Unless you’ve been under a rock for the last 24 hours you know that Tim Cook (with U2 by his side) announced yesterday that U2’s brand new album Songs Of Innocence has been given to every single iTunes user. Apple says that this means the album is available to 500 million people, more people than have ever had free access to a full album. While many people are focused on the music industry implications of this promotion I have thought about it in the context of the concept of free and how the internet enables free as a business strategy better than any other medium of distribution.
For those of you who haven’t delved too deeply into the free concept I highly recommend reading (or listening to) the book Free: The Future of a Radical Price by Chris Anderson. Interestingly enough, the audio version of the book is…free! Strangely enough I think that Free (the book) is worth paying for if you have to because it may change the context in which you view how free stuff can be used to facilitate growth of a business. More importantly, you may understand more about how the internet has created a great opportunity to capitalize on the free concept.
What’s interesting about the free concept is that it doesn’t mean that no one gets paid for the work they do. In fact, I’m pretty sure that Apple paid U2 (or their record company) a few million dollars (or more) to simply buy the right to distribute the album in digital form. That’s a good deal for U2 and the record company because they don’t have to sweat sales figures (which for U2 have declined precipitously in recent years). It’s also a good deal for the millions of U2 fans who would have gladly paid for the album and now don’t have to. Surely millions more people will at least give the album a listen and this is also to the benefit of U2 who could find that new interest strengthens sales of their extensive back catalog. Is this a good deal for Apple though?
As far as Apple is concerned a deal like this wouldn’t make sense if we were talking about having to deal with a physical product such as a CD. After all shipping a CD to every iTunes account holder (ala AOL in the 1990s) would cost millions of dollars on its own and would result in the waste of millions of CDs. Apple could give the CDs out in their stores but then that would vastly reduce the overall impact of the promotion by reducing convenience to the consumer. That and the costs to Apple would still be much higher than digital distribution via iTunes. So while the fact that using the internet means that there are still considerable costs (storage, bandwidth and the lost opportunity of Apple’s cut of iTunes sales among them) those costs are favorable when compared with other forms of promotion.
Consider that for the 2014 Super Bowl one thirty second commercial cost an average of $4 million and that’s after spending a considerable amount to conceive and produce the commercial. I’ll venture to guess that Apple’s U2 promotion will have a cost that’s somewhat equivalent to the production and airing of two thirty second Super Bowl spots. The downside of the Super Bowl commercial is that for the cost you still only get access to a largely North American audience (which in 2014 was estimated to be about 111 million people). That’s not bad but it’s hard to tie it to anything immediate because people who are watching are focused on the game and may forget the ad spot by the next day. So for Apple I see the U2 promotion as a much more effective way to spend their marketing dollars.
Beyond a better spend of marketing dollars it drives people back to (or encourages them to create an account on) iTunes where Apple makes a boat load of money from people purchasing digital goods including music, movies, books and apps. Interestingly enough Apple also announced yesterday something called Apple Pay which allows people to pay for things using their iPhone…by accessing the credit card stored in user’s iTunes account. Apple will get a cut of each transaction facilitated using Apple Pay. So it’s easy to see why Apple has an important stake in their customers being engaged with iTunes. And the U2 album promotion seeks to reignite that engagement. It may or may not work as Apple intends but the more important issue is the fact that the internet has created economics such that paying to giving away a free album is just as good as (and probably better than) advertising.
All of this begs the very important question that people involved in developing business strategies should be asking, which is, “How can I use free things delivered via the internet to ignite interest in our business?” Those who are not asking that question are missing out on a huge opportunity – one that gets bigger every day as the internet audience grows and the cost of distributing content via the internet falls. While I’m sure that many skeptics of free strategies remain, the Apple U2 promotion lends strong legitimacy to the strategy. Because now that a world famous major music artist and the world’s leading personal technology company have teamed up for perhaps the biggest free event ever the excuse can no longer be made that free is a fringe idea that’s only worth trying by companies that are desperate and/or foolish.