MobileRead Forums - View Single Post - interesting article on the economics of e-content

tspin46 · 10-12-2007, 06:17 AM

It might be useful to examine the original home video market. In the late 1970's home video equipment was very scarce. Individual video tapes cost between $79.95 and $129.95. The video tape industry made a decent margin on sales, but the video tape line was not a major profit center for the film studios. The hardware was just too expensive to support a high volume of machine sales ($795.00 to $1,795.00).

Ten years later the hardware was $295.00 to $495.00 and tapes were $24.95 to $29.95. Volume in sales of machines and media made up for lower margins and video tape movies became a major source of reveue worldwide for the film studios.

Ten years later the cost of VHS players dropped to $49.95 to $200.00 and movies could be purchased for $10.00. DVDs were introduced at a high cost for players and a high(er) cost for media.

The volume sales of media players was sparked by movie rental and the cost of media was reduced because of increased sales to a much larger user base.

Currently with e-books all media is in theory purchased (or obtained from the free lists or the dark side) and the providers are into the high margin low volume mind set. It will take many more users to force the price down for both readers and media. Wait 10 or 15 years and readers will be give aways like cell phones and media will be much cheaper.

10-12-2007, 06:17 AM	#13
tspin46 Junior Member Posts: 3 Karma: 10 Join Date: Oct 2007 Device: Sony prs 500	It might be useful to examine the original home video market. In the late 1970's home video equipment was very scarce. Individual video tapes cost between $79.95 and $129.95. The video tape industry made a decent margin on sales, but the video tape line was not a major profit center for the film studios. The hardware was just too expensive to support a high volume of machine sales ($795.00 to $1,795.00). Ten years later the hardware was $295.00 to $495.00 and tapes were $24.95 to $29.95. Volume in sales of machines and media made up for lower margins and video tape movies became a major source of reveue worldwide for the film studios. Ten years later the cost of VHS players dropped to $49.95 to $200.00 and movies could be purchased for $10.00. DVDs were introduced at a high cost for players and a high(er) cost for media. The volume sales of media players was sparked by movie rental and the cost of media was reduced because of increased sales to a much larger user base. Currently with e-books all media is in theory purchased (or obtained from the free lists or the dark side) and the providers are into the high margin low volume mind set. It will take many more users to force the price down for both readers and media. Wait 10 or 15 years and readers will be give aways like cell phones and media will be much cheaper. Last edited by tspin46; 10-12-2007 at 06:35 AM. Reason: correct spelling errors.