In economics, digital goods are all digitized economic objects that serve to satisfy the needs of economic agents.
In economics, goods are divided into tangible goods, intangible goods (services) and digital goods with regard to their physical nature. Digital goods are a modern type of goods that have only emerged through digitalization and contain digital data. According to the degree of digitalization, a distinction can be made between physical goods, semi-physical goods (online trading of goods with digitized ordering and payment), semi-digital goods (software including consulting or training) and – with the highest degree of digitalization – digital goods. Digital goods can be developed, distributed or applied with the help of information systems. Digital goods in the narrower sense are intangible goods that are in demand because of their function, but their content plays no or only a subordinate role.
Many digital goods have been and continue to be sold as tangible goods in physical – analogue – form. This includes sound carriers such as audio CDs, in which the music is inseparably linked to its carrier medium. If the music is recognized by the carrier medium as a real commodity in the form of a music file on the goods market and is in demand repeatably, this is a digital good. The digitisation of previously analogue goods also produces digital goods. Thus, if texts are digitized into text files, images and films into image files, or records into music files, these files are digital goods.
Digital goods include, in particular, image files, computer programs, e-books, music files, software, video files or online newspapers. The typical market for them is the Internet, so music downloads from music files, for example, are part of the demand for digital goods. Digital goods are always present in electronic form, encoded as a set of bits. Both operators need electronic reproduction equipment in order to be able to use digital goods, so they should be classified as complementary goods.
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Features and Economic Aspects
Digital goods share certain common characteristics that distinguish them from other goods.
In consumption, digital goods have a degree of rivalry with other types of goods of “zero”, i.e. they are non-rival goods. For example, a book in physical form can only be borrowed by one person at a time in a library. If, on the other hand, the book is available electronically, it can be borrowed by any number of people at the same time. Digital goods are not subject to wear and tear (such as books caused by constant reading), have consistent product quality, and are also non-destructible. The digital data can be copied and modified, and there is no difference between the original and the copy. Digital goods are easily reproducible, with little or no reproduction costs. Digital goods tend to become obsolete very quickly (chart-topping music in weeks, software in months or years); an exception is made for publications, where the infrastructure (hardware/software) required for use can become outdated. There are therefore short time intervals until a successor version comes onto the market. The estate has low distribution costs (especially through the Internet).
Since digital goods are goods, the question must be clarified whether they belong to the free or scarce goods or to the private or public goods. The ease of reproducibility speaks in favor of free goods. The fact that the use of digital goods is independent of the number of users (non-exclusivity) and that the use by one consumer is not restricted by another consumer (non-rivalry) speaks in favour of an assignment to public goods. For example, music files on peer-to-peer file-sharing sites are considered public goods. They are traded in an imperfect market because their market price is higher than their marginal cost, they are not homogeneous, and government market regulation is required.
As a rule, digital goods have a high proportion of fixed costs, as is the case with the development by programming software, for example. The variable costs of such a good, on the other hand, tend towards zero, since they – once developed – are theoretically not subject to any restriction on the number of units sold. This phenomenon is referred to as the first copy cost of development. Virtual goods are a special form of digital goods.
