Compare the advantages and disadvantages of distributing digitizable products electronically versus physically.

Products that can be transformed to digital format and delivered over the Internet are called digital products. Each delivery method has advantages and disadvantages for both sellers and buyers. Customers, for example, may prefer the formats available through physical distribution. They perceive value in holding a physical CD ROM or music CD as opposed to a download file. In addition, the related packaging of a physical product may be significant. Current technology makes a standard music CD more versatile for use in cars and portable devices than a downloaded MP3 file. Customers may have to wait days for physical products to be delivered.

Let’s take a look at some goods whose distribution can be digitized. Software, music, or news stories may be distributed in a physical form as well as a digitized form. A consumer may purchase a shrink-wrapped CD-ROM containing software (along with the owner’s manual and a warranty card) or they may pay for the software at a Web site and immediately download it onto their computer. This may be done through File Transfer Protocol or FTP, a fast way to download large files. For sellers, the costs associated with the manufacture, storage, and distribution of physical products (DVDs, CD-ROMs, paper magazines, etc.) can be enormous. Another advantage is that a producer of digital content can bypass the traditional retail channel, thereby reducing overall costs and capturing greater profits. Nobody knows for sure whether digital delivery replaces or enhances traditional delivery methods for various types of digital content.