Why I Dislike iTunes And XBox Marketplace
It is no secret that virtual goods are a hard sell for me; I need to get something not easily duplicated for my money. After my first post Fantasy7 made the argument that people buy a Facebook gift for the experience. They buy it for the joy of giving and for the joy of receiving. A similar argument was made for in-game items for games such as Word of Warcraft. Again, I understand this. Which is why I then wrote a second post to address these issues.
Again Fantasy7 was back, pushing for virtual goods. That music and games could be passed on. That an e-book had just as much value as a book on the shelf you don’t read. If you don’t intend to resell it they have the same value. While, for me, this is an argument that is on rather thin ice I at least understand where Fantasy7 is coming from. But I am not convinced and today I will make another case against virtual goods.
I believe some of the views toward virtual goods are shortsighted. In reality, one can never know how long they will want something. This is why craigslist become a hit quickly and why rummage sales will never go out of style. At some point in time you will have stuff that is either no longer of value to you either because it is junk or too worn/old for you. At such a point one could just throw it away. Or one could gift it. Or recycle it.
Lets take one example most people can get on board with, a car. A car is not something that one generally just throws away. Nor is it something that is generally just gifted – though I do recognize that children may get one as a gift. I think everyone can get on board with the idea that trashing or gifting a car is not the most common thing to do with it. Even though the goal is to get rid of the car, people still sell it because it retains some value in some way, even if it is just for parts. The physical item has value and always will, if only as scrap metal. It may have too small of a value for the owner to do anything but trash it, but there is still value, however small.
Now to my point. Digital goods only have value to the original seller. If this is not the case, can someone please show me where I can sell my iTunes songs I don’t want? Or where to unload my XBox Marketplace download of the original Halo? Only iTunes and Xbox make money in these spaces. Not the case with purchased games where I have a physical, non-easily reproducible copy of the game. Yes it is a copy of some original source code, but there is the case, manual, artwork, etc. that are not easily copied. If you buy an iTunes song or movie it does not take much to make a copy, copyright protected or not.
My larger point is that any virtual good that you purchase is a sunk cost. End of story. This is simply not the case with physical goods. Forget the arguments about worth and experience and all that. Even Fantasy7 can’t argue with the statement that a virtual game or song is a sunk cost (it may be different for online game merchandise, though as soon as the multi-player server goes offline, the player is left with nothing, no matter how much real money they spent). It is simply a fact. And this is why I will always prefer a physical good with any purchase I make. I cannot predict the future, nor can any of you, so why not keep my options open. The physical will always retain value.
So what prompted this post? I was going to throw away some old XBox games. But, I checked online to see if they were worth something. Anything I could get for them would be gravy since the plan was to junk them. And believe it or not, Amazon is selling WWE Raw 2 for $89.94. Others list it new at $29.99 and used at $7.76.
It’s not much but it is a free lunch. Assume that you have just the download from Xbox Live Marketplace. Who’s paying for your lunch?
This has been a Thought From The Cake Scraps.
Alright Mr. The Cake Scraps, I have concluded reading your article. I understand your arguments, but for the most part I have to disagree with you.
I’m a big fan of digital downloads. I prefer to buy something digitally and download it over the internet. Movies, TV shows, games, music, and books are all things I’ve purchased online. The reason I like it is something that you didn’t mention in the post. It’s convenient in multiple ways. 1.) I can buy it from the comfort of my own home, I don’t have to go to the store or order it online and wait to get it. 2.) My entire goal of digital goods is to get it onto my computer. With my laptop I have all my music, movies, TV shows, etc. right with me. I can plug my laptop into my TV if need be. If I buy a movie or a music CD I then have to spend time getting it into the media that I want. Admittedly it doesn’t take long with a music CD but a movie takes a considerable amount of my time.
I think your argument with the car is comparing apples to oranges. The argument starts out about media, then if you bring in something that is only physical you can’t compare it any longer. I get your point though, but consider this. Media costs about $10-$50. Throwing that out will not affect your bottom line as much as throwing away a car you purchased for $10,000+. Say I’m rich beyond my wildest dreams. Throwing away a $10,000 car when I’m worth billions may affect my bottom line less than if I spend the time to sell it to make up for a negligible loss. How much is your time worth?
This brings me to the crux of my argument for digital downloads: my time. Buying a $10 album from iTunes versus buying the same item from a store for the same price is a better option for me. Sure I’ll be able to sell the CD later for maybe $1 or $2 but how much time would I have to invest in order to get that money. eBay takes time to list, wait for payment, ship, and dealing with customers on there isn’t always a pleasant experience.
Resale value when we’re talking about $10-$50 item isn’t a concern any longer for me since graduating from college. I believe my time is worth more than the resale value. The resale value for my car worth $10,000 is worth my time. A billionaire’s time is worth more than the resale value of a $10,000 car.
I will agree that a digital download is a sunk cost, but it comes down to the opportunity cost on an individual basis. For you it doesn’t make sense for the digital downloads, for me it does (not implying you’re poor or anything, you just place a higher value on the physical item then I do).
@Ryan
You certainly are right that the digital download does provide a service that is immediate. What I’d love to see is a site that sells the download now for $X and a download and physical copy (+ shipping) for $Y and see what the breakdown is. What is the real preference when both options exist; what is the price people are willing to pay for it? And then to slice and dice that by music type, artist, buyer demographics. It would be an awesome exercise in analytics. The only thing that is clear is that it appeals to some people and not to others.
And you also have a fair point about the price. If you take cost of the media and subtract out the value you get from watching/listening to it you very well may end up with a marginal amount of money.
It does come down to individual personality. I like knowing that I have the option (if never exercised) to sell or give stuff away. I like the chance that the item could be rare and valuable one day down the road.
And, at a very basic level, I just like to get something, anything, for my money. It just feels inherently wrong at some level to pay for the content and get nothing but a digital file that is easily copied on my machine 100 times and still not worth the 99 cents I paid for it.
I’m sure down the road, when production and distribution of physical copies becomes too expensive to be feasible, I will buy more virtual goods. The cost difference will be to high. And to be honest, the 99 cent song is almost there. Show me 49 cents and it’s a done deal. So someday I may do it, but not while the download and the physical copy are within a few bucks of each other.
I would also love to see some statistics with sites offering both options. One that I know of (but they’re not parting with their stats as far as I can tell) is The Pragmatic Programmer (http://pragprog.com). They offer an eBook, the physical copy, or an eBook and physical copy of their books.
The dual option isn’t as cheap as I’d like it to be, one of the books was $60 for the eBook and physical option that I purchased but at the time the book hadn’t been published and they had a beta of the eBook so you get it now and then a physical copy later.
On a quick side note, I love the Swoopo ads on your site, especially since you ripped them apart in a previous post 🙂
@Ryan I blame Google 😉
And I’ll have to check out that site. And then get my hands on their data somehow.