When Marginal Costs Approach Zero

February 4, 2008

– treat it as zero and sell something else.


Chris Anderson gave again a great speech about “Free” at the 2007 O`Reilly Tools Of Change Conference . The focus on his speech, as the conference, is the book/publishing industry. But basically he demonstrates, explain again the great simple idea:

When the marginal cost of producing something tends to zero, the smart thing to do is to treat it as zero and get ahead of the competition and give it away for free in order to sell something else. You can build whole businesses around giving stuff away for free.

For example? Broadcasting and television made distribution almost free: to amortize the cost of expensive broadcast equipment, reaching out to millions of people reduces the marginal cost of reaching to an additional customer to almost zero.

Chris shows much more in his speech. Listen the podcast of the full speech here.

That`s a basic thought every media company should think about in the “digital age” as long as “Moores Law” is right…


One Response to “When Marginal Costs Approach Zero”

  1. […] marginal costs, nearly “public goods” et cetera, there was this suggestion “to sell something else“. So what is this “something else”? The first look should get all the […]

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