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?

Apple and the New PLC

Continuing from my last post on the New Product Life Cycle.  I stumbled across some really interesting sales data for the iPod.  Notice how Apple’s new product introduction process coincides perfectly with the decline of each product’s individual PLC.  This is the challenge that companies will increasingly face.  Even a blockbuster product like the iPod requires constant innovation to keep the sales numbers growing.

This may be simple in concept.  But hardly any companies in India seem to have the capability or even the mentality to be innovation leaders.  On this front, at least, the US seems to have little to worry about!

The New Product Life Cycle

Marketing isn’t what it used to be.  In business school, we read about the product life cycle (PLC) – a curve that traced the evolution of sales from introduction to decline.  The traditional PLC was characterised by an underlying “evolution”.  After introducing a product, a marketer would see slow adoption, followed by strong growth, a period of stability where one could milk the product, followed by a slow decline.

That isn’t happening anymore.  PLCs have gotten incredibly compressed – and resemble “fads” in many cases.  The new PLC is characterised by rapid adoption (or failure), a short sharp peak and rapid decline – followed (hopefully) by a long tail.  The true blockbuster product – with the traditional PLC is increasingly rare.  You see this in several industries – entertainment (music, movies), mobile phones, cars, apparel – name it.

All this changes the job of the marketer quite considerably.  One can’t hope for a gradual diffusion of the product anymore.  A new product introduction requires speed and scale in order to be successful.

What are the implications of the new PLC:

1. Intense marketing activity up-front in order to break through the clutter

2. Widespread distribution arrangements to capitalise on the marketing activities and the short sales period

3. Flexible manufacturing capacity that can ramp-up and down rapidly

4. Risk-management techniques to manage exposures caused by intense up-front investments

5. Use of low cost distribution channels to extract value from the long tail

6. Rapid product development processes

Are you configured to succeed in this new environment?  Or, are you still trying to milk the old?