Monday, June 09, 2014

Geo-blocking and all that

A very short blog post about a very simple article on geo-blocking.

The article makes the case for differential pricing in geographic markets by overall willingness to pay (which is facilitated by geo-blocking in software and content sales) on the simple argument that as a consequence the total volume of sales is higher hence reducing the average price over all.

The case is reasonable - and is similar to why it makes sense to have differential speed tiers on the NBN.

Assume I have an upfront cost of $100 I need to recover and $1 per unit marginal cost, and two geographies - one very populace but poorer and another smaller and wealthier.  If I can sell 50 copies in one country for $2 and 10 copies in another for $6 I will be able to recover costs. If I have to charge the one higher price I may be able to sell none in the larger market and need to charge $21 for the 5 customers I can convince to pay that price.

We can see how this actually worked in software by disaggregating markets by users. The release of Office for Home and Student use at a lower price point was far more effective than the earlier strategy of creating Microsoft Works.

That said, the theory is good and does a little to explain the Australian case - because despite what the Coalition Government would tell you this is one of the wealthiest places on earth.

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