Not Free, Not Easy, Not Trivial — The Warehousing and Delivery of Digital Goods « The Scholarly Kitchen

Not Free, Not Easy, Not Trivial — The Warehousing and Delivery of Digital Goods « The Scholarly Kitchen.

This is an interesting article, which validly takes to task the mistaken belief that digital content is cost-free or cost-negligible to produce and distribute.

What the article does not adequately (or accurately) address is the differential in the per unit cost of of creation and distribution of electronic works versus physical works.

Also problematic is the article’s implication that the increasing proliferation of data impacts the cost of individual digital works.  While increased volumes of data certainly impacts the total cost of storage, categorization, indexing, and distributing the entire body of data, it does not (in any manner which I have seen adequately demonstrated) increase the cost of storage, categorization, indexing, and distribution of individual works comprising the larger body. To the contrary, anecdotal evidence would imply that within certain nodal ranges, increased volumes of data would tend to decrease the per unit costs associate with each discrete work, spreading the costs over a wider number of works and enabling certain economies of scale. (I’d be interesting in seeing empirical data which would demonstrate whether this anecdotal evidence bears up in a wider examination of trends.)

Despite its apparent shortcomings, the article does raise the valid point that creation and distribution of digital works is not a cost-free proposition. Of course, the article does, by implication, beg the question, “What is the most rational basis for pricing digital works?” This appears to be a question with which the content industry is struggling mightily.

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2 comments on “Not Free, Not Easy, Not Trivial — The Warehousing and Delivery of Digital Goods « The Scholarly Kitchen

  1. Michael Ault says:

    As a creator of digital works (books) I can say it is just as much work to produce as a paper book on my part, to say my time is worthless or that I shouldn’t derive a profit from my work is socialist if not criminal in nature. Only those who have never produced anything of worth think things are worthless.

    • Michael,

      I agree. The argument that digital works should be free (or even negligible in price) is nonsensical.

      Certainly from the creation / authorship standpoint, there is no difference whatsoever in the “cost” (i.e. the time and the creative energy, etc.) that goes into the creation of a creative work regardless of the means of its distribution. There is tremendous value in the creation of any creative work. In fact, regardless of the distribution model, it appears that all but the most powerful and popular “artists” (to use the term generically for creators of all forms of creative content) have largely received the short end of the value stick when it comes to the business of selling content. Does a record company truly bring more value to an album than the composers and/or musicians? Does a publishing house bring more value to a book than the author? Yes, each of these distribution channels does bring value and, without them, the public would have a far more difficult time finding and accessing creative works. Distribution has value and there are real costs involved in it too.

      My point (or at least my intent) is to point out that, particularly when it comes to the distribution (and production, and warehousing, etc.) of content, there are differences in cost between physical and digital. To ignore this entirely in the pricing equation is not realistic. That does not mean, however, that price must be driven by cost. That is not realistic. Price, in a market economy, is driven by perceived value to the consumer.

      A consumer may place great value on a product that costs very little to create and/or distribute, just as a customer may place very little value on a product that is tremendously expensive to create and/or distribute.

      Now, with respect to certain types of works (ex. musical recording, video) technology has certainly reduced the costs of production. That reduction in cost, however, effects products that are distributed physically and electronically equal. Many different things go into customers’ perception of value. This includes (but is not limited to) things like supply/scarcity, utility, affordability, social norms/conventions, and competition. It is the “competition” avenue where, at least in part, this issue of cost of production and distribution can impact perceived value.

      Where you have two similar but non-identical products (say an e-book vs. a hardback or a CD vs. an .mp3 of the same work), I don’t think it is realistic to say that knowledge (or belief) on the part of a customer that there is a radically different cost involved in the comparable products will have zero effect on the customer’s perception of what is a fair or reasonable price for one vs. the other. That having been said, because the products are not identical, it is possible to negate any negative impact on price created by an actual or perceived difference in cost basis of a product. For example, the immediacy of instant access vs. delayed gratification may be sufficient to justify greater price parity because instant access (at least for some consumers) adds value. At least in my mind, the failure to adequately make the case for the value adds from digital media is one of the digital distribution companies’ great failures.

      Of course, there are other facts at play with respect pricing digital content. “Piracy” is a very real problem in the digital content economy. As it become more an more widespread it has wide-ranging negative effects, not the least of which is depressing demand (and thus price) for legitimate goods. This is an issue that must be addressed in the content industry. I tend towards the belief that the innovation and evolution of business models are a more effective route towards dealing with this issue than simply suing the pants off of your customer base (thus creating negative market sentiment). That having been said, evolving business models is a painful, disruptive, and often, in the short-term, costly proposition. There is no “magic bullet” here, and only time will tell who is right and who is wrong about the most effective way to deal with digital piracy.

      All of this, however, is a very long, round-about way of coming back to my essential point: digital works are by no means worthless. Creators and distributors of content (whether physical or digital) both have very real costs (both physical and opportunity) and deserve the opportunity (but not the right) to derive a profit from their efforts. The real debate is in pricing models. What is sustainable and what is not?

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