6 ms·

The marginal cost of replication for things like news, drugs, and software, especially software, have always been close to zero, and your economics would sugges

The marginal cost of replication for things like news, drugs, and software, especially software, have always been close to zero, and your economics would suggest that these would have trended toward marginal costs of a few bucks per CD, but that's the wrong way to think about it. Software has large development costs that must be recouped, so marginal cost doesn't really play into what's going on here.

pchristensen 16y ago
It's the lack of straightforward substitutes that keep prices high on software and drugs. The large fixed cost of development only means that (proprietary) software won't get written or drugs won't be discovered and put through FDA trials if prices fall due to competition. Take commercial C compilers. Used to be a thriving industry, but once Gcc got good enough, people stopped paying.
- kiba 16y ago
  Right, copyright often retard and frustrate attempt to get it to marginal cost. Still, there are pirated goods, which are often inferior products due to inconvenient access. The one exception that I had already mentioned are translated Japanese manga and to less extent other Asia originated comics such as China and Korea. Generally, they act more as advertising and brake to competitor substitute goods that could otherwise gain momentum.
  - rick888 16y ago
    "which are often inferior products due to inconvenient access" It's interesting because DRM and the "inconvenient access" you speak of were created as a direct result of mass piracy.
- neutronicus 16y ago
  People certainly still pay for intel's C compiler.
  - kiba 16y ago
    So it doesn't completely displace most compiler, but it does displace a lot? On the flip side, how many people actually use Intel's C compiler as opposed to people who just use GCC?
    - hvs 16y ago
      On Windows, GCC is not a very viable option (yes, I'm aware of Cygwin, MinGW, etc) for production software right now. And you'll be hard pressed to find a solid compiler that ISN'T proprietary.
      - fragmede 16y ago
        On Windows, perhaps due to competition from GCC, perhaps not, Microsoft offers various Visual Studio Express editions free of charge, and the license allows commercial use, so you can sell programs made with Express editions. You're right in that the compiler IS proprietary, but the question is not of license, but of wallet cost to user - $0.
- bad_user 16y ago
  > once Gcc got good enough, people stopped paying People still pay for development tools. Lots of people paid for IntelliJ IDEA even with Eclipse around. GCC is also a piss poor compiler by any standard, that's why many people have such high hopes for LLVM. You also have to think about "complementary products" ... Apple is investing in the LLVM/GCC compilers because it helps them sell their hardware with their proprietary OS installed, which is by no means free. The cost of replication or the lack of substitutes is irrelevant ... people don't use GIMP over Photoshop because a Photoshop substitute is fucking hard to develop ... it took 22 years to reach its current state.
  - kiba 16y ago
    People still pay for development tools. Lots of people paid for IntelliJ IDEA even with Eclipse around. I think a free product have to be utterly superior to a paid product in order to displace commercial products. The cost of replication or the lack of substitutes is irrelevant ... people don't use GIMP over Photoshop because a Photoshop substitute is fucking hard to develop ... it took 22 years to reach its current state. I am not parsing this statement. Do you mean that because it take 22 years to develop Photoshop, that it is impossible for GIMP to be good enough to be a substitute good thus eventually displacing it?
    - pchristensen 16y ago
      "I think a free product have to be utterly superior to a paid product in order to displace commercial products." In order to completely displace commercial products, yes. But for any reasonably complex or powerful product, there's a market of customers that are overserved by it and would pay less for less if they could. This is usually handled by product segmentation - think of options in cars. If you don't need the extra power, go for the 4-cylinder instead of the V-6. If cash is more important than comfort, skip the leather seats. If you need the fastest, most luxurious car and money isn't an option, check every box on the list.
  - Symmetry 16y ago
    > GCC is also a piss poor compiler by any standard, that's why many people have such high hopes for LLVM. I hear this a lot, but when I see places where people have actually done benchmarks GCC usually doesn't come out too bad, and when you look at the correctness of the code (for C at least) its hard to find something better than GCC.
kiba 16y ago
Software has large development costs that must be recouped, so marginal cost doesn't really play into what's going on here. Just because something cost a lot of money to produce doesn't mean you get to price it "cost + profit margin". Reality doesn't work that way. And things does get driven down to zero. Look at pirates who offer download of vista for free on bittorrent. Webcomics are free. Most Asian comics that are available in English are in actual, pirated and scanlated, but are often available in way more convenient format than the legitimate things(which are often not translated and probably never will make it to the shore of foreign countries). Most stuff on the internet are free anyway, which should be ample evidence for my argument.
- siglesias 16y ago
  Most stuff on the internet are free anyway, which should be ample evidence for my argument. What stuff? Stuff that's paid for with advertisement dollars? Do you think this stuff would still be free or marginal cost without those advertisement dollars? I think the fact that so much software and media (probably well over 90%) is paid for in some fashion by consumers (either through advertisers or directly) is evidence to the contrary of what you are saying. There's no such thing as a free lunch. Econ 101.
  - kiba 16y ago
    Things would still be driven down to marginal cost. It would instead be pirated, rather than be supported by advertising dollars. It would mean that people would have to find alternative business models. So, it does not void my arguments at all.
    - deleted 16y ago
      [deleted]
  - siglesias 16y ago
    The risk of being fined makes the cost of piracy non zero.
    - 16y ago
rick888 16y ago
"On the contrary, free stuff is the overriding trend for stuff that have the marginal cost of replication close to zero. It is not so much culture that is driving it, but the economic forces that does." Currency also has little value (and is relatively easy and cheap to replicate). It's just ink and paper, but we value it as much higher. If you bought software from me and I sent you random bytes instead, would you be satisfied? According to you, they have the same value. You aren't paying for the bits that are assorted in a specific order. You are paying for the time, effort, and knowledge it took to assort those bits (which is still unique as the average person can't press a button and create Photoshop with no effort). "Also, the allegedly common complainers who only want free stuff is unquantified. You will need some evidence to show that most people are conscious freeloaders who complain a lot." As a simple example, look at some of the startups here on HN. Many have gotten rid of the freemium model. The reason? Freeloaders are taking up resources and they can't afford it. Freeloaders are driving the cost of software to $0. Because software isn't something tangible, its value is based on what people think it's worth. If anybody can download your app for free (because freeloaders have downloaded it and spread it around), the perceived value will rapidly approach $0. The general attitude about getting everything for free will just lead to less commercial software. Personally, I'm not selling software anymore. I'm selling SaaS. So Instead of paying a flat-fee for software, my users will now be paying a monthly fee. Business owners aren't stupid. They will eventually realize that piracy is impossible to defend against. The consequences are less freedom for the customer/end user.
- kiba 16y ago
  The general attitude about getting everything for free will just lead to less commercial software. Personally, I'm not selling software anymore. I'm selling SaaS. So Instead of paying a flat-fee for software, my users will now be paying a monthly fee. Business owners aren't stupid. They will eventually realize that piracy is impossible to defend against. The consequences are less freedom for the customer/end user. My opinion is that commercial software will just change, not be less and less. I also thought some people are too dumb to realize that piracy is impossible to defend against and will be swept away in changes. I just realize that I wasn't looking at the right kind of people. Internet savy and those who are aware of the nature of software economic already realize this. SaaS is exactly the conclusion that I come up for a web application that I was supposed and still angling to complete.
davidw 16y ago
Once something is a 'commodity', and the sunk costs have been recouped, the price will trend towards the marginal cost. This comes straight from Varian and Shapiro's "Information Rules" by the way - it's not just something I'm making up.
- polynomial 16y ago
  "Intellectual Property" is the dam that keeps the waters of commodification at bay (where you have products with a negligible cost of replication.)
  - kiba 16y ago
    It's more like a leaky dam that will eventually burst and explode. It slows down commodification of software, sometime to a significant degrees.

