There was a life before the internet. It’s hard to imagine now, but when people wanted to find stuff out or read things, they had to stand up, walk to a bookshelf and brush away the dust. And, get this, people would, once upon a time, expect to pay for the movies they watched, the books they read or music they listened to.

The notion of media being free online, whether legally or illegally, is at the centre of Chris Anderson’s new book, Free: The Future of a Radical Price. Anderson’s first book, The Long Tail, was much fêted. But his second work has attracted a fierce critic in the shape of Malcolm Gladwell, the lauded pop-thinker and author of the seminal books The Tipping Point, Blink and Outliers.

The battleground may be in cyberspace, but the rules of engagement are reassuringly old-fashioned. Gladwell wrote a excoriating review of Free in The New Yorker. This fight is about, quite literally, nothing. Zero. Or as Anderson puts it, the “default cost of a country-sized economy”, which the internet is.

Anderson argues that the ever-decreasing cost of processing, bandwidth and storage means that the annual deflation rate of the online world is nearly 50 per cent. Thus, the trend line of the cost of doing business online points the same way, to zero. This, the “freeconomy” model, means that if the cost of doing business is zero, pricing goods at zero is rational. Money can be made around the fringes of free. Google, or the “citadel of free” as Anderson calls it, makes extraordinary money out of advertising, but gives its services free to its customers. The more customers that it attracts by giving away free tools, the more money it makes.

This is where Anderson takes a battering from his rival thinker. Gladwell debunks the idea that the cost trend is toward zero. He points out Anderson’s admission that there is always a tiny marginal cost of distributing content. The cost of YouTube delivering one video to one consumer is, in Anderson’s view, “close enough to free to round down”. But as Gladwell points out, with YouTube expecting to serve up 75 billion videos this year, “close enough to free” adds up to pretty expensive. He also mocks Anderson’s attempts to imagine a future role for newspapers, in which much of the content is written for nothing by volunteers. Anderson’s obsession with cheap distribution ignores the costs of producing anything truly valuable. Gladwell ends with a withering comment: “The only iron law here is the one too obvious to write a book about, which is that the digital age has so transformed the ways in which things are made and sold that there are no iron laws.”

But in the course of Gladwell’s attack, he makes two large errors. He assumes that Anderson is the evangelist of free, not its chronicler, and he ignores the central conceit of the book that consumers now fully expect to pay nothing. Anyone under 30 finds it laughable that paying for news, music, television, film or social networking could ever be considered a default position. While it is true that the digital age means there are no iron laws, anyone operating a business online has to define themselves against free competition.

In his errors, Gladwell is abetted by his victim whose views changed during the course of writing Free. Anderson says that he had assumed, like many others, that advertising would fill the funding gap. “From the middle of 2008, it became clear that advertising was going to be limited. It was not going to go away, but clearly it’s not going to float all the boats.”

He began to be more interested in “freemium”: the idea that any product has two versions — the free and the premium. If this sounds familiar, it’s because it is. In the early days of the internet, freemium was the model most media outlets tried. Give consumers the bait, hook them in, and convert them to cash. But they didn’t convert. As Anderson says, the gap in the consumer’s mind between 0p and 1p is infinitely greater than the gap between 1p and £1.

The next model tried was the freeconomy model. There was a rush to give away all content free. Old-fashioned media subsidised new, waiting for the advertisers to come in and plug the funding gap. But they didn’t. Media outlets are in a bind. A quick suicide if they do not embrace the internet, a slow death if they do. They are moving back towards freemium, but a reimagined version.

“The gaming industry,” Anderson says, “ is the one getting it right. They all tend to use the same model. Use free to build the biggest possible audience, then convert about 10-20 per cent to paid, using something that’s non-punitive.” Online gamers can play free, but can pay for cheats that save time, or cool add-ons for their avatars.

Despite his change of emphasis, all the marketing for Free concentrates on the freeconomy, the radical bit, and plays down freemium, the old-idea-warmed-up bit.

The logic of Anderson’s argument, which suggests that only the best-content providers will be able to monetise their free content, leads to conclusions that he shies away from. Only a few will be able to make the conversion from free to a hybrid of free and paid, and there will be copious casualties across a range of media, from record labels to newspapers.

Gladwell, like Anderson, is a journalist, and perhaps wants to shoot the messenger. He may not like Anderson’s take on the way that the expectation of free goods is dictating the economics of the internet. But that does not mean Anderson is wrong. The brutal truth is that if consumers cannot be induced to pay for content, and the advertising does not pick up, much of the media as we know it is doomed.

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