: Bit Torrent to offer DRM's video content
Russell McMahon email (remove spam text)
>> I'm sure it costs the same as any other pay-for-tv service too.
>> see new technology as a way to raise profits for themselves, not
>> make things
>> cheaper for consumers.
> That is self-defeating logic. Due to a property known as market
> elasticity, the
> returns on investment are the lower, the higher the end price is
Not at all:
1. He did not say that the end price was higher than existing
services, which is a key factor. He effectively said that people have
new technology and use it to save themselves money and thereby raise
profit levels thereby unreasoning profits. As presented this works
perfectly well in a 'fair market' as users see an equal product in
each case so both sell squally well but the new tech product has
greater profits. For a constant market size the new tech / lower cost
system company will make more money.
2. Carried to its logical conclusion the above argument re market
elasticity says that infinite profit occurs at zero price (or negative
price). Obviously pricing affects market volumes, variably so
depending on the product type, but its not linear or necessarily
consistent in application case to case.
If I sell a product at 50% markup, if I double the price I
simplistically triple my profit per item. If the sales i make decrease
I also reduce my inventory costs, sales costs and more. So, I MAY be
able to sustain a loss of MORE than 2/3 of my market and still make
more profit. If I double my price and lose half my sales volume then I
simplistically make 50% more profit in absolute terms. Obviously the
equation is much affected by many factors, not the least being
original markup, but this demonstrates that elasticity and profit are
not necessarily profitably correlated.
ROI is more complex as it depends on whether eg your investment is
prior to the pricing change or made from the start using a higher
priced model or ... .
3. Using the example I posted about as an example, just because bit
torrent allows a seller to achieve lower personal costs at the expense
of a potentially higher consumer cost, it may not be clear to the
consumer that they are in fact paying more by indirect costs. Actual
cost to the consumer may be chargeable bandwidth but, even if
bandwidth is charged flat rate, a torrent system will encourage data
proliferation and spread the "noising up" of the network more widely.
Users may not be aware of this 'cost"..
FWIW I do my best not to run things like Skype, Bit Torrent or other
cooperative systems which use my resources in an undefined and quite
probably inequitable manner.
See also: www.piclist.com/techref/displays.htm?key=video
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