pchristensen 16y ago

It's the lack of straightforward substitutes that keep prices high on software and drugs. The large fixed cost of development only means that (proprietary) software won't get written or drugs won't be discovered and put through FDA trials if prices fall due to competition. Take commercial C compilers. Used to be a thriving industry, but once Gcc got good enough, people stopped paying.

kiba 16y ago
Right, copyright often retard and frustrate attempt to get it to marginal cost. Still, there are pirated goods, which are often inferior products due to inconvenient access. The one exception that I had already mentioned are translated Japanese manga and to less extent other Asia originated comics such as China and Korea. Generally, they act more as advertising and brake to competitor substitute goods that could otherwise gain momentum.
- rick888 16y ago
  "which are often inferior products due to inconvenient access" It's interesting because DRM and the "inconvenient access" you speak of were created as a direct result of mass piracy.
neutronicus 16y ago
People certainly still pay for intel's C compiler.
- kiba 16y ago
  So it doesn't completely displace most compiler, but it does displace a lot? On the flip side, how many people actually use Intel's C compiler as opposed to people who just use GCC?
  - hvs 16y ago
    On Windows, GCC is not a very viable option (yes, I'm aware of Cygwin, MinGW, etc) for production software right now. And you'll be hard pressed to find a solid compiler that ISN'T proprietary.
    - fragmede 16y ago
      On Windows, perhaps due to competition from GCC, perhaps not, Microsoft offers various Visual Studio Express editions free of charge, and the license allows commercial use, so you can sell programs made with Express editions. You're right in that the compiler IS proprietary, but the question is not of license, but of wallet cost to user - $0.
bad_user 16y ago
> once Gcc got good enough, people stopped paying People still pay for development tools. Lots of people paid for IntelliJ IDEA even with Eclipse around. GCC is also a piss poor compiler by any standard, that's why many people have such high hopes for LLVM. You also have to think about "complementary products" ... Apple is investing in the LLVM/GCC compilers because it helps them sell their hardware with their proprietary OS installed, which is by no means free. The cost of replication or the lack of substitutes is irrelevant ... people don't use GIMP over Photoshop because a Photoshop substitute is fucking hard to develop ... it took 22 years to reach its current state.
- kiba 16y ago
  People still pay for development tools. Lots of people paid for IntelliJ IDEA even with Eclipse around. I think a free product have to be utterly superior to a paid product in order to displace commercial products. The cost of replication or the lack of substitutes is irrelevant ... people don't use GIMP over Photoshop because a Photoshop substitute is fucking hard to develop ... it took 22 years to reach its current state. I am not parsing this statement. Do you mean that because it take 22 years to develop Photoshop, that it is impossible for GIMP to be good enough to be a substitute good thus eventually displacing it?
  - pchristensen 16y ago
    "I think a free product have to be utterly superior to a paid product in order to displace commercial products." In order to completely displace commercial products, yes. But for any reasonably complex or powerful product, there's a market of customers that are overserved by it and would pay less for less if they could. This is usually handled by product segmentation - think of options in cars. If you don't need the extra power, go for the 4-cylinder instead of the V-6. If cash is more important than comfort, skip the leather seats. If you need the fastest, most luxurious car and money isn't an option, check every box on the list.
- Symmetry 16y ago
  > GCC is also a piss poor compiler by any standard, that's why many people have such high hopes for LLVM. I hear this a lot, but when I see places where people have actually done benchmarks GCC usually doesn't come out too bad, and when you look at the correctness of the code (for C at least) its hard to find something better than GCC.

