How can you compete with free?

This was the title of the popular Digital Rights workshop at the World Economic Forum, Davos, and the participants went on to post the following requirements for a successful business model:

+ The appeal of simplicity
+ Convenience
+ A filtering function (to direct customers to what they want and/or personalize it)
+ A peer-to-peer mechanism or function
+ Possibly new and attractively designed appliances
+ Defined and undefined added value (quality, transparency, pricing structure/model)

Loïc Le Meur, one of the participants, went on to post the question, "What type of business models do you think will appear?"

I would like to invite the panel to take a look at the DIPR system. DIPR uses P2P protocols to exchange unique identifications that grant unrestricted access to the digital product - very simple and convenient for the customer. The same identifications provide filtering and metadata and access to backup copies to further help the customer. In addition, these dual identifications also establish direct but confidential, virtual, links between the author and the consumer which can then be used for all sorts of enhanced business transactions such as free samples, follow-up promotions, even rebates on successful products.

Because DIPR does not rely on DRM controls the customer can take their choice of any attractive reproduction equipment available!

How to compete with free? - Let the customer buy a collective share of the product. What does Peter Gabriel think?