There is a place for both free and paid clubs. Basic market analysis would indicate that you mostly won’t draw the same people to each place. Of course, assuming the two places are in the same general area, there will likely be some overlap, but I suspect there is an inverse linear relationship between the difference in dues and the overlap in members between two clubs.
Using Pittsburgh as an example, the Monroeville Chess Club is free to all (donations can be made, but there is zero pressure to do so). The Pittsburgh Chess Club has annual membership dues (varying based on age/status and county of residence). The two clubs offer different benefits, different ambience, and largely different player pools. The average field at the PCC is quite a bit stronger, rating-wise, but there are a lot of Elo-hungry little piranhas at the MCC, so that gap may be shrinking. There’s a lot more study material at the PCC (other than perhaps the White Collection at the Cleveland Public Library, I’m not sure there’s a bigger publicly accessible chess library in the country). But you can get good analysis at the MCC any week from an experienced master, a feature that is generally not available at the PCC.
Most PCC members aren’t MCC members, and most MCC members aren’t PCC members, for various reasons. The two clubs have different foci, they are about 15 minutes apart by car, they have a conflicting meeting night, and Pittsburghers are strange about not being willing to travel more than 10-15 minutes for most things. However, the two clubs do have some cross-pollination for USCF tournaments, which is a good thing for Pittsburgh chess. And there are players (like my son) who are members of both clubs.
Certainly, Pittsburgh chess would be poorer if either club tried to be more like the other.
The Pittsburgh Chess Club and Monroeville Club do not compete with one another. Nor do we compete with the University of Pgh club or other regional chess organizations. The clubs with websites have links with each other. We all use the local clearinghouse and check with each other through e-mail or personal contact to see that we do not drop one of our tournaments on somebody else’s tournaments. We post flyers of every group’s tournaments at our club so that our members have choices where to play. Our flyers are dropped off at their clubs or we send a pdf of our event for them to copy and post. It is a usual practice for a bunch of our club’s players to decide to go to an event together to support a tournament sponsored by another club.
Getting back to dues for a bit. When our club was at Borders Books, we could not charge dues. We were able to use their facilities for free; that was part of the deal. They made money from us through sales of books and items from their café. We made money from our tournaments and donations. When we moved to our new site, we discussed the conditions under which we would be allowed to use their rooms. We told them we would charge no dues and were providing a service to the community. In return, we received tremendous cooperation and trust.
From a discussion at chesstempo.com “Paying for local chess rating in different countries” (names withheld to protect the innocent)
In Israel ($1=3.48 shekels-today) 135sh for 3 mos … 240/6…420/1yr…760/2yr…1000/3yr…1500/5yr…2300/10yr…unspecified discounts for Jr and 60+ and under 8 and 80+…discounts for handicapped too
Another pays 12GBP/yr ( 1pound = 1.67 dollars-today) covers internal club matches and team matches but not tournaments…alternatively pay 2#/rated game
In New Zealand ($1=1.18 $NZ today) National tourneys cost 20 $NZ (paid via club or 1st tourney entered) of that 4$NZ goes to National Federation of rating…
Finally a USCF member says (s)he pays $3/club game … tourneys may be $30-$40 for 5 round local and $60-$80 for 5 round regionally … club membership = $20…club members get $5 off club tournament entry fees…