I noticed a story about Joost having trouble maintaining its model of offering free content and it takes us over to a debate between Malcolm Gladwell and Chris Anderson over the evolution of Free in a digital world.
Gladwell’s review of Anderson’s Free: The Future of a Radical Price includes the following quote from the book:
Distribution is now close enough to free to round down. Today, it costs about $0.25 to stream one hour of video to one person. Next year, it will be $0.15. A year later it will be less than a dime. Which is why YouTube’s founders decided to give it away. . . . The result is both messy and runs counter to every instinct of a television professional, but this is what abundance both requires and demands.
However, as all of the major ISPs understand so well, there is a big difference between “free” and “close enough to free to round down”. Gladwell puts it eloquently:
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.
As we head into the CRTC’s network management proceedings this week, these principles are worth keeping in mind. There is a significant difference between absorbing costs that are “close to free” as a small company and taking these up to mass market scale.