18. Impact of Digitisation
ā¢ Number of (long-term)
subscribers = 830,000
ā¢ NYT printing & delivery
costs =$644m per
annum
āAll the news thatās ļ¬t to print!ā
19. Impact of Digitisation
ā¢ Number of (long-term)
subscribers = 830,000
ā¢ NYT printing & delivery
costs =$644m per
annum
ā¢ Cost per subscriber =
$775
āAll the news thatās ļ¬t to print!ā
20. Impact of Digitisation
ā¢ Number of (long-term)
subscribers = 830,000
ā¢ NYT printing & delivery
costs =$644m per
annum
ā¢ Cost per subscriber =
$775
ā¢ Price of an iPad = $519
āAll the news thatās ļ¬t to print!ā
21. Impact of Digitisation
ā¢ Number of (long-term)
subscribers = 830,000
ā¢ NYT printing & delivery
costs =$644m per
annum
ā¢ Cost per subscriber =
$775
ā¢ Price of an iPad = $519
ā¢ Cheaper to give people
an iPad a year!
āAll the news thatās ļ¬t to print!ā
22. Impact of Digitisation
ā¢ Number of (long-term)
subscribers = 830,000
ā¢ NYT printing & delivery
costs =$644m per
annum
ā¢ Cost per subscriber =
$775
ā¢ Price of an iPad = $519
ā¢ Cheaper to give people
an iPad a year!
āNone of the news is ļ¬t to print!ā
31. Strategic Implications
ā¢ Entry is easy
ā¢ CD ROM phonebooks
ā¢ Nynex charged $10,000 per
disk for NY directory
ā¢ ProCD and Digital Directory
Assistance
ā¢ Overseas workers at $3.50
daily wage
ā¢ Bertrand competition
ā¢ Start at $200 each
ā¢ Price forced to marginal cost
42. Information is different
ā¢ Characteristics
ā¢ Uncertainty
ā¢ Indivisibility
ā¢ Appropriability
43. Information is different
ā¢ Characteristics
ā¢ Uncertainty
ā¢ Indivisibility
ā¢ Appropriability
ā¢ Implications
44. Information is different
ā¢ Characteristics
ā¢ Uncertainty
ā¢ Indivisibility
ā¢ Appropriability
ā¢ Implications
ā¢ Creative destruction
45. Information is different
ā¢ Characteristics
ā¢ Uncertainty
ā¢ Indivisibility
ā¢ Appropriability
ā¢ Implications
ā¢ Creative destruction
āCreative destruction is the
essential fact about capitalism.ā
46. Information is different
ā¢ Characteristics
ā¢ Uncertainty
ā¢ Indivisibility
ā¢ Appropriability
ā¢ Implications
ā¢ Creative destruction
ā¢ Information overload
47. Information is different
ā¢ Characteristics
ā¢ Uncertainty
ā¢ Indivisibility
ā¢ Appropriability
ā¢ Implications
ā¢ Creative destruction
ā¢ Information overload
āWhat information consumes is rather obvious: it consumes
the attention of its recipients. Hence, a wealth of information
creates a poverty of attention and a need to allocate that
attention efficiently among the overabundance of information
sources that might consume it.ā
49. Uncertainty
āBellās patent department at refused to patent
our ampliļ¬er [for the laser]ā¦for optical
frequencies becauseā¦optical waves had never
been of any importance to communications and
hence the invention had little bearing on Bell
System interestsā
Charles Townes, Nobel Laureate
50. Uncertainty
āBellās patent department at refused to patent
our ampliļ¬er [for the laser]ā¦for optical
frequencies becauseā¦optical waves had never
been of any importance to communications and
hence the invention had little bearing on Bell
System interestsā
Charles Townes, Nobel Laureate
Western Union will agree to stay out of the
telephone business if Bell agrees to stay out of
the telegraph business.
