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This is not unique to digital goods. Products that rely on intellectual property have worked the same way for centuries. The cost of movies, drugs, books, etc.

This is not unique to digital goods. Products that rely on intellectual property have worked the same way for centuries. The cost of movies, drugs, books, etc. have nothing to do with their marginal cost.

Godel_unicode 8y ago
It's not even just an intellectual property problem either, but one of any market with artificially constrained supply. See for instance OPEC-created oil prices and De Beers-created diamond prices. In a way, you could argue that iTunes was the fracking of music sales, and that other markets need something similar.
EGreg 8y ago
The cost of goods should be the amortized startup cost plus the marginal cost. Startup costs can include the R&D and so on. “Intellectual property” is just one framework by which the startup costs can be recouped, but at the price of a major impedance mismatch. Instead, the startup costs can be paid for in a collaborative framework (open source, wikipedia, and so on) and the growing snowball of results freely used and remixed in common by all, producing more results. Then the marginal costs would be simply hosting and support. The questions of “but then who would make XYZ” have already been answered. The question, though, is will we still have famous authors and heroes, or will our digital products be made 95% by the crowd. I think the latter. Wikipedia and open source have very few famous personalities - just the BDFLs that launched and run the project, and not specific creators of content.
- ojilles 8y ago
  Not saying that’s false, but YouTube has a bunch of very famous authors.
anongraddebt 8y ago
I don't think gizmo686 had fully fleshed out their argument. Digital goods do seem to be doing some wonky things that our previous models don't handle well. There is a combination of near zero marginal costs, near instantaneous global distribution, and near zero transaction costs. Before the internet, books and movies did not have those three properties.
thomastjeffery 8y ago
For centuries, IP-based goods have had a significant marginal cost. With the printing press, this cost went down, but it still took a significant effort to create a copy; giving that copy some independent value. Digital media has practically zero marginal cost. So long as you are connected to someone with data, it is trivial, and practically free to copy that data. There are efforts (DRM) to fill the void of marginal cost; but they are hacked together, and fundamentally flawed.

Godel_unicode 8y ago

It's not even just an intellectual property problem either, but one of any market with artificially constrained supply. See for instance OPEC-created oil prices and De Beers-created diamond prices. In a way, you could argue that iTunes was the fracking of music sales, and that other markets need something similar.

EGreg 8y ago

The cost of goods should be the amortized startup cost plus the marginal cost. Startup costs can include the R&D and so on. “Intellectual property” is just one framework by which the startup costs can be recouped, but at the price of a major impedance mismatch. Instead, the startup costs can be paid for in a collaborative framework (open source, wikipedia, and so on) and the growing snowball of results freely used and remixed in common by all, producing more results. Then the marginal costs would be simply hosting and support. The questions of “but then who would make XYZ” have already been answered. The question, though, is will we still have famous authors and heroes, or will our digital products be made 95% by the crowd. I think the latter. Wikipedia and open source have very few famous personalities - just the BDFLs that launched and run the project, and not specific creators of content.

ojilles 8y ago
Not saying that’s false, but YouTube has a bunch of very famous authors.

anongraddebt 8y ago

I don't think gizmo686 had fully fleshed out their argument. Digital goods do seem to be doing some wonky things that our previous models don't handle well. There is a combination of near zero marginal costs, near instantaneous global distribution, and near zero transaction costs. Before the internet, books and movies did not have those three properties.

thomastjeffery 8y ago

For centuries, IP-based goods have had a significant marginal cost. With the printing press, this cost went down, but it still took a significant effort to create a copy; giving that copy some independent value. Digital media has practically zero marginal cost. So long as you are connected to someone with data, it is trivial, and practically free to copy that data. There are efforts (DRM) to fill the void of marginal cost; but they are hacked together, and fundamentally flawed.