Encarta: The Price Curve of Death
May 4, 2009
I found Randall Stross’s “Encyclopedic Knowledge, Then vs. Now” in the New York Times here interesting. The article provides a useful supplement to my comments about online pricing in my “Mysteries of Online” series here. What struck me as I read the essay was the need for what I call “the curve of death”. The idea is that researchers probe the “market”, determine a price range, and then over the life of the product adjust the prices to covert the idea into a gusher of cash. As Mr. Stross pointed out, Encarta was unable to make headway, first, against the $129 Compton’s Interactive Encyclopedia and, second, against the Wikipedia. The numbers he provided, when converted to a simple line chart, provide a textbook example of what I call the “curve of death”. In today’s online marketplace, one “can’t make up the investment on volume when the price is forced ever lower.” Here’s what the curve looked like when I toyed with Mr. Stross’s data:
Once the curve starts to nosedive, in this particular instance, Microsoft killed the product a quarter century after Encarta started through its lifecycle. What I concluded was that once a product fails to generate traction, further price cuts do not mean the product will become successful. I recall a lecture by an ivory tower type who explained economies of scale and the wisdom of cutting prices as the manufacturer moved “up the experience curve”. Didn’t seem to work for Encarta. My experience suggests that the ongoing cost of information products is a killer. Automation offers one way out of the box. Shifting production to volunteers may be another. The traditional approach and the traditional wisdom, in the case of Encarta, did not work even with the marketing muscle of Microsoft behind the product. Persistence is often an excellent characteristic. I wonder if the curve suggested an earlier exit from the Encarta business?
Stephen Arnold, May 3, 2009
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[…] Digital educational content in itself is not worth money. It is easy to duplicate. One of my favorite images in capturing this is the Encarta price curve of death: […]