Versioning

Versioning

What are the features of information products?

• Goods capable of being distributed in digital forms (e.g. book, movie, phone book info)

• Distinctive costs structure

o Expensive for first copy

o Cheap for subsequent copies

• Large fixed costs (dominated by sunk costs)

• Low variable costs/ marginal costs

• Few capacity constraints and vast economies of scale

What is the implication of cost structure of information products? Does zero marginal cost necessarily imply a zero price?

• Since low marginal costs for additional copies, the more you produced the lower the average costs

• Not implying zero price

o Large and sunk fixed costs, in case of devastating price war, those non-market dominants will lose

o Can never recoup the big up-front investment

o In particular if perfectly competitive market -> price war -> lose

What is versioning? How to provide different versions of information products?

• Create DIFFERENT versions of the SAME core of information, based on different buyers’ need

• Set prices according to the value those customers place on that information

• Let the customers segment themselves – they pick the product version reveals the value they are willing to pay

• Convenience – restrict the access of information (time, place)

o e.g America Online - different monthly membership plan

• Comprehensiveness– the extent/ depth of information (full article, archives, geographical coverage, historical, statistical details)

o New York Times, Business Weeks – sell the extensive historical information

• Manipulation – allow user to print, amend, store the information

o Lexis-Nexis – impose charges on downloading information

• Community – chatroom, bulletin boards, allow user to discuss information

o Silicon Investor - offer discussion boards

• Annoyance – no advertisement...