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. (more…)