Competing with Pirates

Given the incredibly short life-cycles of entertainment products, piracy can have a serious impact on profitability of content publishers.

Moser Baer seems to have found the answer, and is a classic New-Product-Lifecycle player. Compete, rather than complain.  While all the entertainment labels moaned and groaned about piracy, Moser Baer acquired a portfolio of titles and flooded the market with low priced titles.  How did they do it?  My guess:

1. Leveraged their production capacity for optical disks (classic forward integration)

2. Acquired a large portfolio of titles on the cheap (typically old and neglected titles.  The owners were happy to get anything for them)

3. Reduced packaging costs (paper jackets instead of fancy boxes)

4. Micro-retailed their products to hit the local grocery store – not just the music shops (which are increasingly losing relevance anyway)

5. Took a portfolio view on profitability, instead of focusing on single titles

Over the last few years, the price of DVDs has collapsed in the market (Rs 50-200 for “original” DVDs and Rs 30 for “pirated” DVDs; earlier these numbers were Rs 400-500 for originals and Rs 60-100 for copies).  But the sales of legit DVDs has probably grown.  Interestingly, many of the retailers of pirated DVDs now stock Moser Baer DVDs.  They can’t compete much on price anymore, and as one of them told me “We also want to sell original”.  For Moser Baer, which treated the market like a new-comer and not like an incumbent, it has been a rapid rise.

Are you still trying old-product-life-cycle strategies?  Does your industry run the risk of a Moser Baer coming in?

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