Anderson’s “Free” starts out by giving us a quick economics briefing, using that as backdrop to defend the notion of ‘free’.  He explains that, for instance, traditional, or old media has used a third-party advertising model to earn revenue while still providing a “free” product.  I may not pay for 30 Rock, but when I buy products advertised during commercial breaks on TV or in interstitials on Hulu, I am still giving my money to NBC.  It’s pretty basic and has worked for Google, a benevolent empire that has largely amassed their wealth through selling advertising and diversifying revenue streams.  Of course, the model isn’t absolutely identical – the web magnifies things by presenting opportunities to apply wisdom gleaned from specific metrics and target users with relevant advertising, as well as ways of satisfying niches with long tail services – but the principle is the same: subsidize one product (free content) with money made from another (paid ad space).  Multiply and diversify.

With the notion of one product funding the other in mind, I further illustrate the point by explaining how I helped inadvertently save ABC, Monday Night Football, and the Disney company in 2004.  Maybe.  Or not.  But keep reading!  I think you’ll enjoy the reasoning anyways!

The popularity of Monday Night Football, or MNF, a free over-the-air product until 2006, has apparently soured since moving from ABC to cable’s ESPN in 2006.  In fact, this year MNF has seen a decline in viewers week over week.  Meanwhile, competitor NBC’s Sunday Night Football, or SNF, has quickly become the NFL’s showcase; during that same transition period in ’06 SNF bested the last year of ABC’s MNF by comparison.  In general, it would appear that on average more fans are watching SNF than MNF (and SNF is on the rise – although, it should be noted that MNF has set cable viewing records, though still not as high as when it was over-the-air).  MNF just isn’t the same juggernaut it used to be, and that’s also in part because, for the viewer, cable TV generally comes at some price as compared to free over-the-air broadcasting).  Truthfully, ESPN doesn’t reach as many households as ABC did or NBC currently does, but, in using a cross-subsidies model – some Andersonian and basic economic thinking – I have found an interesting way of explaining how Disney, who owns ABC and ESPN, is going to come out winner.  In this situation, ABC will be our free product and the eventual beneficiary of the move.

In 2006, when MNF jumped from ABC to ESPN, NBC saw an opportunity to shift NFL eyeballs from Monday to Sunday.  On the other hand, Disney was looking at the move as an opportunity to bolster its ESPN brand as well as develop their free product – ABC’s Monday night – with other shows targeting other demographics.  However, this internal counter-programming was still probably not going to make up for all the prestige Disney would be losing in bumping MNF to a cable network.  Nevertheless, as their plans to switch MNF’s channel were taking shape, Disney still had Al Michaels in it’s deck, the lead play-by-play announcer and respected voice of MNF telecasts up to that point.  Certainly ESPN’s iteration of MNF would benefit from having Michaels, but Michaels would wind up with NBC’s SNF during the transition instead.  But this was no accident or failure on Disney’s part, for, ever the synergists, they must have spotted a different way to cross-subsidize and recoup expected losses with Michaels not around for ESPN MNF.  Michaels became expendable.  Let’s quickly investigate why.

First, back up to fall 2004, when ABC saw MNF get its lowest rating for a game ever.  Yes, their free ad-supported product was losing money.  Big deal?  Well, back up a few more months.  During the summer of 2004, Disney’s video game unit, Buena Vista Games, started a Think Tank of college interns to devise concepts for new video games.  I was one of those interns, a senior at USC.  One of the concepts we pitched, Epic Mickey, a recently announced game by Warren Spector and Junction Point that’s expected to reinvigorate the character Mickey Mouse and hopefully make him relevant to a whole new generation, was just coming together under the direction of game developer Chris Takami and others.  During our think-tanking we came across the character of Oswald, the Lucky Rabbit as we were looking for potential supporting characters to fit the story we concocted for the game. When we brought our ideas for Oswald to Chris Takami, he had some folks do some research and discover that Disney no longer held the rights to the character.  Oswald was Walt Disney’s first cartoon creation, but due to a financial dispute he wound up out of Disney’s hands and  in to the hands of Universal Pictures.  Of course, eventually Walt would craft Mickey Mouse and the rest is history, but this story doesn’t stop there.

