Digital content? Zero value
p2p news view / p2pnet: There have been a few articles, recently, going on about digital content and how much it’s worth. For example, the music industry apparently wants to charge more for popular content arguing the laws of supply and demand should apply to online pricing. However, I’d argue they should be very careful about invoking those laws. Why? Well, because if we do accept that supply and demand should affect the price of content, then digital content should be worth a whole lot less than physically supplied content such as CDs and DVDs.
Why? Because only a limited number of CDs and DVDs are made each year.
If a million people wanted a copy of a CD and there’s only 100,000 available, then demand outstrips supply. In this case, the price will go up. It wouldn’t go to 10 times the normal price, but it will go up, even if it’s just because people on eBay are charging a fortune for them.
But if a 100,000 people wanted one of 1,000,000 CDs, the difference in supply and demand should see the price fall as the likes of clearance sales try to get rid of them.
Which is exactly where the problem lies for the cartels.
The purely digital content you download has an infinite supply. That’s right. An infinite number of people could download the same content, obviously not all at once though. Which means CDs and DVDs should cost more than digital content supplied over the net. A lot more, and this is only reasonable.
Physically supplied content has extra costs, such as duplication costs, transport costs, insurance, overheads added by the stores including paying staff, the list goes on. These costs don’t, of course, exist for an online outlet. There’s only the costs incurred by the hosting site.
So in theory the only costs an online purchaser should have to pay are for are the costs of the hosting site, and royalties to content creators and, if applicable, performers.
Far from popular content being worth more, it should be worth a lot less than the equivalent physically supplied content because it never runs out and there’s always enough for everyone.
Finite demand divided by infinite supply is a very very small number. It would probably take a computer larger than the universe to accurately calculate it.
So the next time someone raves to you about the value of digital content being offered over the net, tell them it’s worth nothing. Well, a number so close to nothing as to be impossible to calculate anyway.
When they look at you in horror and demand to know what you base that on, tell them this: The laws of supply and demand.
Tony from Oz
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October 20th, 2005 at 4:45 pm
There is an economic term to discuss this issue, and that is to discuss marginal cost. Marginal cost is the cost to produce or purchase one more unit of a good or service. There are then fixed development costs which are the same no matter if there is one or 6.5 billion units made.
With pure intangibles where there is no physical media, and with peer-to-peer networking bringing the bandwidth charges lower, the marginal cost to the developer for digital material is approaching zero.
I believe is is very wrong to suggest that the value of this work is Zero. Regardless of the marginal cost there is still value in the work, and there are still fixed development costs. If you enjoy these works then it is fair for the developers of these works to be able to expect to recoup these fixed development costs plus a profit. While I disagree with the concept of “theft” ever being used in the context of intangibles as the term “theft” doesn’t apply for any rational meaning of the word, it is still dishonest and harmful to ignore what is fair to be asked by the developers.
What modern businesspersons are doing is recognizing the fact that the marginal cost is approaching zero and using business models which focus on the fixed costs. This is what is happening with Free/Libre and Open Source Software http://flora.ca/floss , and with Open Access journals. Contrary to the misinformation from certain outdated businesses (”Software manufacturers” like Microsoft, traditional journal publishers, etc), these aren’t environments where the developers don’t get paid, but environments where the developers get paid up-front for the fixed development costs. In fact, with the costs of counting copies (including the financial, marketing and social costs of enforcement against “infringement”), and the unnecessary middle-men out of the way, these developers are more likely to get paid better and get more stable amounts for their work.
Once the basic economics is understood, then other business model options (such as voluntary collective licensing, etc) become obvious. Unfortunately we live in an environment where incumbent businesses do not understand economics, and would rather fight against economic progress in parliaments and in the courts rather than embrace and harness economic progress.
October 20th, 2005 at 7:48 pm
Russell is of course correct. However, I do tend to disagree with the following:
“Unfortunately we live in an environment where incumbent businesses do not understand economics, and would rather fight against economic progress in parliaments and in the courts rather than embrace and harness economic progress.”
I think they do understand it, and they realize they have been overcharging for years. They want the laws changed to protect their ability to overcharge. They like the concept of do a job once and get paid forever. If they did the job and got paid up front, they’d need to keep doing ’stuff’ to get paid…. And yes I do agree development costs and the like (I’m sure different industires have different words to describes these costs) need to be reimbursed but I think the current state (and the way things seem to be headed) are way to biased towards the creators…. well to the right holders, which seem to be something (or someone) other than the creator.
There are many companies that buy up others creative works (artistic works, programs etc) just so they can overcharge for them.
October 21st, 2005 at 3:12 am
Phantom Poet Graffito don’t know what type of calculator this guy is using. What’s the use of customers buying into a 400 billion dollar plus consumer electronic industry and there is nothing on the devices before you purchase it or after? Don’t be so hard on the word **content**.
Give a small nobody–independent a chance to buy a headstone for
his mama’s grave instead of telling these Big Mob Media companies that
they should hook-up to you and stream media through your entire house on a ten thousand dollar system without throwing king-content his
pennies per share. F**K that. . ! your friend forever, Literati X. . .
October 21st, 2005 at 8:09 am
Russell,
Well said, this is exactly how I see it and is why I propose a new intellectual contribution model [1] where copies and files are recognised as having zero value and the creative effort of the author or artist is valued and protected in a distributed environment.
[1] http://p2pnet.net/story/6358
and – http://www.indicare.org/tiki-read_article.php?articleId=133