If your business is now selling digital copies of something, you can’t use the economics of your prior state. Every business would like to maintain that kind of pricing power. However, if the marginal cost of making the digital copy is close to zero, and you’re selling into a mass market, how do you justify your pricing? Why isn’t free the right price?
When is free the wrong price? When you’re selling digital copies into a niche or small market and producing the master copy is expensive and requires highly specialized talent. This could be a picture of the software business, the music business or the movie business. The digital has changed the very DNA of these industries. You can’t accept the price cutting power of the digital on the production side, if you don’t accept the price cutting power on the distribution and sales side. The digital can’t be quarantined.