After Pandora announced that they will be charging 99 cents for users listening to more than 40 hours/month and a running into a review of Spotify’s streaming service in Slate, I had some thoughts on the “freemium” business model and paying for service and time savings.

Happily, I also ran into this essay instead of having to write it all down myself!

Let’s go back to the donut analogy. Many opponents of the economy of free say: if you give donuts for free, and the guy next to you tries to sell them at any price, he will inevitably lose because no one will buy them. But this criticism doesn’t take into account the number of steps required to retrieve the donut (which is a very important part of every online experience.) So, the real analogy would be this: if you offer donuts for free, but anyone who wants them has to run three circles around the nearby building to get one, many people will simply pay, for example, $1 for the donut if it means they can just take it immediately.

via You Think ‘Free’ is About the Price? It’s not..