Matt Nikkel 's Techdirt Comments

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  • On the post: Step One To Embracing A Lack Of Scarcity: Recognize What Market You're Really In

    Matt Nikkel ( profile ), 26 Jan, 2007 @ 07:16am

    Re: Re: Re: Scarcity is not the issue

    You guys are assuming that the good itself has to be scarce. However, there is always more than one type of scarcity involved in production of a good. Talented musicians and water could very well be the scarce resource. However, it could just as well be something else, like shipping or labor, that is the scarce resource that raises the perceived value of the product.

    Bottled water is successful because the industry has convinced customers that their product is superior to what comes out of the tap. It's irrelevant to the market if this claim is true or not. It only matters that it affects how the customer perceives the value of the product. Furthermore, there is an added convenience to having the water in a bottle, which brings a value to the product. Water isn't the scarce resource that determines bottled water's value, it's its purity (or perceived purity at least) and convenience.

    Conversely, music produced by the RIAA has carried a high perceived value for many years when compared to that produced by indie labels. The recordings were perceived to be better produced by the customers. Again, whether or not they actually were is irrelevant. However, with the advent of the CD-R customers suddenly had a new piece of information about how much the product was actually worth. When they discovered that the actual price of creating that physical disk was somewhere on the order of $0.25 their perceived value of the RIAA's product plummeted. Since then, the internet and MP3's have made the storage and distribution of music even cheaper.

    It wasn't the music that the consumers considered to be scarce, it was the media that they were recorded on and the distribution of that media. Music has always been abundant, but quality distribution of music was scarce, and that's how the recording companies made their money. Without that scarcity, the RIAA's methods for controlling the market are useless, hence their declining state over the last decade.

  • On the post: Step One To Embracing A Lack Of Scarcity: Recognize What Market You're Really In

    Matt Nikkel ( profile ), 25 Jan, 2007 @ 03:24pm

    Re: Imagine...

    What I find even more shocking is how the MPAA is following right in their footsteps. Hind sight is 20/20, and it's not difficult to see nearly every error that the RIAA made along the way. Yet even with this supreme example of exactly how not to do things, the MPAA seems determined to repeat every single one of the RIAA's mistakes.

  • On the post: Step One To Embracing A Lack Of Scarcity: Recognize What Market You're Really In

    Matt Nikkel ( profile ), 25 Jan, 2007 @ 03:19pm

    Hit it right on the head

    I think you hit it right on the head. The music/movie industry sees a lost sale and says:

    "Where did that sale go? It must have gone to one of two places. Either that customer no longer desires our product or the customer has stolen our product. We see no evidence that the customer no longer desires to be entertained by our product therefore they must have stolen it."

    However, the customer sees it completely differently. I look at the situation and say:

    "I have limited time and money to supply my entertainment needs. I could surf the web. I can play video games. I can read a book. I can download a podcast. I can watch TV. And so on..."

    I then make a judgment based on a variety of factors such as how much a given option entertains me, how convenient it is to my time, and how much it costs.

    These days music loses out to podcasts in this equation. They're cheaper and more convenient, although entertainment value varies (but then again, so does that of music). Movies still get some of my spending dollar, but not as much as they used to. Their primary competitors now are my Tivo and Xbox 360.

    In order to win my entertainment dollar music and movies need to become sufficiently cheaper, more convenient, more entertaining, or some combination of the three. As of right now, the RIAA and MPAA seem to be intent on doing just the opposite. As you said, they fail to realize what industry they're in and just who they are competing against.

  • On the post: Infinity Is Your Friend In Economics

    Matt Nikkel ( profile ), 18 Jan, 2007 @ 03:25pm

    Re: Re:

    While this article was amusing to consider, the solid fact must be stated that there is nothing that is infinite (unless one wants to consider space or time), therefore no price may be zero.

    Um. Stuff is priced at zero all the time. So, there goes your theory.


    You guys are both confusing price with cost. The price is simply what someone directly pays for an item or good. In an entirely free market, price is an expression of the value of the good. Price can be, and often is, zero because the monetary value of the item is essentially worthless. Sometimes it is voluntarily zero, as in a sale where they have free giveaways. Sometimes it is not, as in the case of illegal music downloading, where the producers feel that the good has worth, but consumers do not.

    However, items always have a cost, no matter how incremental, that does not equal zero. In the case of a downloadable MP3 this is expressed in the cost of the bandwidth provided by the ISP, the electricity needed to run the computer, the minute fraction of the production cost of the music, and a million other incremental costs. Even added all together, these costs probably have a value of less than $0.25, but it is still there.