The English word company means “A group of persons”. I would surmise then that the business entity “company” got its name because it comprised of a group of persons engaged in a common business purpose.
An individual can start and run a company all by herself. There is nothing new about that. What is however changing is just how much that company can achieve with a small team. A few individuals can create a company with millions of dollars in revenues and tens of millions of dollars of value.
I got an invite for Joost and tried it out yesterday. It rocked.
Joost, for those who haven’t heard about it yet, is basically internet TV. Full screen, high(er) quality, mainstream TV content streamed to your computer over broad band. The guys behind it are Janus Friis and Niklas Zennström, the same duo that did Kazaa and Skype. With their backgrounds you have to take Joost seriously.
And it doesn’t disappoint. Yesterday, I downloaded the beta version of the client software and settled down to try it out. My verdict – this was vastly superior to any other video on the internet and ‘acceptable’ when compared to regular TV. Every program started with a few seconds of rickety video but once the buffering kicked-in, it was smooth sailing from there on.
On May 16, Engadget, a blog on consumer electronics, posted breaking news that Apple’s iPhone and Leopard OS were going to be delayed. This was based upon an internal Apple email that they had been able to lay their hands on.Within a few minutes, AAPL had lost 3% off its market cap. Techcrunch has a blow by blow account here. Paul Kedrosky has another interesting take on the episode here.
My interest in this episode is in connecting it with other recent developments in text analysis based algorithmic trading to see what this might augur for the future.
Candace Browning, Head of Research at Merrill Lynch posted an open letter last week that talked about the “Napsterization” of sell-side research, justifying why Merrill Lynch would have to take control of the distribution of their research.
First of all, let me compliment you on your pricing strategy so far. You have aced the test on how to price information products. Information products like music are tricky – the content is all in digital form, the fixed costs are high and marginal costs approach zero. How do you price such a thing?
Your current strategy seems to be working well. You have segmented the market according to the listeners’ ability to pay. To each segment you offer a different product (or sometimes the same product) at vastly different prices. I checked prices at different places for the same album – Don. Here’s what I found:
Last week’s post on YouTube and Viacom got some great comments. If you get a moment go read them. Ram Medury brings up the case of VAS content providers in India, who get a small fraction of the revenues. The rest is kept by the Indian mobile service provider. Senthil says that it’s about the quality of the content. If the content is compelling it will pull in the dollars. Also, Robert Young at Gigaom has a very thought provoking post on the subject of Google and old media companies.
Onward ho! As promised, this week I take up another interesting space where the “Content vs. Distribution” battle is being played out – digital music.
The old adage “Content is king” doesn’t seem to be borne out by the post-bubble resurgence of new media. The three companies that have benefited by this resurgence the most are Google, Apple and YouTube, which is now part of Google. None of them create content.
A few months back in a post on ‘Paperbacks in India’ I had talked about how information products have some interesting challenges when it comes to pricing in the developing world. I believe that in what is called Software as a Service (or SaaS) – basically web-based hosted software like your internet banking software or even Yahoo Mail – there are significant opportunities for Indian technologists.
Every trip to India, I bring back half a suitcase full of books. My wife is a voracious reader of fiction and she reads a lot of Indian fiction too. Also, we want our children to read Indian mythology and other Indian stories and it’s impossible to get Indian childrens’ books in the US (there’s eBay retail opportunity for someone out there).
Of all the reasons why I buy books in India, cost is not one of them (unlike for Hindi film music and DVDs where there is a cost arb opportunity). But I think I may have to reconsider. I had just bought The Argumentative Indian’ by Amartya Sen in the US before going to India. It was the hardcover edition and cost about $25. In India the same book was available in paperback for less than half that price.
I know what’s going on of course. A book is an information product (like music, magazines, software and cinema). All of them are digitizable and the medium that carries them is immaterial (more or less) to the enjoyment of the product. All information products have a similar business problem. The marginal cost of producing the next copy is minimal and so variable cost has no bearing on the pricing of the product. For instance, the cost of a blank CD disc is insignificant compared to the price of the CD. So how does one price such a product?
In the case of books, the cost is not insignificant but it is much less than the price of the book (20% of the cost of a hardcover). So how does one price a book? The main technique is what I will loosely call ‘windowing’, though this is a term more widely used in the movie business. Publishers first come out with hardcover editions for (in the US) a $20+ price. With this they cover the well informed, price insensitive crowd. After a year or so comes the paperback with a price of around $10 that caters to the more price sensitive crowd.
However, there is another problem that publishers must deal with. Readers in different countries have vastly different purchasing power. How do they preserve their pricing model in the developed world without losing readers in developing countries like India? In the past they would just delay the launch of the book in India. However, in today’s global village, the media buzz around the launch of a new book creates demand everywhere at the same time. Postponing the book launch in India could mean lost sales.
So the solution is to launch relevant books in India simultaneously (or closely after) with the US market, but go straight to paperback. The different covers in a way justifies the different prices. For me, this is great news. I hate buying hardcovers because I do most of my reading on long flights and that is just extra weight to lug around. But many times, I just can’t wait. Paperbacks in India are like having your cake and eating it too.
Pricing of information products is one of the most fascinating subjects in business. My own company sells an information product. Many an hour has already been spent on how to price it. I’m sure this is not the last time I’ll be talking about this subject on this blog.