The price is wrong.


Gather round grandchildren I want to tell you about the gloried days of consumerism.

We used to buy things in places called stores or shoppes.    Stores like Borders which closed down in 2011.  We would go into them and look at actual objects like $18.99 compact discs, $5.99 magazines, $24.99 Deluxe Edition DVDs and $26.00 hard-backed books.  I know you have no idea what a disc, magazine, dvd, or paper book is, but just try to imagine with me.

Most of the time in these stores we wouldn’t really buy anything, we would just look at all the stuff and the other people looking at stuff   Well unless it was Christmas time, and then we would buy 16 month calendars or gift cards for our aunts and stepparents.

But things changed and now we get most everything instantly digitally fantastically.

Now I miss all those stores sometimes, as I could go in and the college-educated store clerk could ask me if I need anything and I would mumble “just browsing” and move away quickly.  Sometimes I miss that human contact, handing that actual person a credit card to swipe and the delightful back and forth about whether I want a bag or not.

But overall I like the digital e-delivery of today.  Instant gratification works like a peach.

It’s great for the environment, no trees needed for paper, no gas needed to ship anything from China to midwest distribution centers.  No throwing away all the useless packaging, or having to move all those damn books when a lease runs out.

The destuffificaion is a blessing I tell you, but at first I didn’t trust not having something to hold or barter with.  I used to have so much damn stuff.

Now things used to cost a lot:

• A book $25 bucks for a brand new one, maybe $16 a paper-back

• A compact disc(yes, they used to be even less compact) from $14-18.

• A movie $20 and up.

But there were more expenses back then; you had to design and produce packaging, you had to pay to ship the units to stores, and the stores had to make enough money to pay people to display and sell the products.

So when all the media moved from physical products to digital products the whole commerce system was in chaos.  All the companies wanted to charge the same amount for digital copies as physical ones.  So they tried to charge the same prices, or maybe 10-20% less than a physical copy for a digital copy.  This didn’t work at all.  People just stole all the files for free instead of pay people, which ultimately degraded the quality of the products, and led to less sales.  The big media companies were on the path to self-destruction.

What the big companies didn’t realize, until it was nearly too late, was that in the new digital economy you need to charge a lot less than before, and make it really convenient for people.   Awesomely convenient.   You make up your money through a high volume in a global market, and some light advertisements.

Old school market leaders were still trying to restrict products within certain regions, and  control how people could use their products.  They were basically stopping mass consumption, by either making unnecessary restrictions and more likely charging things from an antiquated price point, and not charging what the most people were actually willing to pay in the modern digital era.

• In the new digital economy a book should cost $4-$7.

• A magazine should cost a dollar an issue.

• An album should cost $3-$5.

• A television show should cost about a cent a minute.  So a sitcom would cost 30 cents an episode and a drama would cost 60 cents an episode.

• A movie should cost about $2-$5.

Now those prices seem low compared to the physical prices, but they’re much cheaper to distribute, and the prices are competing with free.  What companies didn’t understand in the new economy is that you needed to price things at the level where people feel like it’s not worth it to steal it.  When you charge people near the same amount as before it’s not worth it to them and they will just steal it and people will end up getting no money instead of a high volume of some money.

New revenue could be made with ads as people don’t mind adds if the price is cheap enough.

Some companies opened up the pricing by democratizing it to meet the price points the new digital consumers wanted – The Apple App store was one of the first such ventures.

The companies that followed suit were saved, but most perished and new companies, that allowed flexible pricing dictated by lower prices to maintain constant demand, flourished.

Now turn off your eyescreens and go to bed grandchildren.

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