There is a lot of discussion in the local Australian media at the moment about CEO salaries.

There is criticism that some of them get paid too much.

Now, having been the CEO of a public company, I reckon that the legal responsibilities that go with the job are extremely significant, so CEO's should be paid well. And if they don't deliver what the shareholders want, they find it difficult to get another gig. So in some ways its like being in a pop group. You get a couple of hits and then the styles change and suddenly no hits and no gigs. So you had better make as much hay as you can while the sun shines.

There is a big problem in focusing only on CEO remuneration though. It isn't about what they get paid. Its actually about how much we all pay.

Think about this from the point of view of the content business and prices.

During the days of vinyl and videocassettes there was a considerable amount of cost that was inherent in the manufacturing and shipping processes that needed to be considered in setting a retail price. When CDs and DVDs were introduced manufacturing and shipping costs were all substantially reduced once the original costs of equipment had been recovered. Then along came digital distribution and the cost of manufacturing and distribution became near zero.

But the cost at retail didn't go down to reflect this. The cost at retail for a digital download stayed pretty much on par with the cost of physical goods. So this means that the margin going to the companies that release the product has increased quite substantially.

Now think about the margin per unit that is going to the companies that release the content and understand that they are now making much more and their profit is coming from each one of us buying content in one form or another.

This number is much more significant than the amount paid to CEO's. CEO's are answerable to their shareholders. But companies are not answerable to their customers.

Every time you purchase a digital copy of a piece of content and pay a price that is equivalent to the retail price of a CD or DVD you are contributing at a usurious rate to the profitability of the company concerned.

It may not seem a lot to pay a couple of cents here or there, but its like taxes, it all adds up.

This entry was posted on September 30, 2009 at 12:06 am. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Posted in Intellectual Property Main Page by Chris Gilbey No Comments Yet