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Relationship between intellectual property and consumer electronics prices

Relationship between intellectual property and consumer electronics prices

by David Veksler

Is it reasonable to expect all high-tech products coming out today to be cheaply available in the future?

Of course it’s a truism nowadays that electronics are getting better and cheaper all the time, but I wonder if we can generalize to the following argument:

Consumer electronic products (I am speaking mostly about audio/video/computer products) have three somewhat unique properties. First, they are relatively low bandwidth and low power, due to the hardware limitations of homes and consumption by a few people. Second, they are mass-produced. Third, they are mostly information products, which means that are not limited to any particular form of material.

These properties are especially suitable to rapid innovation and a trend towards automation of production. The trend has accelerated with the shift from analog to digital, which makes data integrity much easier. The key to the process is that increasing automation shifts production costs from manufacturing and materials to design. More and more of a products retail costs becomes intellectual property. For example, low-end DVD players can be found for under $30. I read somewhere that the licensing required to decode DVDs alone costs about $20. (This is also about the cost of a DVD plug-in for Windows Media Player.)

Are the any inherent cost factors I’m overlooking?

Let me put the question another way: today or soon, a $3,000 LCD TV might cost $30 in raw materials and $30 in labor, and the rest in intellectual property. (Those numbers are WAGs.) Is there any reason to think that it would not be $60 in 15 years, when the IP has expired and/or been reverse-engineered?

Discuss here.