High Fixed Costs

Since the information product is not sold alone, but in conjunction with some medium, the costs of the information product itself are largely independent of the number of copies sold in the various appropriate media. That is, from the viewpoint of the seller, the costs of the information product itself are fixed costs, and the only variable costs are those of the media. Information producers have this cost structure in common with public utilities and "natural monopolies" of all kinds, and as the phrase indicates, high fixed costs have some tendency to give rise to monopoly (though the term "natural monopoly" is probably usually an exaggeration). Of course, this reinforces the tendency toward monopoly created by uniqueness.

The Incentive Problem