kiba 16y ago

Software has large development costs that must be recouped, so marginal cost doesn't really play into what's going on here. Just because something cost a lot of money to produce doesn't mean you get to price it "cost + profit margin". Reality doesn't work that way. And things does get driven down to zero. Look at pirates who offer download of vista for free on bittorrent. Webcomics are free. Most Asian comics that are available in English are in actual, pirated and scanlated, but are often available in way more convenient format than the legitimate things(which are often not translated and probably never will make it to the shore of foreign countries). Most stuff on the internet are free anyway, which should be ample evidence for my argument.

siglesias 16y ago
Most stuff on the internet are free anyway, which should be ample evidence for my argument. What stuff? Stuff that's paid for with advertisement dollars? Do you think this stuff would still be free or marginal cost without those advertisement dollars? I think the fact that so much software and media (probably well over 90%) is paid for in some fashion by consumers (either through advertisers or directly) is evidence to the contrary of what you are saying. There's no such thing as a free lunch. Econ 101.
- kiba 16y ago
  Things would still be driven down to marginal cost. It would instead be pirated, rather than be supported by advertising dollars. It would mean that people would have to find alternative business models. So, it does not void my arguments at all.
  - deleted 16y ago
    [deleted]
- siglesias 16y ago
  The risk of being fined makes the cost of piracy non zero.
  - 16y ago

rick888 16y ago

"On the contrary, free stuff is the overriding trend for stuff that have the marginal cost of replication close to zero. It is not so much culture that is driving it, but the economic forces that does." Currency also has little value (and is relatively easy and cheap to replicate). It's just ink and paper, but we value it as much higher. If you bought software from me and I sent you random bytes instead, would you be satisfied? According to you, they have the same value. You aren't paying for the bits that are assorted in a specific order. You are paying for the time, effort, and knowledge it took to assort those bits (which is still unique as the average person can't press a button and create Photoshop with no effort). "Also, the allegedly common complainers who only want free stuff is unquantified. You will need some evidence to show that most people are conscious freeloaders who complain a lot." As a simple example, look at some of the startups here on HN. Many have gotten rid of the freemium model. The reason? Freeloaders are taking up resources and they can't afford it. Freeloaders are driving the cost of software to $0. Because software isn't something tangible, its value is based on what people think it's worth. If anybody can download your app for free (because freeloaders have downloaded it and spread it around), the perceived value will rapidly approach $0. The general attitude about getting everything for free will just lead to less commercial software. Personally, I'm not selling software anymore. I'm selling SaaS. So Instead of paying a flat-fee for software, my users will now be paying a monthly fee. Business owners aren't stupid. They will eventually realize that piracy is impossible to defend against. The consequences are less freedom for the customer/end user.

kiba 16y ago
The general attitude about getting everything for free will just lead to less commercial software. Personally, I'm not selling software anymore. I'm selling SaaS. So Instead of paying a flat-fee for software, my users will now be paying a monthly fee. Business owners aren't stupid. They will eventually realize that piracy is impossible to defend against. The consequences are less freedom for the customer/end user. My opinion is that commercial software will just change, not be less and less. I also thought some people are too dumb to realize that piracy is impossible to defend against and will be swept away in changes. I just realize that I wasn't looking at the right kind of people. Internet savy and those who are aware of the nature of software economic already realize this. SaaS is exactly the conclusion that I come up for a web application that I was supposed and still angling to complete.

davidw 16y ago

Once something is a 'commodity', and the sunk costs have been recouped, the price will trend towards the marginal cost. This comes straight from Varian and Shapiro's "Information Rules" by the way - it's not just something I'm making up.

polynomial 16y ago
"Intellectual Property" is the dam that keeps the waters of commodification at bay (where you have products with a negligible cost of replication.)
- kiba 16y ago
  It's more like a leaky dam that will eventually burst and explode. It slows down commodification of software, sometime to a significant degrees.