The Marginal Cost of Creativity & Free

I’m playing a bit of catch-up here, but it strikes me that there is something between the execution and delivery of the service that could be a differentiator…

http://www.ted.com/talks/joseph_pine_on_what_consumers_want.html

I’m trying to wrap my head around the very same thing – how to present a better value proposition to the client by involving them in the creativity-execution-delivery cycle… y’know, create the whole ‘delight the customer’ thing similar to the quality improvement movement of the last cycle. The ‘Freemium’ model fits in there somewhere… I just know it!

As Gary points out above, creative goods are very much “marginal cost” kind of things, more so than most physical items since so much of the cost is upfront rather than in the production. A book takes the same time and cost to write, edit, and design whether it ends up with a print run of 100 copies or 100 million.

My favourite example for what’s happening with many fields is graphical design. That field went through its crisis when the Mac appeared and suddenly everybody was a designer. The results were far below what a professional designer would accomplish (outline fonts with shadows, anyone?) but as it turned out, for a lot of stuff it was good enough. A large bread-and-butter market for graphical design – name cards, restaurant menus, invitations, signs and placards … – disappeared as people started doing it themselves (or asked the neighbour 16 year old to do it for them). Much worse results than a professional but nearly free and good enough. Gradually, of course, the better amateurs got quite good, so the difference between them and the low-end professionals all but disappeared.

On the other hand, the explosion of amateur design gradually meant a whole new appreciation of the field. When you notice how crappy and amateurish design can be you want to improve on that if you have the budget. High-end graphical design is flourishing as never before.

So the best designers and firms are overwhelmed with work, and making more money than before the advent of DTP. On the other hand, the low-end, jobbing designers have been culled. There’s much less call for the kind of low-budget, small scale jobs that many could eke out a living from. The field as a whole is making as much money (more, actually, with the need to design for the web too) as before. But the distribution of income has been more skewed, with more to the best and less to the rest.

I would expect to see the same thing happening in photography. Free (literally) images taken by amateurs and given away, or taken by the prospective clients themselves, is going to crowd out a lot of the low-end professional photography. The appreciation of images as a communications tool has already grown hugely, so expect the top end of photographers to flourish. The in-between people? No idea. It will be interesting to see where the cut-off to “good enough” is for photography.

Right now I’d agree with you. The only way to ‘Web 2.0-ify’ the notion is to have a pool of resources, not just a single photographer or studio. The obvious solution is to create a market (literally, a website) to which clients would be attracted to get their work produced… at low/no cost through a bidding system; like an eBay for creative services type of model, but with features that suit media creatives, like portfolios/micro-sites, virtual/temporary design teams, etc.

The carrot would be enhanced services that make the process understandable for less savvy buyers; like a full suite of canned usage rights, production options, and deliverables/payment brokering… the ‘premium’ service offerings.

It’s still a fuzzy notion, and one that if I had the time and team to execute I’d love to do myself… for now I’ll satisfy myself by describing it, and hope that someone else can pick it up.

Freemium definitely has a place for an individual photographer.

Jim, isn’t this blog essentially a freemium product? Is writing a blog, with thoughts, news and photos available to readers for free (with upsell opportunities to stock and assignments), a good business decision for you?

I think we’re getting a bit crossed on terminology, and missing the finer grain that I meant to draw out, but didn’t.

“Photography” is a broad industry with many different products: assignments, stock, workshops et. al.

Each of those products has different cost structures with different key cost components (like the ones you laid out in this post). Each of those types of costs have fixed and marginal costs embedded in them.

For an assignment shoot, time is a marginal cost. For stock photography, time is a fixed cost, since the investment one makes in time is an investment that is amortized over future sales.

For an assignment, the cost to deliver the images is a marginal cost. For stock, the cost to deliver the images is fixed, the cost to get into an agency, on the web, available for sale, is fixed.

Be careful that “capital expenses” is a term used to describe investments that are amortized over time or product use, thus they are considered fixed costs. But obviously some equipment costs are fixed (e.g. buying cameras, lenses to use over many shoots), and some are marginal (e.g. equipment rentals, film).

But these are just clarifications to your main point, which is that creating and delivering an image has many different activities with their own components of cost, and that it is important to think about the true marginal costs of all of our activities instead of simply assuming it will be free.

However, the market will not compensate us for all of these activities. Some of these activities, by the nature of competition in a highly competitive market, will be driven to prices equal to or near marginal cost (and for many activities, marginal cost = zero) unless we use highly differentiated assets to compete: experience, brilliance, ability to execute, ability to create something nobody else could create, etc.

I won’t speak for you, but I think that is what you were trying to say in this post.

Just be careful with terminology 🙂