Two forces tug legacy industries from opposite directions. On the one side, you have customer demand. On the other side you have a mix of fear and laziness. In-between is where corporations and industries find themselves, and they face a choice. Sadly, in most cases, the fear and laziness win out. It’s left to radical new upstarts to provide customers with what they actually want.
The examples are numerous. Look at Tesla, a company that builds all-electric cars and wants to sell them direct to the consumer in order to keep the price down. These cars are sexy, great for the environment, and becoming more and more affordable. What’s the response from the competition? An appeal to the courts to block the skirting of dealership laws. An appeal to an old and wasteful system that means higher prices to the consumer and lined pockets for the middlemen. Check out what the New York Times had to say about these attempts:
Car dealers in New York, New Jersey and several other states are waging legal, legislative and regulatory campaigns to stop Tesla, the fast-growing electric-car company, from selling its vehicles directly to consumers. These moves are little more than attempts to protect an old retail model by limiting consumer choices.
How about Uber and Lyft? Having used these services, and having gotten around dozens of cities by cab, the most amazing shock to me is that taxis weren’t the ones who innovated here. With every potential customer holding a networked computer in the palm of their hand, the increased efficiency made possible by an app that handled dispatching, routing, and payment is a no-brainer. But fear and laziness win out, and now taxis are appealing to the courts to keep a system that is less efficient (which means worse for traffic and worse for the environment) and provides less customer satisfaction.
What does the New York Times have to say about this innovation and Uber’s pricing strategy with UberX?
The key to understanding Uber’s strategy is the concept of “elasticity of demand,” which is how people will react to a lower price. If consumers’ demand is highly elastic, it means that a slightly lower price will lead to people taking a lot more UberX rides.
Price elasticity. Lower prices will result in widespread adoption and greater profits. Interesting.
How about that great disrupter, Netflix? Having put video rental chains out of business and then proving that dropping an entire season of TV all at once can be a good thing, Netflix is now arguing that the classic program of “windowing” is not good for the film industry. Netflix wants to release the sequel to 2000’s smash hit Crouching Tiger, Hidden Dragon on Netflix as well as in theaters, all on the same day. The theaters (which are predominantly three companies) refused. Netflix appealed to the Imax chain, but Imax waived control of their screens to the same three aforementioned companies, who host their installations. Again, the companies refused. And again, the New York Times had fair coverage of the event, saying:
Theater chains in the United States have rallied against attempts to change the traditional model for releasing films, worried that movie fans might stay at home rather than pay for movie tickets. The theaters now typically play movies for three months without competition.
Netflix, Imax and the Weinstein Company, which is producing “Crouching Tiger,” said that movie fans were asking for new ways to watch films. “Going out to the movies is a very different experience than staying in,” said Ted Sarandos, chief content officer at Netflix. “Withholding access only invites piracy.”
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