Wednesday, 9 December 2009

Absolutely Free - Part 1


Why do I believe music will be free?

A can of coke costs about 60p. Of that 60p a few pence goes to whoever I bought it from, a few pence goes to whoever transported it, a few pence goes to the raw materials and a few pence goes to packaging. In the end, coca-cola will make very little profit (there was a period in the 40s where they actually made a loss on every sale).

In a competitive market, the price of a product falls to around the marginal cost (that is the cost of creating one additional unit). The fixed costs - setting up the factory, promoting the brand etc are not reflected in the unit price.

Apply this to music.

The marginal cost of one digital copy of an album is zero. OK, not exactly zero. There is some time involved and some bandwidth, but pretty much zero. Kinda like my chances of fucking Megan Fox.

Sooner or later the price of digital music will fall to meet the marginal cost. Zero.

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