As more commercial activity involves the digital (web, ebooks, music...) the temptation to spread the idea for free is actually economically easy and possible while trying the strategy that notes "giving out something for free will lead to more revenue in the long run". Nowadays, a culture of free digital consumption set itself as a standard in our everyday life and is being adopted by a huge section of consumers (mainly from teenagers to the upper middle class). Therefore the concept behind the strategy of the free bases itself on that the source of this free product will be discovered, attract attention, spread and lead to some category of people actually buying something.
For a while, one could use free to promote an idea and have leverage to turn that attention into paid sales of a similar item (I use my music mixes as a free way to promote myself as a DJ for example which I can later use to get extra revenue at a certain point and/or for a certain reason).
In our recent times, people start to feel foolish when they pay for something and the free substitute is easily available and perhaps more convenient.
Therefore, people with something to sell are going to have to invent things that can't possibly have a free substitute. Take for example Armin Van Buuren. His tracks and productions are easy to acquire and enjoy but his live shows, eccentric performances and grand productions will always be payed. A few years ago, Armin would play around 2 to 3 hours live and earn a certain revenue that is mixed between track sales and event shows. Nowadays, Armin as a brand became active on social platforms, giving the word out of events, productions and locations. That way he's giving extensive and constant free promotion to his name (his brand) and trying to earn a potential following as much as possible since these are the people who will be interested in experiencing his live shows, earning him the money. His radio shows and music have become the promotional hook, a tool to capture audiences and potential spectators to shows that have evolved from simple to an audiovisual spectacle with unexpected surprises, technology and more.
Another example is Lady Gaga. Her music is basically free, it's the concerts that cost money. Another example is playing basketball at a health club. That's free, it's membership that costs money.
Creators don't have to like it, but free culture is here and it's getting more pervasive. Armin Van Buuren's Armada label noticed that and tried fighting it at first, but today Armada makes heavy use of YouTube as a marketing channel for example. If you watch their tracks on YouTube you will notice they include plenty of branding and calls to action to bring a listener into the world of the label. The end result is massive exposure, with a huge global following, leading to sold out gigs all around the world (which are not free).
The end result we have today is a conglomeration of new media companies, evolving old-media companies, e-commerce, social voting tools, search engines, file sharing and good old word of mouth all driving how music is distributed. It’s complicated, but we’re getting closer to a model that works. Musicians and record labels, like us bloggers, are relying more and more on multiple streams of income, and the highest value product they have, is the face-to-face time they offer. In the case of music, that’s concert time, and especially at the very top end of most popular artists, the big cash is made from ticket sales to concerts.
Free has always been part of the equation. The bestselling book of all time, The Bible, has no copyright and has been shared freely for thousands of years. Musicians gladly show up to play for virtually free on the Tonight Show or Saturday Night Live for example (while taking into consideration the promotion & audiences watching). The line for using free as a discovery tool is shifting, and the best way to monetize is for the idea to be coupled with something that could never be free. Paying for content will ensure that more of it gets payed.
Consumers should be willing to pay for great content and I believe they are. They are now trained that a big portion of the market is now free. But creators, marketers and strategists should find ways to "package" these products so that they're worth paying for again.