Dirt cheap: Techdirt bets on 'free' business models

Heaping criticism and scorn on media companies has worked well for Mike Masnick, operator of the popular blog Techdirt.

Masnick is the firey commentator who blasts copyright owners and anyone else he believes has failed to accept that in the Digital Age most of the control now rests with consumers. He strongly maintains, however, that there are still ways for entertainers, artists, and journalists to make money. They just have to be developed. Plenty of people disagree with him of course.

Still, there's no denying that his brand of criticism has resonated with the growing number of techies, bloggers, and file sharers who believe art, news, and entertainment should be free. What separates Masnick, 34, from other notable old-media critics is that he isn't satisfied with just slamming music labels or Hollywood studios for failing to find alternative business models. He's gone looking for them himself.

Techdirt has begun experimenting with whether a content owner, such as himself, can generate meaningful revenue while giving away his main product. Instead of charging for his posts, Masnick offers fans a range of other items or services to purchase, such as a Techdirt T-shirt, spending a day with Masnick, or access to his stories before they're posted.

Over the past couple of years, the free model has drawn a lot of attention. For instance, Radiohead and Nine Inch Nails stirred a lot of fanfare with their attempts at music giveaways.

In an interview with CNET News, Masnick spoke about his tests at finding a new publishing paradigm, copyright fights, and rage.

Q: Do you see yourself as the spokesman for the free content or anti-copyright crowd?
Mike Masnick: I don't think so. I might take a slightly different perspective on some of these things than some of those folks. There are a lot of voices in this discussion. I think I'm one of the voices and I certainly do have an audience. But I try as much as I can to focus the discussions more on the business side of it and where the opportunities are.

I recognize that there is always some controversy whenever we discuss these things, but I try to focus on some of the economics of it. That comes from my background and my business school training and the economics professors in school who got me thinking about this stuff. If you understand the economics you start to see it as inevitable. The idea of trying to hold back against it seems kind of silly. When you recognize the basic economic principals, then you realize there are a lot of opportunities there.

Tell me about what you're doing with your experiments.
Masnick: Obviously, I'd been following what the different musicians have been doing and writing about it on the blog and talking about it at the various conferences, and we wanted to find how the different models were working and what's cool about them. The ones that we've liked and we've noticed are things like what Trent Reznor is doing but also what Josh Freese, and Jill Sobule, and some others have done with sort of setting up tiers of options.

So they really were focusing on connecting with fans in an interesting way but also offering different tiers of options so people can buy at different types of levels. We've seen that happen and we started to wonder what would happen if you applied that model to a publication rather than just the music business. We said 'Let's experiment with that. We've been calling it Connect With Fans, and Reason to Buy.

We didn't expect it to be our business model but we thought that we could learn something from it and understand the different issues that musicians have to go through and the media must go through in terms of experimenting with different business models and let's see what happens. That was the basic plan. We sort of took the Josh Freese and the Jill Sobule models as kind of the inspiration in terms of how we designed it. We set up tiers. I don't remember how many. I think it was 11 different ways that people could support us and get something of value back. We wanted to be clear that this isn't the NPR- or PBS-type model where we are begging for support. We want to make sure people are getting something of real value back. We wanted to make it fun, and cool.

As part of that, we got some different authors and musicians to take part as well. (One) of the different options is the Techdirt Book Club, which includes some books that we really like that really talk about these different issues, with all of the authors offering up signed copies. And the Music Club is four different musicians all agreeing to offer up something unique, that you can't get anywhere else. In some cases it's a signed book or CD.

We finally came up with this idea where Jill is going to take some notebooks and write out some lyrics by hand and then some doodles and drawings using up the first few pages of the notebook. And so for the people who buy the Music Club, they get a unique one-of-a-kind, hand-drawn notebook from Jill and also a signed copy of her CD. Some of the other artists, one of them created a CD that's just for this package that includes some tracks he's released before but also never-before-released tracks. (Note: most of the items Masnick referred to here were included in a $150 package called Techdirt Music Club. It has since sold out).

What made you attempt this?
Masnick: Partly it was to get the experience. It's an experiment and we wanted to see what happens. At times people would complain "Oh, you can't talk about any of this stuff because you're not doing any of it." We said "OK, let's see what happens. Let's find out what we learn." It's a little bit different than being a musician but we figure there's always going to be something you can learn from it.

How long will you keep this going?
Masnick: We don't know yet. We launched it and said let's see. One of the things we've been doing is running one-off promotions. We may keep doing that. We'll start shutting some of the tiers down and replacing them with new tiers. We'll do that for a while and see what happens.

Do you consider yourself a journalist, entrepreneur...?
Masnick: Well, there is a lot more to the company beyond the blog. It's not just me. We have eight full-time employees. The part that really pays the bills is the Insight Community. What we did is basically build up the community around Techdirt and have set it up so companies can tap into that community to generate insightful conversations, either for internal purposes--things like market research--or for external purposes such as branding.

Are you profitable?
Masnick: We are profitable. The project itself has definitely been profitable. We didn't want to set too high of expectations ourselves, we kind of wanted to see where it was going. Some of our basic assumptions we've learned were wrong but in a good way. We sort of naturally expected that least expensive levels would be the top sellers. That hasn't been true. To date, the top seller has been the package called the Approaching Infinity Package, which is a book based on a series of Techdirt posts about understanding the economics and business models. We took those posts and expanded on it a little more. People are buying that package, which also comes with a T-shirt. It is our best seller so far.

Who is your reader? Tell me about him or her?
Masnick: It is mostly him. There are definitely female readers and some active as well, but there is definitely a majority of male readers. It's a pretty broad mix. Most are from the U.S. We have a pretty decent-sized audience. We do have a pretty good international following, especially in English-speaking countries; Canada New Zealand, England. In the U.S., we're pretty spread out. A lot of our following is not Silicon Valley-based. We're not considered, I don't think, as a Silicon Valley blog. It's due partly because we don't talk about the latest start-ups. We talk more about economics and policy and lot of things that touch on different areas. We have less of a focus on the Silicon Valley scene even though we're based here.

What's interesting here, we've done a couple of reader surveys and stuff and the readers are sort of bi-modal. There is definitely a group of younger, late-teen, early 20s reader and another crew that's late 30s and early 40s. Those are the two high points. There certainly are a bunch of IT folks, and a lot of media folks, and a lot of policy and government people. We get a fair number of readers from the Washington, D.C. area. We get lawyers, a lot of patent lawyers like to get upset about what I say about the patent system. It's a broad mix because we don't get that deep into the tech aspect of it. Slash-dot is a heavy techie audience.

Why are you so full of rage? You seem to think that the content owners are sticking their head in the sand. That also appears to really tick you off?
Masnick: I try to not think of it as rage. It's kind of funny, I actually think of myself as optimistic.

What I find frustrating is when I think people or companies are trying to hold back what the technology allows. Those are my concerns especially when we're holding back the opportunity. That's where a lot of this comes from. I've been writing Techdirt in one form or another since 1997. So it was started when I was in business school, looking for a way to keep myself in touch with what was going on with technology and business world and it was a good way of paying attention.

It kind of grew from there.