Is it possible to make money from digital content?

In a world where content is given away for free, how do you make money? Newspapers are struggling in world where news is available for free online. The music industry, Hollywood and a number of other makers of content are feeling the pain of having their content freely distributed by 'fans'.

Mike Masnick has finished a his series of posts on the economics of Free. The central thesis is simple: In the past there was a cost associated with producing music tapes, videos or newspapers. The consumer paid for this cost. Digital distribution mean there is zero cost in producing new copies of the content. This means the 'thing' that people are willing to pay for has shifted. People will now pay £350 for an iPod and free music, whereas in the past it would be ridiculous to think you'd pay more than £40 for a Walkman. The key is in recognising which elements of the experience have scarcity, i.e. there is a limited supply of. Physical goods, such as iPods and CDs are scarce. Digital content is easily copied, so is not scarce.

The theory is compelling. Media companies across the world will need to face these challenges; I suspect the those that are most capable of creating scarcity in the way they distribute content will win big.