How do you budget the idea of "Free"?

I like Chris Anderson, editor of wired, and respected for his seminal work "The Long Tail". Marketers, particularly retailers, must position their brands for a new and completely inverse value proposition whereas up to now, 5% of what they market has been given away free (the 95% balance sold at a price) to a value proposition whereby 95% of what they market is given away for free, and (5% is paid for). Now, as a former merchant, I know this concept is difficult to grasp. However, I believe it is an inevitable fact. We are entering the age of "free". Chris calls it "Freemium"...
My clients keep asking me, well "how do you budget for free? Ironically, I see it
as the new cost center. It is the creative and technical resources to manage the
marketing and distribution of "free" which has a cost. I believe, for many marketerss, a primary strategic benefit for the immediate implementation of a social media strategy is to insure that the costs associated with "free" are leveraged, that social currency is earned, groups of individuals with shared interests are identified, communities are formed, and the marketer can maintain a following for the products and services offered. This will certainly evolve traditional pricing structures to a point where discounting as we know it will fade!!
Stay tuned for more.