In Anderson's words, "The Internet is the first truly competitive market the world has ever seen," and in this environment we experience "the law of gravity online: If marginal cost is zero, and competition is unlimited, price will fall to zero." Anderson's quick to note that he's not saying the price should be zero or things should be free; he's merely observing the dynamics at work in the market for any products or services that can be converted to bits.
He also noted that it's not simply "free" vs. "paid" products and services, but rather free versions supported by advertising and "freemium" versions in which consumers and users pay to get something extra. What will people pay for? In Anderson's words...
People will pay to save time.
People will pay to lower risk.
People will pay for things they love.
People will pay for status.
People will pay if you make them (once they're hooked.)