Bell-Western Union Patent Agreement of 1878
54. Rosenberg
ā¢ Little understanding of potential applications or uses
ā¢ Dependence on complementary innovations
ā¢ The emergence of new technological systems
55. Rosenberg
ā¢ Little understanding of potential applications or uses
ā¢ Dependence on complementary innovations
ā¢ The emergence of new technological systems
ā¢ Initial technology is developed in the context of a narrow application
56. Rosenberg
ā¢ Little understanding of potential applications or uses
ā¢ Dependence on complementary innovations
ā¢ The emergence of new technological systems
ā¢ Initial technology is developed in the context of a narrow application
ā¢ Inability to imagine how to satisfy human needs in novel ways
57. Rosenberg
ā¢ Little understanding of potential applications or uses
ā¢ Dependence on complementary innovations
ā¢ The emergence of new technological systems
ā¢ Initial technology is developed in the context of a narrow application
ā¢ Inability to imagine how to satisfy human needs in novel ways
59. Good ideas sell themselves?
āIf a man can make a better mousetrap
than his neighbour, though he lives in the
woods the world will make a beaten path to
his door.ā
Ralph Waldo Emerson
60. Good ideas sell themselves?
āIf a man has good corn or wood, or boards, or
pigs, to sell, or can make better chairs or
knives, crucibles or church organs, than
anybody else, you will find a broad hard-beaten
road to his house, though it be in the woods.ā
Ralph Waldo Emerson
62. Good ideas can be a hard sell
ā¢ Lonnie Johnson,
inventor
63. Good ideas can be a hard sell
ā¢ Lonnie Johnson,
inventor
ā¢ Invention 1: The
Supersoaker
64. Good ideas can be a hard sell
ā¢ Lonnie Johnson,
inventor
ā¢ Invention 1: The
Supersoaker
65. Good ideas can be a hard sell
ā¢ Lonnie Johnson,
inventor
ā¢ Invention 1: The
Supersoaker
ā¢ Invention 2: JTEC that
converts heat to
electricity with an
efļ¬ciency rate of 60%
68. Indivisibility
ā¢ Brand: āInformation
wants to be free.ā
69. Indivisibility
ā¢ Brand: āInformation
wants to be free.ā
ā¢ High (sunk) ļ¬xed costs
and low unit costs
70. Indivisibility
ā¢ Brand: āInformation
wants to be free.ā
ā¢ High (sunk) ļ¬xed costs
and low unit costs
Cost
Use
71. Indivisibility
ā¢ Brand: āInformation
wants to be free.ā
ā¢ High (sunk) ļ¬xed costs
and low unit costs
Cost
Use
72. Indivisibility
ā¢ Brand: āInformation
wants to be free.ā
ā¢ High (sunk) ļ¬xed costs
and low unit costs
Cost
ā¢ Marginal cost of ļ¬rst unit
high and of subsequent
units low
Use
73. Indivisibility
ā¢ Brand: āInformation
wants to be free.ā
ā¢ High (sunk) ļ¬xed costs
and low unit costs
Marginal
Cost ā¢ Marginal cost of ļ¬rst unit
high and of subsequent
units low
Use
74. Indivisibility
ā¢ Brand: āInformation
wants to be free.ā
ā¢ High (sunk) ļ¬xed costs
and low unit costs
Marginal
Cost ā¢ Marginal cost of ļ¬rst unit
high and of subsequent
units low
Use
75. Indivisibility
ā¢ Brand: āInformation
wants to be free.ā
ā¢ High (sunk) ļ¬xed costs
and low unit costs
Marginal
Cost ā¢ Marginal cost of ļ¬rst unit
high and of subsequent
units low
ā¢ Challenge for
competitive provision
Use
76. Appropriability and Creative Destruction
Each new generation displaced the
old, speciļ¬cally, their monopoly rents.
77. Appropriability and Creative Destruction
Each new generation displaced the
old, speciļ¬cally, their monopoly rents.
78. Appropriability and Creative Destruction
Each new generation displaced the
old, speciļ¬cally, their monopoly rents.
79. Appropriability and Creative Destruction
Each new generation displaced the
old, speciļ¬cally, their monopoly rents.
80. Appropriability and Creative Destruction
Each new generation displaced the
old, speciļ¬cally, their monopoly rents.
81. Appropriability and Creative Destruction
Each new generation displaced the
old, speciļ¬cally, their monopoly rents.
84. Do you control the previous generation?
ā¢ 1934: in Bell labs, Clarence
Hickman invents the answering
machine.
85. Do you control the previous generation?
ā¢ 1934: in Bell labs, Clarence
Hickman invents the answering
machine.
ā¢ Chief innovation: magnetic
recording tape allows computing
storage.
86. Do you control the previous generation?
ā¢ 1934: in Bell labs, Clarence
Hickman invents the answering
machine.
