What If We Give It Away?

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Mmm… doughnuts

In 2012, NPR’s Planet Money ran a great episode called The Cost of Free Doughnuts. It marveled at the incredible resentment caused when entities charge for something that had once been offered for free, as when the Red Cross briefly charged GIs for doughnuts it had traditionally given them gratis. The organization is still trying to live down the hit to its reputation caused by doughnuts in 1942. All because those doughnuts were supposed to be a token of appreciation, a gift.

In the podcast, reporter Alex Blumberg¹ expands on the emotional undercurrent of this type of freely-given thing by imagining the absurdity of a family dinner where parents suddenly charge their kids for the cost of the meal. “So if your mom charges you for food, you start to think, well, what else is she going to charge you for? Is she going to be like 10 cents a minute to listen to your problems or 40 bucks for a ride to the airport?” 

His co-reporter Channa Joffe-Walt goes on:

I remember listening at the time and shouting a little editorial note to no one: “...and I’m listening to this podcast. Which is also free!”

Oh, the gratuity!

Radio has always been free for those who listen. That’s the nature of it, right? Sure, maybe you need to buy a receiver to hear it. And yes, your enjoyment may be interrupted by ads. Other media have ads, yet they also have a sticker price: newspapers and magazines, cable and streaming TV, movies, books. But radio is part of a genre of media, one that now includes podcasts and websites such as this one, that may have ads but are flat-out free for users to enjoy.

I always assumed this was kind of an accident of radio’s past, or something dictated by the one-to-many technology of broadcasting itself. This is in fact true. What I didn’t know was how much people foresaw the economic disaster free would turn out to be as a business model, and how very hard they tried — though not hard enough — to avoid the structure we now hobble along with today.

Imagine my surprise to learn that the question of revenue actually preceded the practical uses of broadcasting technology.² At a demonstration of “Hertzian Waves” by professor Oliver Lodge at the London Physical Society in January 1898, he spoke about how electromagnetic waves might one day carry the sound of voices that could “shout at the world.”

The uncredited author who covered Lodge’s demo for The Electrician laughed at the idea — not because it was technologically, but economically unfeasible: “No one wants to pay for shouting to the world on a system by which it would be impossible to prevent non-subscribers from benefitting gratuitously.”

Non-subscribers, did you catch that?

Anyway, as Brown professor emerita Susan Smulyan says at the top of her book Selling Radio, “When the first radio station began in 1920, no one knew how to make money from broadcasting.” The only business model that made obvious sense at first was for the people who sold radios, such as department stores, to get broadcast licenses so they could have a signal for the radio units on display to receive.

“No one knew how radio could earn any money for the owner of a station unless such owner chanced to be a dealer in radio supplies,” wrote Gleason Archer in 1938. “That there were staggering expenses — upwards of fifty thousand dollars even for a modest  station — did not seem to dampen the ardor of would-be broadcasters.”

Yeah, but ardor did dampen once the musical acts who had been persuaded to perform “for exposure” stopped offering their labor for free. Many in-store stations shut down after a few years.

Radio slot machine

You might think that advertising just naturally attached itself to radio from the beginning as a source of income. Not so. First of all, advertisers had no idea how radio worked, or if it worked. But also, radio was regulated by the US Department of Commerce, and Secretary of Commerce Herbert Hoover hated the idea of using the airwaves to sell stuff. 

“I believe the quickest way to kill broadcasting would be to use it for direct advertising,” he told assembled radio men (all men) in 1924. “The reader of a newspaper has an option whether he will read an ad or not, but if a speech by the President is to be used as the meat in a sandwich of two patent medicine advertisements, there will be no radio left.” 

OK, mark that up to one of the many developments Herbert Hoover failed to predict. But his concern was not just moralistic. “The wireless” was still emerging from its original use as a means for ships to issue distress calls. Hoover had to consider the radio spectrum as a public good. Think about it, would you want to listen to an ad when you call 9-1-1? (do not answer that, telcoms!). So yes, in the early days of radio at least, direct advertising was still off the table.

Instead there was a period of goofy ideas. The Slot-Machine Radio was one of them: a coin-operated receiver that you could tune to various stations and get two hours of entertainment, all for a quarter. This contraption appears to have only existed in the feverish mind of author Hugo Gernsback, also known as “the father of science fiction.” His 1922 piece never pauses on the economics of how the quarters would be distributed back to the radio stations. It just gets right to the cool stuff, the TECH. 

Who is to pay …and how?

Then there was the competition, announced in the May 1924 edition of Radio Broadcast, the WIRED magazine of its era: “Who Is To Pay for Broadcasting and How?” The winning idea would get a prize of $500 and finally settle this vexing problem for good. 

I wrote about that competition for NiemanLab, so I won’t reprise my whole piece here. The winning idea was a tax on vacuum tubes, then the cutting-edge broadcast reception technology. The more tubes, the better your radio, so the more you should pay to a government-administered fund to support broadcasting.

Even as radio’s brightest men (again, men) awarded this idea a prize, they also trashed it. Here’s some of the trashing, conveniently packaged by Radio Broadcast in April 1925.

The also-rans

Thanks to the libertarian dudes in charge of broadcasting, the US would reject the model adopted in Europe for a general or user tax to support radio programming. That rejection would not relent until decades later with the never-adequately-funded, and now utterly de-funded, Corporation for Public Broadcasting.

But going back to the 1920s, it’s interesting how many of the also-ran entries in the competition (at least the ones we know about) did eventually come to pass in some form. 

Several entries proposed making use of radio program schedules, charging “a nominal rate which nevertheless would agglomerate to a respectable sum,” wrote Radio Broadcast editor Zeh Bouck. So basically, TV Guide.

