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Originally Posted by Adder
Apparently you have the concept. I'm not sure the facts are right though -- I'm not sure marginal costs decline with size. Then again, I would think the biggest marginal cost is bandwidth, which I have never shopped for in that kind of scale.
The rest of actually delivering content online should be very, very low marginal cost at any reasonable scale.
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I don't think it's that marginal costs in themselves are significantly lower with size. Rather, Apple's size allows it to recover the sizable fixed costs over a larger set of sales, such that it can get a reasonable return on its investment, whereas a smaller company with lower sales would either be unprofitable selling slightly above marginal cost (because it cannot recoup its sunk costs) or would have to charge higher prices in order to recover its investment.
