Sunday, May 21, 2006

"There is no such thing as scarcity in digital goods."

Fred Wilson packs a lot of bang into a small post.
This is a venture capitalist who puts his (or someone's) money where his mouth is. Seriously, though, he makes a couple of solid observations.

In the physical world scarcity is what leads to value.

In the digital world abundance is what leads to value.
Take the case of the Jonas Brothers, a band of three brothers based in New Jersey. Their record label, Columbia Records, spent a bunch of money recording a series of music videos based on their single Mandy. They spent more money buying traffic to the Jonas Brothers website to showcase the video. The result was very little traffic.

Then in a stroke of brilliance, Columbia Records put the video in an embeddable player on the Jonas Brother's myspace page. Within weeks the video had replicated all over myspace. The result was a huge amount of traffic and increased sales of the song Mandy on iTunes. Masive viral replication drove sales. Abundance at work.

Further illustrating the point, he tells about his child's birthday party which included not one, but two photographers. One was a photo-booth quickie for the amusement of the kids, the other a professional photographer. As a result of the event the photo-booth entrepreneur enjoys a ton of new business, whereas the pro's expensive product is "locked behind the password protected site and few if anyone will buy them other than our family."

This is one dimension of new economics at work.

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