Business Matters: Research in Motion Falters, Android and iOS Safer Than Ever
— Apple and Google’s dominant mobile and tablet market shares probably won’t be jeopardized any time soon. Just a couple weeks after Research in Motion (RIM) warned of lower profits, the company was hit by a perfect storm of events. Shares of RIM dropped 21.45% to $27.75 Friday on an otherwise positive day on Wall Street.
First, news broke Thursday afternoon that chief operating officer Don Morrison would be taking a medical leave. Shares of RIM were down only 0.6% at that point in the day.
After the bell Thursday, RIM reported disappointing first quarter earnings on Thursday. Revenue failed to meet Wall Street expectations and the company lowered its earnings guidance to $7.50 a share to the $5.25 to $6.00 range. It admitted to a disappointing PlayBook launch in the U.S. and warned of upcoming job cuts this quarter.
There was more bad news: The BlackBerry Bold 9900/9300 will be delayed from its planned August launch to later this year. And the 4G version of the company’s PlayBook tablet will not launch this summer.
To top it off, the company’s sixth-largest shareholder, Jarislowsky Fraser Ltd., said it has sold half its RIM shares, according to Bloomberg. “They are resting on their laurels,” said the firm’s chairman. “Steve Jobs is a much better marketer than RIM.”
According to a May report by Nielsen, RIM’s BlackBerry had a 23% share of the U.S. smartphone market. Google’s Android operating system was tops with a 36% share while Apple’s iOS operating system was second at 26%.
Hating on QR Codes
— A tip to marketers from AdAge on QR codes, or quick response codes. You know them as the ugly, square-ish bar codes that make an otherwise attractive magazine ad look horribly unattractive. They’re popular in the tech world (where everybody loves a shiny new object) but not so popular in the music world.
“This is a dead-end technology. This is a transitional technology, and other options are headed to market that will quickly displace it. Improvements in mobile search far outpace QR capture. Near Field Communications will provide richer machine interfaces. Google Places has already abandoned QR codes for NFC chips. Does ‘mini-disk’ ring any bells? They were smaller than a compact disc and couldn’t hold nearly as much information. The QR code is the mini-disk of the future.” ( AdAge.com)
Ebook Price Wars
— The discussion on how to price digital goods continues with some thoughts on pricing ebooks by Chad Post, the publisher of nonprofit publisher Open Letter Books. He starts by talking about author John Locke (not the deceased one) who sells his thrillers for $0.99 in digital format.
“Why pay $12.99 for ‘entertainment’ when you could buy a John Locke thriller for $0.99? I have no answer to that question. Seriously. And this has always been my problem with e-books: they emphasize immediate entertainment – and gratification – over real ‘reading,’ which takes more commitment, patience, attention and time.”
Post says he never wanted to get into the ebook market where “self-published authors game the system.” But he works for nonprofit publisher whose mission is to promote “pure literature” to as wide an audience as possible. He understood there are a lot of people who like ebooks. He knows satisfied ebook readers will talk to their friends. And he understands that ebooks are at the lower end of a wider product mix. Here’s how he explains his rational for pricing his ebooks at $4.99.
“We can’t survive by selling all our books at $4.99 unless someone drops a million-dollar check in the mail right now, or we sell 4 or 5 times the number of copies we typically sell. But we can survive if every fifth person who buys a $4.99 Open Letter e-book raves about it to friends and convinces a few people to buy either the $14 paperback or a $9.99 e-book. Which fits in with our mission of generating genuine excitement about our books and may help expand the audience for works in translation in general, which is good for everyone.”( Publishing Perspectives)
How to Price Online Music Services?
— What is the best way to price online music services? This was just two of the questions David Touve, an assistant professor at Washington & Lee University, sought to answer in a presentation give at the World Copyright Summit in Brussels early this month.
Popular opinion seems to hold that current prices are too high, but rights owners’ constraints prohibit them from falling naturally to meet market demand. Through some rough calculations based on a survey of potential subscription service customers, Touve found that services’ optimal prices may indeed be much lower than where they currently stand.
Here was his approach: Touve the results of a Rackspace survey that asked consumers what they would pay for a subscription music service. Then he constructed a familiar, downward-sloping demand curve based on the survey results, with the X axis representing the number of customers and the Y axis representing the price of the service.
The thing to keep in mind about a demand curve is there will typically be just one revenue-maximizing price. It may be a high price and it may be a low price. It depends on the slope of the curve and the demand for a product or service at particular points on the curve.
The most common answer in the Rackspace survey was £1 to £3.99, which was favored by about 28% of people surveyed. It turns out the revenue-maximizing place on the demand curve was the £3.99 price point. Only 1% of people said they would pay £10.99 per month, and 17% of people would pay between £4.00 and £7.99. So, everybody who would pay at least £3.99 (1% plus 5% plus 17%) would bring in about £57.2 million in monthly revenue. (To calculate a population to correspond with each price point, Touve multiplied the percent that corresponds with each price point and the UK’s 62.3 million population).
Since just 1% of people said they would pay £10.99 per month for the service, it represents the lowest revenue of the bunch: just £6.8 million per month. The second-best price point was 0.99, which would generate £31.5 million per month. The £7.99 price point would generate £29.9 million per month.
Remember the curve is a rough estimate based on a series of price ranges and consumers’ stated willingness to pay those prices for an unlimited music subscription service. It’s great for illustrative purposes. It’s probably pretty close to the truth. But it’s not so exact that one can use the results to make declarative statements on pricing of music services.
And remember that surveys don’t necessarily reflect reality. Touve pointed out that 1% of the population does not currently pay for a premium subscription service — less than half a percent do so. What we actually do, he noted, is not what we say we are going to do. ( DavidTouve.com)