4: FOLLOW THE FREE, STRATEGIES
Act as if your product or service is free.
Magazine publishers do this. The cover price on a magazine barely covers the cost of printing it, so publishers act as if they were giving it away (and some actually do). They make their money instead on advertising. Says pundit Esther Dyson, "The creator who immediately writes off the costs of developing content--as if it were valueless--is always going to win over the creator who can't figure out how to cover those costs." Memberships in serious discounters such as Cendant are also "as if free." Cendant "gives away" the merchandise very near the cost of manufacturing, as if the stuff were free. They make the bulk of their profits not from selling goods to its members--who get fantastic retail prices--but from selling $40 per year membership fees.
This may be exactly backwards. In traditional publishing businesses the costs of developing content and capital infrastructure are more or less fixed while the cost of paper,ink and distribution are more or less incremental. Therefore, additional advertising can profitably be sold at or near it's incremental cost (paper + ink + distribution) but content and infrastructure cost should be covered by non-advertising sales revenue.
Advertising supported media is crashing because advertising is collapsing. Clay Shirky is speaking and writing about this, saying that advertising was over-priced for many years and now that price structure is in free fall.
The subscription model, which feeds into the idea of a relationship rather than a commodity economy, may be more applicable going forward.
PS: Dropped your name today at Harvard's Berkman Center in a question to Sam Bowles of Santa Fe Institute about his concepts of "Kudonomics," the idea that we are moving back to some aspects of a hunter/gatherer society where sharing rather than ownership has primacy.
"Act as if your product or service WERE free."
The subjunctive is there for a reason. Use it.