rent vs. buy: digital goods

My daughter, who’s very interested in digital goods, suggested that I write about them.

Why?

They’re new, and they’re different.  Also, Laura supplied a lot of the information in this post.

Part of the difference between the digital goods we have now and their physical counterparts is in the nature of the beast(s).  Part, however, comes the desire of sellers–particularly Apple–to recreate the AOL-style “walled garden” that tethers the buyer to a given seller’s product line and secures fat profits for the retailer.

Some examples:

Generally speaking, for digital goods like e-books, or songs or movies, you don’t really own the digital copy you download.  You only have a license to use it.  Kindle owners found this out early on.  Amazon was inadvertently distributing 1984 without having bought the digital rights.  When the company found out–presumably when the rights holder called asking for money–Amazon simply went “Poof!” and made the book disappear from all the Kindles it had appeared on.  Apparently very few of the shocked Orwell fans had read the fine print in the Kindle service agreement.  It is kind of funny, though.

Usually, you can’t give your download to someone else.  You may be able to lend it for a short period of time, but maybe not.

The digital good may appear on all of your devices.   …or it may appear just on all your Android devices but not Apple, or vice versa.

 

The most peculiar aspect of digital goods, to my mind, is what happens with e-books in (if that’s the right word) libraries.  Many authors or imprints won’t sell e-books to libraries, so the selection is limited.  At least some sellers place counters in the downloads, so that the copy disappears after a certain number of borrowings.  It isn’t a quality control issue–a worry that the digital copy has somehow degraded;  it’s to mimic what happens to physical books, which eventually fall apart after repeated use.   In other words, it’s to force the library to pay again after a certain number of uses.

 

investment significance?

Maybe there’s none.

On the other hand, I think we’ve got to distinguish carefully between essential characteristics of digital goods and those that are a function of sellers’ desire to create closed “ecosystems.”  After all, the AOL walled garden lost any allure it had (I never got it) when people discovered there was a big wide world outside the AOL server farms that AOL got in the way of people experiencing.

I suspect the same will eventually happen with Apple–personally, I think this might be happening already.  As/when this occurs, I’d expect the price of digital goods in general to fall (maybe a lot).  A sharp separation will probably also emerge between high-quality content, whose unit sales will increase (again, maybe by a lot), and me-too content, which will disappear.

 

 

 

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: