Tuesday, March 31, 2009

Disruptee outlives disruptor

Based on content licensed from Funk & Wagnalls and Collier’s Encyclopedia, in the 1990s Microsoft used a sub-$100 Encarta CD-ROMs to wipe out most of the dead tree encyclopedias.

As Blown to Bits (2000: 2) recounts

The CD-ROM came from nowhere and destroyed the printed encyclopedia business. Whereas Britannica sells for $1,5000 to $2,200 per set (depending on the quality of the binding), CD-ROM encyclopedias, such as Encarta, Grolier, and Compton, list for $50 to $70. But hardly anybody pays even that: the vast majority of copies are given away to promote the sale of ocmptuers and peripherals. With a marginal manufacutirng cost of $1.50 per copy, the CD-ROM as freebie makes good economic sense. The marginal cost of Britannica, in contrast, is about $250 for production plus about $500 to $600 for the salesperson’s commission.
Today Microsoft announced that it’s pulling the plug on both the CD-ROM and the online version of Encarta. The crowd sourced Wikipedia is credited with its demise.

At one level, Clay Christensen has yet another example for his disruptive innovation commoditization story — in which a commoditized technology itself gets commoditized. We saw this with minicomputers wiped out by PCs and someday PCs wiped out by mobile phones.

But I also find it interesting that Britannica (at least in its online version) will outlive Encarta. While Britannica is in its own life-and-death struggle with Wikipedia, it appears (at least in the short run) that its emphasis on quality is being recognized. (Benkler’s Wealth of Networks p. 71 gives an example of that interest).

This means we'll at least have Brittanica (paid), the Columbia Encyclopedia (available free on Dictionary.com) and Wikipedia. Given both Wikipedia’s severe limitations as well as the inherent risk of a single source of information for the world, as a member of a free society I hope the market doesn’t collapse any further.

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