I’ve been working on Creative Commons licences for years, and thinking about business models built around open source and free (as in beer) content for just as long. Since I finished listening to the audiobook of Chris Anderson’s Free last week, these topics were fresh in my mind, so it was very timely that CBC’s excellent tech trends radio programme, Spark, invited me to comment on an interview they did with Eric Frank. Many thanks to Spark producer Dan Misener for inviting me to comment. [Below is an adaptation of my comments that Dan posted to the Spark blog.]Eric Frank is a co-founder of Flat World Knowledge, which Chris Anderson profiled in Free as an example of a company building a business around free textbooks. Listen to the interview to find out how Flat World Knowledge works. In a nutshell, the site provides textbooks free of cost to read online, and charges a variety of prices for the content in different versions, including a cheap, printable PDF file, a more expensive audiobook, a black and white bound textbook, and a full price, full colour hardcover book. They also allow instructors to mix and match content among textbooks to make just the right reader for their own course. Finally, the content in all of their textbooks is licensed under Creative Commons Attribution, NonCommercial, ShareAlike licences. I love the idea behind Flat World Knowledge and the new business model Eric Frank is carving out of the textbook market. It’s ripe for change. And I’m thrilled that they’re using Creative Commons licences that permit adaptations for their textbooks. But I think it’s important to distinguish between FWK’s business model and their choice to use Creative Commons licences. Using Creative Commons licensed works to make money is not paradoxical at all. But to understand the role of CC licences in FWK’s textbook business, you need to understand more than the relationship between CC and commerce. First you can look at the apparent paradox of making money by giving it away, and then look at the role of CC licences in that business. As Chris Anderson says in his book Free, FWK recognizes that the price of textbook content will approach its marginal cost of zero. They’re beating the rest of the market to the bottom, and they’ve developed a terrific business model based on selling the added value — the selections of print versions, audio versions, and subscriptions. But it seems to me that the choice to use CC licences is not an integral part of that business model. I think they could do everything they’re doing so far — allowing instructors to remix chapters; allowing students to buy different versions; allowing anybody to read the books for free online — without also allowing people to modify the content itself and give it away, which the CC licence allows. They could do all of that with All Rights Reserved stamped on every page they generate. See, Eric Frank talked about the increased choices that instructors and students have through FWK, but the rights under the CC licence are more broad than the examples he presented. For instance, since you can read textbook content for free on their site, and it’s under a CC licence, you can copy and paste it off the screen and reuse it as desired (within the limits of that particular BY-NC-SA licence). Instructors could copy and paste entire textbooks from the site, modify them as desired, and distribute them to their own classes (under the same Creative Commons licence of course) without ever paying a cent to FWK or the author. University student societies could buy the PDF versions of texts and provide them through University coursepack services printed on demand for students, undercutting the FWK price. Professors could do the same, modifying content in the texts over the years, gradually keeping books current and adapting them for their own needs, all within the bounds of the CC licence. [Selling copies may be a sticking point because the CC licences are of the NonCommercial variety, but my own view is that these sorts of sales would be permitted since they are not primarily for commercial purposes. FWK may see this differently of course.] So why have FWK used CC licences? CC serves at least two purposes for their business model that anybody dealing with free of charge content should consider. The first is that content falling under CC licences becomes part of the knowledge commons. Like an open API on a web app, CC allows content to be reused outside of the original market (education in this case) in creative and unexpected ways. The benefit for FWK and its authors is in whuffie — these downstream uses feed into the reputation economy, turning textbooks with relatively limited distribution into new avenues for authors to promote their expertise in a field. Another reason FWK may have chosen to use Creative Commons licences is the marketing value of the licences. There is a large and growing community of well connected technorati committed to open source and free content. Adopting CC licences sends a message to that community that FWK understands the importance of Free. It aligns the business with a burgeoning international movement committed to free content and hungry for new business models in the zero cost and reputation economies. Attracting the attention of that community has an undeniable marketing value that likely brings at least a short to medium term benefit to FWK. Chris Anderson wrote that, in industries where the marginal costs are close to zero, it’s only a matter of time before the price of products will also drop to zero, and he encourages people to beat the competition to the bottom. Flat World Knowledge has clearly done this for their textbooks by nurturing the internet distribution channel where the marginal costs are virtually nil (no paper, printing or postage) and provided choices to reduce the marginal costs for other products (black and white as opposed to colour). All of this reduces prices for textbooks in FWK’s own catalogue. Their use of CC licences is like a second tier of the same puzzle, reducing margins not for printing and distributing textbooks in their catalogue, but for creating textbook content. Virtually all of the cost of creating textbook content is in the writing, so copyright law keeps the marginal costs of duplication artificially high. Recognizing that the marginal costs are easily reduced through open licensing, FWK has gone straight to the bottom (in a good way) in this race as well. Not only have they reduced prices and increased choice, as Eric Frank said, but they have reduced barriers to the creation and use of content and further strengthened their position as a source of excellent educational content.