REAL WORLD VIEWS 2.5 Marginal costs of downloadable products A distinguishing feature of today's digital technol- ogy is that it is characterized by zero (or near-zero) marginal costs. Once you've made the investment needed to create a digital good, it costs next to nothing to roll out and distribute millions of copies. Software, e-books and music are increasingly avail- able as downloadable products. Each software, book or music download has no marginal cost. As download purchases are typically fully automated, there are no labour costs. Also, as the software development, publishing or music production costs are all in the past (i.e. sunk costs), there are no material or component type costs. There are, of fixed costs incurred with running servers course, and other components of the technology behind downloadable software and other media. Compare this with a purchase of an item of clothing from a leading high street retail outlet such as Zara. The purchase in this case is processed by a member of staff at the store. Going back along the supply chain, there may be logistical or delivery costs and, of course, the labour and material cost of the item of clothing itself. Questions 1 Do you agree the marginal cost of downloaded software or music is nil? 2 What marginal costs, if any, might be incurred by the provider of the servers where software/ music is downloaded from? References Prodham, B. 'The marginal cost of software', Enterprise Irregulars Blog, available at www.enterpriseirregulars .com/31274/the-marginal-cost-of-software Naughton, J. (2015), 'How Amazon took control of the cloud', The Observer, 4 November 2015 Guardian News & Media Limited, London (UK). search.proquest.com /docview/1729584646?accountid=11526