I was watching a video by Chris Anderson how things in our economy are approaching free.  The main thrust is that in our digital economy things are getting cheaper (which is different that our prior commodity world) and in some instances reach the point where they are effectively free.  And as things approach free, we should embrace that and treat them as free. 

With that, new business models emerge and test things that we can not envision at the outset – so “waste is good” because in the end we should develop a stronger model that works for all involved. 

 
As a result, companies can and and will continue to compete against products that are free.  This is the not the first time (e.g., Microsoft started that way and continues today to compete with free software like Google Gmail and other office products). 

 
Chris Anderson says we should learn 5 lessons from sales of game software

• People will pay to save time
• People will pay to lower risk
• People will pay for things they love
• People will pay for status
• People will pay if you make them (once they are hooked).

 For example, you may not be able to continue charging for your products as you do today.  So over time, you need to understand other opportunities that may arise to monetize the interaction of users with your business.  In the end, we are living in a continual test environment in which we should try things to see what works and doesn’t. 

You can watch his presentation here:  http://siia.net/softsummit/2009/the-price-of-free.asp.