ā¢ Chief innovation: magnetic
recording tape allows computing
storage.
ā¢ AT&T suppressed invention for 60
years.
87. Do you control the previous generation?
ā¢ 1934: in Bell labs, Clarence
Hickman invents the answering
machine.
ā¢ Chief innovation: magnetic
recording tape allows computing
storage.
ā¢ AT&T suppressed invention for 60
years.
ā¢ It was āre-discoveredā in the
1960s and put to use.
88. Do you control the previous generation?
ā¢ 1934: in Bell labs, Clarence
Hickman invents the answering
machine.
ā¢ Chief innovation: magnetic
recording tape allows computing
storage.
ā¢ AT&T suppressed invention for 60
years.
ā¢ It was āre-discoveredā in the
1960s and put to use.
ā¢ Why? AT&T were worried that it
would āgreatly restrict the use of
the telephoneā if, say,
businesspeople thought they
were being recorded; i.e., privacy.
89. Do you control the previous generation?
ā¢ 1934: in Bell labs, Clarence
Hickman invents the answering
machine.
ā¢ Chief innovation: magnetic
recording tape allows computing
storage.
ā¢ AT&T suppressed invention for 60
years.
ā¢ It was āre-discoveredā in the
1960s and put to use.
ā¢ Why? AT&T were worried that it
would āgreatly restrict the use of
the telephoneā if, say,
businesspeople thought they
were being recorded; i.e., privacy.
92. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
93. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
94. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
95. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
ā¢ How do network effects impact on strategy and economics?
96. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
ā¢ How do network effects impact on strategy and economics?
ā¢ What are network effects?
97. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
ā¢ How do network effects impact on strategy and economics?
ā¢ What are network effects?
ā¢ How do you manage networks of disparate agents?
98. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
ā¢ How do network effects impact on strategy and economics?
ā¢ What are network effects?
ā¢ How do you manage networks of disparate agents?
ā¢ How do you use market design to build platforms?
99. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
ā¢ How do network effects impact on strategy and economics?
ā¢ What are network effects?
ā¢ How do you manage networks of disparate agents?
ā¢ How do you use market design to build platforms?
ā¢ How do you commercialise information through advertising?
100. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
ā¢ How do network effects impact on strategy and economics?
ā¢ What are network effects?
ā¢ How do you manage networks of disparate agents?
ā¢ How do you use market design to build platforms?
ā¢ How do you commercialise information through advertising?
ā¢ How do social networks impact on information selling and platform building
strategies?
101. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
ā¢ How do network effects impact on strategy and economics?
ā¢ What are network effects?
ā¢ How do you manage networks of disparate agents?
ā¢ How do you use market design to build platforms?
ā¢ How do you commercialise information through advertising?
ā¢ How do social networks impact on information selling and platform building
strategies?
ā¢ How do you price when information has a social dimension?
102. Course Questions
ā¢ What are the strategic considerations in selling information?
ā¢ How do you price?
ā¢ How do you deal with weak intellectual property protection?
ā¢ How do you overcome search and disclosure hold-up?
ā¢ How do network effects impact on strategy and economics?
ā¢ What are network effects?
ā¢ How do you manage networks of disparate agents?
ā¢ How do you use market design to build platforms?
ā¢ How do you commercialise information through advertising?
ā¢ How do social networks impact on information selling and platform building
strategies?
ā¢ How do you price when information has a social dimension?
ā¢ How do you foster mass collaboration in information provision?
117. Questions
1.Should Thorsten develop a mobile application for iOS or Android? In answering
this question, list the facts that make iPhones versus Android-based phones
relatively attractive for developers to make applications for?
2.When is the development choice a real (āorā) choice versus a soft (āandā) choice?
3.What does the ability to make apps for both platforms as opposed to only one
imply about the bargaining power of the developer with respect to any given
platform?
4.For Thorsten, is the ability to appropriate rents from the platform a consideration
in their choice? Why or why not?
5.Suppose that the case was considering Rovio (the makerās of Angry Birds) and
which platform they might develop their next game for. How would this change
your answers to 3 and 4 above?
6.If a new mobile platform (say Microsoft Windows Mobile) were entering the
application market, what strategies are they likely to employ to compete with
iOS and Android? How will this impact on the rents accrued by application
developers?
