In fact the cost of producing the first unit of an information good is very high, and yet the cost of producing each additional unit is virtually nothing. The cost structure of digital goods is completely different from goods which have to be physically reproduced: developing the product or service leads to relatively high fixed costs, but after that, there are almost no variable costs of production. This enables very large economies of scale. On the other hand, however, in case of a failure, there is no way for a company to recover part of the production cost by halting the reproduction of the good: all the costs are born before the start of the production and are sunk costs as soon as it starts.
Digital goods share many characteristics. However, as mentioned previously, this category is really broad and includes numerous types of goods that do not apply to the same pricing rules. One of the main differences is the one being durable and nondurable digital goods, the latter being also called digital services. Durable digital goods, or just "digital goods ", are a set of data that the customer purchases, downloads and stores on one or more devices, and which he can have unlimited access to. eBooks, music files, videos, games, etc. are all digital goods. On the other hand, digital services are usually information processing services that the customer has to purchase again if he or she wants repeated access to. This category includes time-limited user licenses (such as subscriptions to streaming websites), premium accounts, outsourcing services, etc.
Those characteristics of digital goods have some consequences on key factors of their pricing. Those factors have so far been related to the inner nature of the goods. However, the nature of digital goods also brought changes in the way the markets they are sold on work, especially bringing new rules in competition. Because the access to digital goods is unlimited regarding time and location, markets are also not restricted to a specific area or time.
