Umair Haque / Bubblegeneration

Tuesday, October 23, 2007

Research Note: Open Pricing and Revolutionizing Value Creation

I've been going on for a while about how open pricing is the most revolutionary innovation to hit the economy for a long time; how it will absolutely eviscerate massconomy business models; etc.

Read this - especially the numbers.

And if you're a decision-maker in any consumer industry, spend a few hours today thinking about this and talking about it with your colleagues.

Forget about all the noise - there's a lot of it, but it's largely strategically irrelevant (ie, it's trivial that NBC's Hulu move is a wash, because it vaporizes its own marginal benefits).

Focus on this for a while - because it's a really big deal.

I cannot stress enough the potential of open pricing as an innovation that the tiniest, poorest, most unexpected radical innovators can use to warp and reshape the fabric of entire industries.

That doesn't just mean the music industry - the economics driving open pricing are the same across many, many consumer markets.

I know, I know - it sounds wack if you're a beancounter. But it's not a "marketing stunt", although most journos still think it is.

That's because the economics are unstoppable, inexorable, as inevitable as the tide.

If you don't learn to leverage it - make no mistake, radical innovators will utilize it to drive you deeply and perhaps fatally into a value chasm.

If you ignore it, you are being driven squarely into strategy decay in realtime.

-- umair // 1:00 PM // 5 comments

Comments:

Totally accurate. Though I suspect music is the industry where we will see the initial seismic shifts here -- and I am watching Amie St. in this regard (http://www.aweissman.com/2007/10/amie-st-is-future.html)

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A Weissman // 1:45 PM

Umair,

A market where you set your own price is certainly interesting. There's some interesting stuff going on with conditional pricing with Zillow's "Make Me Move" and iTaggit's "Parting Price" features.

What are your thoughts on that from a web economics point of view? My blog posting on the topic is linked below:

http://austinstartup.typepad.com/austin_startup/2007/10/a-whole-new-mar.html

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Bryan Menell // 7:27 PM

The Digital Art Auction describes a mechanism to enable an audience to effectively haggle with the digital artist over an equitable retail price.

QuidMusic is a simplified prototype site that explored facilitating a fixed pre-payment for an as yet unreleased work.

The Contingency Market is an engine in progress to facilitate all manner of such sites.

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Crosbie Fitch // 7:36 PM

i am so excited to see changes like this. they truly make you feel like you are on the verge of some serious techtonic shifts. i wrote about it on our blog as well. http://cutcaster.blogspot.com/2007/10/radioheads-pay-what-you-want-model.html

Great article.

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Griffin // 4:21 PM

its the long tail of the music industry at work.

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Mark // 5:46 PM