The guy makes some wishful statements, but his error comes from his primary assumption. It's right here:
There are three kinds of free in the world. [...] But there's a third form of free, which is the fascinating one that's really just now coming of age ... where really nobody pays
That statement is false. Somebody always provides the materials, labor, or time to produce any good or service. Just because it sometimes happens to be the same guy that created the good or service doesn't mean the process of creating it didn't cost him anything. "On the house" does not mean "nobody pays".
Exactly.
Cheap =/= Free