Quote:
Originally Posted by jplumey
I guess I don't understand your point. I'm dense that way.
What does amortization have to do with this discussion?
Regardless of the price to make or distribute the product, its price is determined by its value, real or perceived. The value of the product, which I understand is a subjective thing and can be in influenced by the "advertizing" [sic], isn't determined by the cost to produce or distribute the product. If I make a product that is grossly overpriced compared to the value that my customers perceive in it, I will lose their business. They'll go somewhere else and either a) find a similar product that satisfies them at a lower price, or b) come back to my product because it's the product they want.
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Let me put it in car terms. (We all know what a car is). It cost, say 500 million, to design and engineer a new model of a car (not unheard of). If, over the life span of the model being produced (say 7 years) I sell 1 million cars (that's 12,000 cars a month for 7 years) at $20,000 a car, the design cost,
per car, is $500, or 2.5% of the cost of the car. If I sell 1,000 cars over 7 years, the design cost,
per car, is $50,000. I make money at 1 million cars, I lose my shirt at $50,000.
With digital items, there's no $20,000 cost of production to use to amortize the design costs over a long production run, like the car above. Not when I can make a copy for less than 1 cent.
This is a basic fact of the current digital reality. Like it or not. It isn't going to change.