Sunday, September 28, 2008

Where to start looking for modeling Unbundling

In his paper titled, How to Build an Economic Model in Your Spare Time, Hal Varian, UC Berkeley Professor now serving as Chief Economist at Google says this about where to get ideas:
 I think that you should look for your ideas outside the academic journals---in newspapers, in magazines, in conversations, and in TV and radio programs. When you read the newspaper, look for the articles about economics : : : and then look at the ones that aren’t about economics, because lots of the time they end up being about economics too
Given the stories I have been talking about, all of mine came from news media. The academic papers I read seem to have no managerial implications to me. 
Here are other stories I have been thinking about in the context of unbundling

  1. Korean online video game firm Nexon that gives its service free but charges you for every small thing you want to purchase. You want better weapon? better shield to withstand weapons?  you get the picture.
  2. I was at Target stores the other day and saw packs of gift cards that read IMVU credits. IMVU online 3D chat forum that is free to signup but asks people to pay through credits for better style, outfit, rooms, and "moves". 
Both these fall in my definition of unbundled pricing. What used to be part of the monolith is now separated and sold at a price. When you bought a video game, everything came with it. When you reached certain levels you get the appropriate weapons. The last video game I played is Zelda: The Wind Waker.  The title charecter Link starts out with just a sword but works his way through the islands and collects multiple weapons. Sometimes I paid for things, using the game coins I collected.

Now by unbundling the game, Nexon is appealing to those willing to gain superiority in their game by paying for it.

Shrink wrapped video game is a monolith. Make it free and charge for components to make the game play worthwhile, you have unbundling.

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