Does Digital Content Have Zero Value?

By Jon Newton 10/21/05

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.


Jon Newton

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”.


Jon Newton is the editor of p2pnet.net and is a regular contributer to MP3 Newswire. Jon's site is devoted to the politics of digital music and his insights as well as those of his co-writers can be read there. We urge you to explore it.

 


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