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Strategic analysis
The Digital Content Business Model

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Written by on July 15, 2010

There was a great comment in my article "How to really stop piracy" from Paulius, who spoke to another commencer's suggestion that movies should only cost $1.

He wrote:

Movies cost millions to make and millions to market. For example, after marketing, etc 'Avatar' cost around 500 million to make.

$1 for a HD download? Even if they could somehow get hosting and bandwidth completely for free that would mean, they'd have to sell half a billion copies of the movie just to break even.

If we're looking at it realistically, a HD movie clocks in at around two gigabytes. Given that from box office takings alone 40 million people saw Avatar, that's 78,125 TERABYTES in transfer, and bandwidth isn't free.

Do I agree that movies should be cheaper, especially when downloaded? Absolutely. Is a dollar a download reasonable? No.

Paulius makes a very important point. This "free" internet has created an unhealthy disconnect between people's perception of what it costs to make something, and the actual price.

Selling a movie for $1 would devastate the movie industry, and, worse, make it impossible for independent producers to operate at all. The only ones who would be able to make any kind of money, are the really big guys, who miraculously create a blockbuster movie, on a really tiny budget.

It is not just about movies, but all kinds of products: ebooks, articles, news, games, eggs, pillows, and iPad cases. Not only does the "freeconomy" remove the financial foundation of businesses, it also lowers the quality and value of each individual item.

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Thomas Baekdal

Thomas Baekdal

Founder of Baekdal, author, writer, strategic consultant, and new media advocate.

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