>Why? It's the economy, stupid. Improve your service & you attract
>more customers. Attract more customers & you can lower your
>rates. Lower your rates & you attract even more customers.
>Attract even more customers and you can improve your service
>again! It's a cycle limited only by the ability to improve
>service.
Only if the total of new customers pay more than the total cost of
improvements. You always have room for improvement, but eventually it
justs costs too much.
>
>I.e., I get net access free through my work. (Truly free, since
>I'm faculty and it's paid for primarily through student fees.) If
>I want to send 500 copies of a short story around the world to
>500 people it costs me...nothing! (Except the time it takes to
>type in 500 e-mail address). Just to *print* 500 copies would
>cost me several hundred dollars, and we're not even talking about
>mailing costs yet.
>
Somebody is paying in the end, the students in this case. And how
valuable is your time typing, when you could be doing something else.
Taylor said :
>You have gone a little overboard but lets look at the realities,
stopping
>at a reasonable shared resources public highways level.
>
>Lets forget the abstract crap. Lets say ....
>
>Prince has completely produced his CD on master tape and the musos have
all
>gone home.
>
>Prince getting his CD to market requires:
>
> 1. a CD pressing plant
>
( snip snip )
>
>Lets add up 1, 2, 3, 4,5 above, and compare that to the sum of 6, 7, 8,
9.
It all boils down to economies of scale.
The former example can stop at the shared public utilities although they
are very expensive because those costs are incurred by everyone through
taxes and costs are minimal for each individual ( but road tolls paid by
the truckers perhaps not, if accounting accuracy is carried to the
extreme ). Prince is paying high variable costs and his fixed costs are
relatively low. The plant owners have high fixed costs and charge per
copy with discounts for volume. So each additional copy is still costing
him considerably. More sales mean more production time, more trucks,
more people. Whats left of the price after those variable costs have
been paid is not an impressive amount.
In the latter example the fixed costs of the equipment are lower than of
the factories and distribution centers and the variable costs per copy
are even lower because economies of scale kick in faster and at lower
level of costs. If his server and/or link is overloaded and he has to
upgrade that will cost him some fixed costs, but the additional capacity
could serve enough of copies so that whats left of the price after
variable costs is probably some orders of magnitude more than in the
former example. Therefore he can lower the price.
One caveat to this : Everything is variable in the long run.
Gudmann