T&A: A story from Knowledge (at) Wharton, an online business journal site by the Wharton School of Business, University of Pennsylvania, relates how some businesses are now considering giving away stuff for free (or at a loss) in the unusual hope that they can recoup them via paid premiums and high-priced consumables (ie. the same way printers make money from ink cartridges and console makers make money from games sold, except that you still have to pay for the printer and console).

Free: The Past and Future of a Radical Price by Chris Anderson, due out in July 2009

With the impending launch of Wired editor Chris Anderson’s new book in July, titled Free: The Past and Future of a Radical Price, the general belief is that this emerging model of ‘get the skeleton for free but pay for the flesh and organs’ concept, might actually thrive further in a recession. Especially in a recession.

Known as “freeconomics”, the story cites examples from Jeff Jarvis’ book What Would Google Do?, postulating if Google’s model of offering free Gmail storage space for keyword ads for instance, can be replicated in traditional industries like automotives. There are already businesses considering offering electric cars for free but charging for the batteries.

Of course, the phrase ‘there is no such thing as a free lunch’ still holds true when the story compares what freeconomics is (or are doing) to traditional outfits like newspaper publishers, trading firms and travel agencies. The Internet itself, and the way it cuts distribution costs to near-zero, has made consumers extremely price-elastic to anything above that price point. (Editor opinions: 1)

Navin Danapal, Technical Editor, HWM Malaysia

Navin (HWM MY): Free has to be the new price and will be with the recession. Consumers can’t afford to pay for things and if they can get something for free, they will. A good example is the rise in open source software, where consumers rather use the free OpenOffice (NeoOffice for Mac) or Sun’s free StarOffice than to pay for even the most basic of Microsoft Office suites.

While there are competing budget office suites like Kingsoft, if people can get it for free, they would rather do so and use the money for other things which can’t be free - putting food on the table, for example. For computer security, traditional solutions like Symantec is already getting a beating out of people like Kaspersky (even budget solutions from Kingsoft Security still can’t compare to freebies like Avast! antivirus, where its bundled bootscan will remove even the most stubborn of worms).

Operating system-wise, Sun’s recent free Open Solaris is a further option in the market on top of the various Linux free distributions like Fedora and Mandriva. While there is a learning curve required for Linux, success like the ASUS Eee PC have shown that as long it gets the things done, consumers won’t be fussy in a downturn.

Gimp is an extremely versatile image-editor that is available for Linux, Windows and Mac OS X, and it's free.

With options like GIMP and Inkscape for both raster and vector image editing respectively, even the graphics-editing market has alternatives to consider than the increasingly-expensive and demanding Adobe suites. With the proliferation of computers becoming a consumer item, consumers no longer see why should they pay so much for computer hardware, and on top of that, to pay for software. For many who are new to computers, they’ll see it as they don’t have to buy anything else further when they purchase a car or a home appliance - so why should they for a computer?

The constant upgrade by more demanding software is yet another push that will make consumers stick to free software while investing in hardware which has to be upgraded over time due to obscurity and various other reasons. In fact, many new users of computer see the concept of owning a new computer as “buy hardware, free content”. They opine they should only invest in a single aspect, getting the software and the Web for free.

Perhaps that is why Microsoft has decided to make Office 2010’s free Web version to come bundled with advertisements to counter piracy. It’s no surprise that consumers resort to piracy if they can’t find a free alternative, so Microsoft’s attempt can be lauded as a move that companies are beginning to warm up to.

On the local front, AirAsia is making a killing with their free tickets to the first few who book early. This has made it extremely difficult for national carrier, Malaysian Airlines to compete with when it comes to price.