Another idea was for a gigantic funding drive, “concentrated into a period of thirty days in which voluntary contributions would be solicited from rich and poor enthusiasts.” Bouck laughed this one out the door. “Aside from making up, in part, to posterity for the ills we are bequeathing it, little else recommends this idea.” Decades later, of course, the pledge drive would become the somewhat-rickety funding base for Pacifica Radio and many public radio stations. (And perhaps, Back Indie Media?)

There’s one last money-making idea from this pre-advertising era that existed apart from the competition: “wired wireless.” That was an invention of US Signal Corps major general George O. Squier, who figured out how to do “multiplex” transmissions over telephone and even electrical wires. Squier tried to do an end-run around broadcasting in the early 20s, wiring up several homes on Staten Island to his subscription-service “station.” 

Wired wireless never caught on, and Squier actually sold his technology to the company that became Muzak. The USSR had a different version of wired radio: Radio Tochka. I also don’t think it’s a stretch to think of cable TV as an indirect descendant of wired wireless technology.

In terms of audio, probably the only paywall experiment that (thus far) has paid off is the one run by Sirius XM, which somehow got baked into new cars before anyone could stop it. But even their business model goes way back: As Thomas White points out at his site US Early Radio History, SiriusXM basically uses a fancier version of a concept proposed in 1922’s Popular Science by radio columnist Jack Binns: a pay-as-you-go de-scrambler for radio (or in the Sirius case, satellite) signals. 

“Free broadcasting services obviously cannot go on forever, at that scale, and surely some payment to the artists will have to be made ultimately,” Binns declared. (Alas the “payment to artists” part is still 🤷‍♀️) 

One final notion from the 1920s also persists: that some rich person will pay for everything, just because they can. Every day proves how well that fantasy has worked out for media. Likewise, media units that are part of large, publicly-held corporations face continuous downsizing, loss of institutional memory, and a distinct lack of courage.

Anyway, we know the business model radio adopted by default. It gave programming away for free, and starting in the late 1920s, began to sell audience to advertisers to make up the costs and eventually turn a profit. This later became the business model for television, and then much of the Internet. Unfortunately, a media system that relies heavily on advertising is unstable. One of my fellow sites on the Back Indie Media drive, Reality Blurred, started 25 years ago, and did well for quite a while with support from banner ads and Google AdSense. But now, like many other websites, founder Andy Dehnert says he’s facing a “traffic apocalypse” thanks to the way changing tech (AI search overviews) has destroyed his business model.

The price of zero

For several years when I was growing up, my dad was a single-copy dealer for the Dallas Times Herald. He liked this job because he didn’t have to answer to anyone, and it left him alone to do the thing he liked: performing at early music at places like the local Renaissance Faire. Sometimes he’d hire me and a friend to help him out on Sunday mornings. We’d get up at 2AM, get in the van with sleep-drool on our faces, and wait in a line of cars with other dealers at the printing press downtown. Inside this inky inferno, Dad would load up bundled sections of the Sunday paper. My friend and I would sit atop the bundles and assemble the sections as Dad drove to the start of his route. He’d carry stacks and stacks of the assembled papers into convenience stores and collect checks or wads of cash. He’d feed stacks of newspapers into the maws of vending machines and collect coins from the back of the machines into buckets.

That was my first exposure to the business of media, all grimy and nauseated atop piles of papers in the back of a van. I knew the Sunday edition was fat not because of the journalism, though that won awards. The paper was fat because all the classifieds and coupons and comics and sale announcements. People paid for the whole package, ads and news, with the quarters, nickels and dimes that wound up in Dad’s buckets. Not all of that money was ours to keep, of course: some went back to the Herald eventually as my dad purchased more papers to sell. I got a little cut at the end of my shift — $20 plus breakfast at a greasy spoon diner.

All those coins did not save the Dallas Times Herald in the end. It died in 1991, well before the Internet started to undercut newspaper revenues — a victim of extractive ownership and vicious competition. 

There’s one way of looking at what happened to newspapers, and all print media, starting around this time: the media with a business model of charging nothing upfront snuck up and ate another medium that had been charging a price. This new thing (the Internet, which encouraged the same business model as an old thing, broadcasting) hypnotized its prey with its alleged inevitability, plus promises of riches from more ads or acquisition or “synergy” — all of which sounded more magical than the dull jangle of coins in a bucket.

Yet free doughnuts, free broadcasting, and now free everything, prove that once you set your price at zero, you’re stuck at zero. It’s really hard to move up from the free tier, but it’s easy to go even lower. You might get preyed upon by ventures claiming they can manufacture topical podcasts with AI voices for $1/apiece. Unfortunately, this is the kind of thing that happens when you fix your ticket price at nothing: you are valued accordingly. 

Furthermore, as Planet Money pointed out, “free” isn’t just a price, it’s a whole emotional domain. Mom’s dinner is free, the air is free, and so are the trees. Your favorite podcast is free, and so is this newsletter. It feels weird, and probably wrong, to introduce money into the equation. On the other hand, when we always pay for certain types of media — an audiobook for a credit, or a subscription to SiriusXM or Spotify — we may grumble, but more often than not, we tolerate that transaction. 

I don’t know how to fix this paradox. But I do know broadcasting fixed on a certain business model at a time of technological and political upheaval much like our own. No one “decided” on this model — they just rejected other possibilities until it won out through entropy. Which means we can still change things in the present with our own behavior.

Got a quarter?

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1  Yes I’m aware of the irony that Alex Blumberg went on to make millions by starting and then selling a podcast production company that was eaten by Spotify. The lopsided freakishness of this trajectory, to my mind, only proves my larger point about media instability. See also footnote 1 in this post here.

2  I know I found out about this in the footnote to some book or article, but now I cannot find the citation ☹️ If it was you, please let me know so I can be a good pseudo-historian!