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By Thomas Baekdal - May 2011

Think Value of Content, not Products - Digital Economics

The digital world has completely changed the economic models of products. It used to be really simple. One product, one cost, one price. But in the digital world it is pretty much anything but that.

In the digital world, one product can be replicated again and again - without any extra cost. It is a completely different form of economics. How do you price something with an endless amount of supply?

Another thing that the digital world changes are that it is not about a specific outcome. A movie doesn't have to watched as a DVD. You can just watch the file, stream it, etc.

The digital world remove the concepts of making products, and replaces it with the concept of selling content.

Many digital businesses are learning this the hard way. By focusing on a specific product linked to a specific outcome, they work against the market. We saw it with the music business. E.g. When Jennifer Pariser from Sony BMG said,

When an individual makes a copy of a song for himself, I suppose we can say he stole a song.

Or when music studios want Amazon to buy a license for letting people store the music files, that they have already paid for, on a hard disk in the cloud.

But we are seeing it everywhere - music, movies, TV, games, books, and now... news.

If you want to be successful in the digital world, you have to stop thinking about your business as about making products.

The question you need to ask is, "How many people want to pay for the same content twice?"

The correct answer to that question is zero. It might be that a small percentage of people actually do it today, but nobody *wants* to do it.

One example. I pay my cable TV company a lot of money to watch shows like the Mythbusters. So why am I not allowed to watch it online? I already paid for it! Why is it illegal for me to download an episode so that I can watch it on my iPad. Again, I already paid for it.

But it actually goes a bit further than that. Take books.

I think that a book should cost the same regardless of format or channel. What that price should be obviously depends on the book. But, it should be one price for all.

...Or rather... one price + shipping.

One example. I am currently reading the latest edition in the Lost Fleet series - one of my favorite sci-fi book series. It comes in 3 formats.

It is a mess. Why would anyone pay more for an ebook? One that has no production costs? Why is the audiobook so freaking expensive, especially considering that most audiobooks is around $17. It is insane!

It is like the publisher decided to force you to get the printed book, even though ebooks are now the biggest market. They are deliberately going against the flow of what people want.

They should all cost the same amount of money - e.g. $17.99 + print/shipping.

Meaning that if you buy the ebook, the price is $17.99. If you buy the audiobook, the price is $17.99. If you buy printed book, the price is $17.99 + print + shipping.

But you also have to ask, how many people would pay for the same product twice? In this case, it means, how many people will buy both the ebook and the audiobook?

The answer is none...

So... if nobody buys all the formats because they won't pay you twice, why not just sell all the formats as single one-price package?

Meaning that if you pay $17.99 you can read it as an ebook and listen to it as an audiobook. You are not forced into a format. You are buying the content - the story.

This is also opening up for a much better user experience. Imagine being able to read a book across formats. You could start listening to it as audiobook, read on on Kindle for the iPhone while standing in line, go back to listening to it as an audiobook, and later read it on your iPad in the evening.

Kindle already syncs how far you have read between Kindle device. And since Amazon owns Audible. It would be painfully simply to sync how far you have read between ebook and audiobooks.

You could even do it between ebook, audiobooks and print books. The page number on your kindle match the page number in the printed book.

It would give you a reading experience where you can read/listen without having to think about using a specific device, or buying a specific format.

You paid for the content - the story. Why limit people to a format? Why force people to pay for each format separately, when you know that nobody would do that?

Stop thinking about digital as a product. A specific format that people have to pay for. Think of selling the content itself, not its container.


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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé


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