers is clear: give away the device and sell the content.

I’ve never believed that information wants to be free but it looks like the devices that provide it are just begging for gratis status.

Does it make sense for Amazon to go on charging anything at all for the Kindle?  There are compelling arguments in favor of taking the ball across the Zero goal line.

The first is that Amazon has never been afraid to sell the Kindle at a loss in order to undercut the competition. Some observers say that low-end models of the device are breaking even.  So, going into deficit to gain a competitive advantage would not plunge the company into trouble by any means. A million Kindles at $79 per is $79 million – hardly a ding in Amazon’s revenue armor. A free Kindle would give Amazon a decisive lead in the e-reader arms race from which rivals might never recover.

The second argument for free Kindles is that the amount of paid content carried on the e-reader has soared to the point where critical mass sustained by media sales is within reach. As an inducement to consumers the device would come pre-loaded with a starter set of rich content. No charge for your first set of razor blades.

These speculations were prompted by an interesting article by Pascal-Emmanuel Gobry in Business Insider Research, How Amazon Makes Money From The Kindle.

The author discusses the larger Kindle environment he calls the Kindle Ecosystem. At the headwaters of that ecosystem is the device itself.  A free Kindle could create a flood of business that would dominate the marketplace for the foreseeable future.

By the way, the Gillette strategy isn’t limited to Amazon.  Are you listening, Barnes & Noble?

Richard Curtis

This is Read an eBook Week, with thousands of titles available at no cost, offered by many publishers in the hopes of attracting permanent devotees of downloads. E-Reads is a participant with a Warren Murphy “Destroyer” adventure and a Highlands historical romance by Hannah Howell. If the spike in visits to our website is any indicator, thousands of bargain hunters are endorsing the program. There is no better bargain than gratis.

Smashwords founder and blogger Mark Coker has interviewed Rita Toews, whose brainstorm seven years ago led to this annual tradition. “I hope to introduce electronic books to people who have been skeptical about them in the past,” she tells Coker on Huffington Post. “I also hope to give Joe and Jane E. Author a place to get their writing noticed. Now that the traditional publishing houses have shown an interest in e-books it is hard for the unrecognized author to spread the word about their books.”

RC

A popular tune reminds us that “The best things in life are free.” It lists among other benefits the moon, the stars, the flowers in spring and the robins that sing. Omitted from the lyrics is information, because there are a lot of people who don’t think free information is one of the best things in life. In fact “Free” has become one of the nastier four-letter words in the English language, or at least one of the most controversial.

Two authors, Chris Anderson and Cory Doctorow, have invested a good deal of their time (and ours) attempting to redefine free, not merely as an abstract concept but as a template for action. I’ll state my view upfront: I agree with economist Milton Friedman who said “There is no such thing as a free lunch.” Free always has a price, and anyone who believes otherwise will end up either paying it or sticking someone else with the bill. I will even go so far as to say this is an immutable law.

But read on and judge for yourself.

As digital media mature and the financial stakes in the e-book industry soar on a double-digit trajectory, a task force of businesspeople, entrepreneurs and managers, backed by righteously indignant writers, musicians and artists is confronting a generation of Web users that stubbornly refuses to pay for content.

Some members of this generation grew up with a strong sense of entitlement; some simply have little or no comprehension of copyright; still others, taking Robin Hood as their role model, deliberately and defiantly hack protected files or download pirated content to get around the law, asserting their right to liberate it from capitalist exploiters. And still others are, simply, thieves. They all march under the banner “INFORMATION WANTS TO BE FREE” or sport the “Copyleft” symbol displayed here (I’m not sure if Copyleft is copyrighted). Media news reports daily clashes with content providers tired of seeing the fruits of their creativity dissipated, given away or stolen.

The slogan, the movement and the tension between free and commercial date back to the dawn of the modern computer era, indeed to the dawn of copyright protection itself when the conflict between content creators and legitimate users (like scholars) was resolved in a complex body of law that governs intellectual property rights to this day.

