What are digital goods and how does the Internet impact the market for digital goods?

Question

What will be an ideal response?

Answer 1

Digital goods are goods that can be delivered over a digital network. Music tracks, video, Hollywood movies, software, newspapers, magazines, and books can all be expressed, stored, delivered, and sold as purely digital products. For the most part, digital goods are intellectual property, which is defined as "works of the mind." Intellectual property is protected from misappropriation by copyright, patent, and trade secret laws. Today, all these products are delivered as digital streams or downloads while their physical counterparts decline in sales. The impact of the Internet on the market for digital goods is nothing short of revolutionary. Businesses dependent on physical products for sales-such as bookstores, music stores, book publishers, music labels, and film studios-face the possibility of declining sales and even destruction of their businesses. In general, for digital goods, the marginal cost of producing another unit is about zero (it costs next to nothing to make multiple copies of a digital file such as a music file). However, the cost of producing the original first unit is relatively high-in fact, it is nearly the total cost of the product because there are few other costs of inventory and distribution. Costs of delivery over the Internet are very low, inventory costs are low, marketing costs often remain the same, and pricing can be highly variable. On the Internet, the merchant can change prices as often as desired because of low menu costs.