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Video: Chris Anderson and the Economics of ‘Free’

Chris Anderson, the forward-thinking editor of “Wired” and author of “The Long Tail,” talked about his new book, “Free: The Future of a Radical Price,” at Peter Guber’s house on Thursday evening.

The book addresses the seemingly-frightening economics of the Internet, where all kinds of content – music, news, community, data – wants to be free.

How can our economy be sustained in a world with infinite shelf space, he asks? How do you determine value when scarcity becomes impossible? And where everything continues to decline in price over time?

“The world is inflationary,” he explained. “The world of bits is deflationary.”

Anderson, who has proved himself a thought leader with his previous best-seller, “The Long Tail,” talks about the emergence of a 21st century business model oriented to the Internet: “freemium."

What this means in short, is that “you give away 80 to 90 percent of your product, and sell a premium version,” he explained.

“Free is the best form of marketing. People sample, and they buy.”

This may be the way forward for newspapers (or rather, text-based media, like this one), for music, movies, books – his own book is free on Kindle, but $26.99 in hardcover – and the like.

“Digital is different,” he argued. “Free is a force of gravity – it’s water, and it wants to run downhill.”

Here is the video of my interview with Chris Anderson: