We all know the old fashioned way of watching movies. You had to rent a movie, insert the movie in your video player, skip the annoying parts and enjoy the movie. It was annoying, time consuming and a lot of trouble to just watch a movie.
Nowadays an internet connection, a compatible device and a few clicks are enough to sit back and enjoy your media. Netflix and Blendle made these kind information goods available by ease of replication and distribution. Netflix is a digital movie service where people get a monthly subscription to stream movies and series without commercials. Blendle is a digital news platform that gathers articles from all kinds of newspapers and magazines. You only pay for the articles you read. Articles can be shared, people can react on the articles and comment on these reactions. It is a combination of an online kiosk and a social network.
These business models show us the perfect form of information goods. (1) The information provided by the two organizations are costly to produce but cheap to reproduce. (2) Once the first copy of a good had been produced, most costs are sunk and cannot be recovered. (3) Multiple copies can be produced at constant per-unit costs. (4) There are no natural capacity limits for additional copies. Articles and movies can be sold over and over again. Besides these points the business models version in their pricing. However, in a different way. Netflix offers three subscriptions and therefore gain from extremeness aversion. Humans tend to choose the average option, this Goldilock pricing will increase revenue. Blendle on the other hand prices their articles based on the supplier and the length of the article.
Both business models have a couple of similar strengths:
- The services can be easily used on all necessary devices,
- They provide much content,
- They have low costs compared to the old fashioned way,
- They can establish pricing arrangements that capture as much of that value as possible. Done by (a) the registration of the customers, (b) observing queries and clickstreams and (c) through behavioural targeting
Besides these matching strengths, Netflix and Blendle have individual strengths and weaknesses as well:
The future shows some interesting opportunities and threats for Netflix and Blendle and for de information goods market as a whole:
Overall we can see that Netflix and Blendle are operating in a very interesting market. Offering great opportunities. Both Blendle and Netflix can gain a profit of this fast growing industry.
Group 42 – https://www.youtube.com/watch?v=W_a-XZJ7tnM
