Tuesday, September 6, 2011

The Three-Party Market

In "Free 101," Chris Anderson did a wonderful job of explaining and revealing the truth behind the advertising campaign of "free" that most of us encounter on a daily basis.

Crucial to the idea of "free" in the media industry is the Three-Party Market, which helps to explain why many media texts are available to consumers at free or very low costs. At its basic level, the Three Party Market is an exchange between two parties where goods are offered for free, and a third pays its way into the equation and receives money back as a result (24).

It doesn't seem like this would ever work, but Anderson points out that this is a market we encounter all the time in the media industry. Much of television may be free to consumers, so there is a free exchange occurring between the producers of the television shows and those who watch it from their homes.

However, advertisers enter in as the third party. They pay the producer for advertising time or space, so the producer receives their share. This is done in the expectation that consumers, receiving the media text for free, will be influenced by the advertising and pay the advertiser for their product.

If I watch the ABC news for free every night, but I've begun to buy an abundance of "As-seen-on-Tv" products as a result of viewing their commercials regularly, then the system worked. The advertisers gain money and recognition, and the producers are paid by the advertisers, who are paid by the consumers.

Ultimately, this is not a real "free" exchange - both the producer and the advertiser are gaining money, and the consumer is likely to end up paying as a result of interacting with the media text. In the end, this may not be the worst deal for any party involved; the consumer gets to watch their shows at no up-front cost and may find more products that interest them than ever before. Consumers have a right to know, however, that they are the ones ultimately paying to support their "free" television viewing.

Anderson was certainly right when quoting the phrase, "there's no such thing as a free lunch" (20).

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