Cheap is the new free

One of the best posts I've seen on the question of paying for content (at least from my preferred perspective) is on the 37signals blog. Read the comments too, they are eye-opening.

In a post titled "How did the web lose faith in charging for stuff?" David Heinemeier Hansson of 37signals writes:

I think the days of the traditional San Francisco startup approach are numbered. It’ll be flushed down the drain along with CDO’s and zero-down mortgages.

On the other side we’ll have a world where having a price will be the expected. A world where Jason (of 37signals) can’t make headlines saying “free is not the future”. A simpler world where most people, even on the web, will live from direct customers.

That has indeed been our experience with the Hearts of Space online service. To be sure, we were in a relatively unique position to launch a subscription model streaming service in 2001: we had a national presence on public radio, we had an established and well-accepted brand, and we had an inventory of unique, high quality programming to offer.

But the fact is, we had no choice. No one was going to give us any kind of funding, and our traffic numbers made any thought of advertising support a fantasy.

That said, it has taken us a long time to understand the value calculation that users make when deciding whether to pay. We have found that the entire area is very nuanced, and the relationship between free, paid, and "freemium" models takes careful experimentation to get right. We wound up with 3 major levels of service and no less than 25 different pricing options! (see PLANS at www.hos.com)

Despite what must be a record number of payment options for a site our size, we continue to be surprised by the granularity of service that users ask for. Ultimately we may need to build an interface that allows users to pick service levels and payment options from a menu and construct a 100% custom solution for themselves, like Apple or Dell does with their hardware.

We have concluded that it is not up to us to tell our users how to interact with us or how to pay for our content.

We've found you need to pack your service with value from the start, drive the price down as far as you can, keep adding value, innovate, repeat. Once you are rolling, daily interaction with your users will teach you everything else you need to know to get it right.

Takeaway:  Cheap is the new free.  But value is fundamental.