WHY USE IT

Contrary to what some people may think freemium is not a form of socialism. Freemium is a business model, employed with the main objective of making money. Adopting this new business model is a way of adapting to the changing market and the conditions of production.

The term freemium has its origin in the IT world. Here, software companies and Internet service providers have used the model for quite some time. Against the background of the recent financial crisis, the model seems to have become even more popular within this industry.

During the last few years, companies within several other industries are gradually implementing freemium. This is particularly true for the music and publishing industry. A great example of this is the rock band Nine Inch Nails. Fans could download their latest album Ghost l-lV for free. Simultaneously, the rock band generated revenue from a number of other sources, including concerts, deluxe CD box sets and paid downloads.

Effect


In a traditional economy, it would not make sense to distribute 100 free CDs in order to sell 2 concert tickets, 3 T-shirts or 4 paid CDs. The cost of producing and distributing the actual records will simply be too high compared to the revenue.
Once you are able to produce and distribute the music with computers, this changes. The marginal cost of distributing each album is close to zero. Thisis means that only a small percentage of users need to buy something, for this model to be profitable.