Standing between these clashing armies is a contingent of men and women dedicated to understanding the relationship between content given away and content sold. Their observations – some scientific, some anecdotal – have begun to yield some thought-provoking hypotheses that might shape e-business strategies in the next generation. Few of them have as much to say as Chris Anderson, editor-in-chief of Wired and bestselling author of The Long Tail. Anderson’s book, Free: The Future of a Radical Price, has just been published, and an interview with him conducted by Publishers Weekly’s Andrew Richard Albanese reveals just how complex the word – and the concept – is. Free, Anderson states, is “a word with economic, psychological, historical meaning, a word with incredible misunderstanding and paradoxical diversions in definition.”

The first thing that strikes you about the book’s title is its subtitle. Free is a price? That’s hard enough to absorb, but free as a radical price is a real head-scratcher.

Anderson says the definition of free as the opposite of paid is an artificial one. If it were not, how do we explain that people are making money giving products and services away? The answer is to view free as adding value to products that are offered for sale. We’ve often referred to the Gillette Razor model of giving away the razor but selling the blades. That concept can be applied to just about any product or service, and indeed that’s just what is happening. Anderson employs a word we’ve heard a lot of lately, “freemium,” meaning “using free to market paid.” The biggest misunderstanding of my work,” he tells Publishers Weekly, “is that I believe everything should be free. Not the case! Free should be a price point in the marketplace, but the free stuff should market the paid stuff. ”

You would think so. But as Malcolm Gladwell points out in his review of the book in The New Yorker, “…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, “has so far failed to make any money for Google.

“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’s 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 “close enough to free to round down,” “close enough to free” multiplied by seventy-five billion is still a very large number. A recent report by Credit Suisse estimates that YouTube’s 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.”

In other words, free is simply the glamorous side of capitalism that we prefer to see. But it’s really an illusion. In capitalism as in Newtonian physics, for every action there is an equal and opposite reaction. If you’re getting something free, someone else is paying for it.

Another name heard most frequently in connection with free is Cory Doctorow, the Canadian science fiction author, blogger and (depending on which side of the controversy you’re on) either a hero or a subversive. His articulate efforts to shake up the traditional publishing establishment have placed him on the leading edge of the digital paradigm shift. By putting his money where his mouth is he has singlehandedly altered our thinking about what works and what no longer works in the book industry.

Doctorow’s latest experimental venture exemplifies his philosophy. According to Locus, the trade publication of the fantasy and science fiction world, Doctorow’s latest short story collection, A Little Help, will be self-published in at least four different editions: “A free Creative Commons-licensed online edition in various formats; a free audio-book ‘featuring high-quality readings by a variety of voice-actor friends’; a print-on-demand trade paperback with five variant covers; and a limited edition hardcover to be sold in the $100-$250 range’…in batches of 10. The hardcover will feature bound-in SD cards or USB sticks including the e-book and audiobooks, and unique-to-each-volume endpapers made of signed and annotated paper ephemera by Doctorow’s writer friends,” Locus reports.

He will also produce a “super-premium” edition of one copy, including a story written specifically for the purchaser, for $10,000 (don’t bother, it’s already sold!). He will offer custom editions for conferences and other events with cover art of the organization’s choice, for a premium price. He will donate 10% of income from the book to Creative Commons, a non-profit organization dedicated to promoting the licensed sharing of creative works.

“There’re plenty of reasons to do this,” says Doctorow, “but for me, the most interesting one is the ability to empirically test some of the oft- bandied hypotheses about 21st century publication, the spectrum that runs from ‘Self-publication is a narcissistic money-pit that absorbs your time and money without returning as much as a real publishing deal could’ to ‘Publishers are obsolete dinosaurs and writers can do just as well going it alone.’”

Though some of this sounds positively Marxo-communo-anarcho-iconoclasto (Wikipedia says his parents were Trotskyist activists and he campaigned for nuclear disarmament and Greenpeace as a child), we cannot overlook the good old capitalistic enterprise underlying his experiment. By interweaving free and paid – freemium – Cory Doctorow is the poster child for Chris Anderson’s theories.

Richard Curtis