A: Whatever someone is willing to pay for it.
Not what it cost you to produce or acquire it.
Not what you feel or believe it is worth.
Not what you sold it for yesterday, last week, last month, or last year.
After watching a series of comments on a “hey, here’s how to make free content work!” post yesterday, I was reminded of two things:
- no demand means no money (simple economics)
- for a business to be profitable, it must bring something to the market that sells for more than it cost to produce
If the market you operate in changes, especially due to external conditions (consider IBM, Kodak, newspapers), you must change and adapt if you want to remain relevant. If the market no longer values your product/service at a level above your expenses, you have a problem.
There are lots of opinions and statements surrounding the concept of free, but at the end of the day, you have to adjust your business model to accommodate both intra-industrial and external market conditions. Legislated subsidization, complaining that no one understands your value to the world, and suing your customers do nothing to better position your business in the long run.
Yes, for many companies, these are incredibly tough, scary times. Dropping prices, attention fragmentation, and increased competition are a serious combination of challenges to deal with. If companies don’t adapt, some of them won’t be around next year, or they’ll be a former shadow of themselves. But only if they stop adapting.
Change brings both risk and opportunity. You can play defensively and manage risk, act progressively and reach for opportunity, or use a little of both strategies. But ignoring the realities of economics and fundamental business concepts is a recipe for obsolescence.