Business modelsfree

An example of freeconomics in action – the t-shirt economy

By November 28, 2008 4 Comments

Clive Thompson over on Wired has an interesting post about folks giving their video content away for free and making money on the t-shirts their fans love to wear.  This is similar to music merchandise, but applied to web video.

In 2003, Burnie Burns got together with three friends and created Red vs. Blue—an animated comedy series set in the world of first-person shooter Halo. Nerds loved it, and within months nearly a million people were downloading each week’s free show.

Burns & Co. decided they wanted to quit their jobs and work on the series full-time. So they figured out a way to do it: T-shirts.

Burns appropriated the comedy’s wittiest one-liners and set up an online store to sell shirts and caps. Within months, he was filling hundreds of orders a week, generating enough revenue to pay everyone a salary. “The shirts,” he says, “turned us from a hobby into a business.”

Burns is not alone. Increasingly, creative types are harnessing what I’ve begun to call “the T-shirt economy”—paying for bits by selling atoms. Charging for content online is hard, often impossible. Even 10 cents for a download of something like Red vs. Blue might drive away the fans. So instead of fighting this dynamic, today’s smart artists are simply adapting to it.

Their algorithm is simple: First, don’t limit your audience by insisting they pay to see your work. Instead, let your content roam freely online, so it generates as large an audience as possible. Then cash in on your fans’ desire to sport merchandise that declares their allegiance to you.

Paying for bits by selling atoms.

Mike of Techdirt would describe this as giving the abundant good away for free (i.e. the one with zero marginal cost to produce and distribute) and focus on making money on the scarce one.

As Clive goes on to point out the businesses that enable the selling of t-shirts are an important part of the story here.  Companies like CafePress and Spreadshirt enable people to start selling t-shirts with zero up front cost.  They make money on the first t-shirt they sell.

Maybe these companies are the infrastructure plays for the free economy.

As two final asides, a) I love the geekiness of the Burnie Burns story, and b) my favourite definition of a web2.0 business is ‘one where your customers build your business for you – that is Spreadshirt, CafePress etc.