Snap back to 2006, and The Walt Disney Company wants Oswald back from Universal in order to make Epic Mickey.  Why?  Disney CEO Bob Iger, perhaps betting that Epic Mickey will reap bounteous profits and reinvigorate a media franchise, subsequently subsidizing any long-term losses ABC and Disney might experience from MNF’s switch to ESPN, decides to trade Al Michaels to NBC Universal for Oswald the Lucky Rabbit.  Oswald was back home, and with the trade Disney has kickstarted a potentially lucrative video game venture, a mega franchise in the making (could there eventually be movies, books, and more based on Epic Mickey and Oswald? – as a progeny of George Lucas I sugggested as much for Epic Mickey when we pitched it, and Warren Spector has the same vision).  So, Disney cross-subsidizes ABC and synergistically creates new revenue with this trade, and in so doing they establish three revenue streams (new and free ABC Monday night primetime offerings, the Epic Mickey franchise, and the new ESPN MNF) where there was once only one, (free ABC MNF).  And it all starts with a bunch of interns, of which I was one.

If you think about it, as Anderson points out in ‘Free’, this is what Google does so well – they give away one free product (search) and sell another product (AdWords) to subsidize the free one while still earning a profit from other revenue streams, too (such as the freemium-based Google Apps).  ABC is free, but Disney collects revenue and then some to keep it going from other streams (selling on-air commercial time, selling games like Epic Mickey, charging cable systems to carry ESPN, and so forth).  Sure, it’s not the same as offering many high-quality free products at the same time the way Google does with free Gmail, free Google Search, and free Google Maps, all robust standalone products, but it does prove that if you diversify you can offer several very popular products for free or nearly free and still recoup and profit through other means.  Don’t believe me?  Just wait and watch how much attention they pour into promoting Epic Mickey, a game that will make oodles a pop (at whatever the typical Wii game going price will be when it’s released next year).  So, there you have it: Disney, like Google, diversifying and synergizing through new models.  You should do the same, because you must realize, as my friend Brook Elllingwood put it, that all companies are now media companies.  Step in to the 21st century and play by the same rules as the Googles, Facebooks, and Twitters of the world.

As an epilogue, I don’t actually know what went on in the room when Iger traded for Oswald (as a long-gone former intern by that point), and I’m sure there are eight gazillion other ways Disney prepared to handle the MNF move and ABC Monday losses – plus I’m not dense enough to not recognize that Disney makes plenty of money in other ways (theme parks, toys, etc).  But, they could have just bought Oswald back or found some other way of acquiring him.  Why Al Michaels?  Because Epic Mickey is going to be huge and fund rest of Disney’s free products, as well as help keep MNF on cable TV.

With the tools we now possess to get vast quantities of data from user interactions on-line, to monitor chatter on blogs and in social networks like Myspace, and to trackdown to the very minute just what people are tweeting about, should government and law enforcement agencies attempt to do more to monitor the web for death threats and talk of plots to carry out murderous rampages?  And then, to what extent can they respond within the law?  Sure, I’m a staunch proponent of free speech of all kinds, and the thought of the NSA warrantlessly wiretapping my telephone makes me cringe, but the questions people will be asking in the coming days deserve some serious consideration.  It’s not just what could have been done to prevent this needless violence, or even what is being done now by various agencies, it’s SHOULD we monitor and then HOW do you deal with obvious threats?  We have the tools to find out, right now, what people are saying about Coke or Pepsi, so why not track chatter on shooting threats and the like?  Nobody wants to be policed on-line, but if you have the tools and wherewithal, why not?

Note:

Special thanks to Mashable’s post about the Sodini blog, which helped spur this entry.

More examples of the discussion and killers’ posting to the web before they carry out their deadly attacks:

Finland Shooting 2007

Threats against San Francisco area BART cop

Tea Party Death Threats on Twitter