Old and New Product Life Cycles

Fascinating interview with Deepak Puri (MD, Moser Baer) in yesterday’s edition of the Economic Times.  A couple of really interesting examples of old and new PLC management in there.

On optical discs:

“PCs and other devices are still shipping with CD drives. The installed base is large, though the demise is happening. CD is declining 5-8 % every year, DVD (sales) is flat. Bluray is rising fast. Discs will morph into something else. Volumes may come down due to better disc capacities. CD and DVD will have a long tail life and Moser Baer being the lowest cost producer will last till the end. I foresee 7-10 years’ life in optical disc space,” says Mr Puri.

This is a classic lesson in managing a slow dying product (in an old-PLC category).  As demand decreases, high-cost producers will be forced out of the market and business shifts rapidly towards the lowest cost producer.  Eventually, there are only a couple of suppliers left.  Given that optical discs will be around for some more time – given the large installed base – the last supplier left in the industry can make supernormal profits.  Since the product category would still be in decline, it’s pretty unlikely that another competitor would choose to invest in it.  Gold mine!

On the entertainment business (VCDs/DVDs):

“We don’t have resources to go across the country (to tackle piracy). We are looking at certain high piracy areas and trying to tackle the problem. We are now giving five movies compressed on one DVD. We are telling the pirate: when a legal movie is selling for Rs 35, you have to sell below that to make money and your margin is shrinking. We told people: why don’t you start selling legitimate movie, no one will run after you. Many of them have changed.”

It’s something that we had talked about in this blog sometime back.  New PLC management demands rapid proliferation of distribution channels to capitalise on the hype cycle.   Instead of cribbing about pirates, Moser Baer is making it attractive for them to go legit.  Now, if only Hollywood understood!

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