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Guest Opinion
October 2000
Time
tells
We’re avoiding a prohibitive upfront payment and providing a real service as consumers acclimate to convergence.
Eric Hartz, ZapMedia
Where no other media player has gone before, ZapMedia leaps into a new generation of entertainment. With the click of a button, viewers can choose from music, movies, television, the Internet, and email. This is an exciting step towards multimedia convergence. With the ZapMediaEngine, the hardware we developed to make this convergence possible, and the ZapMedia Portal, through which rented and purchased multimedia content flows, we empower the user to make selections, to focus and filter.
In effect, we are introducing a new breed of appliance. At $599, the ZapStation can remain competitive with CD and DVD players. Consumers can ask themselves if they want to buy a DVD or CD player, or try Zap. Our goal is to sway them to try a ZapStation; even if they only use the DVD or CD initially, over time they will begin to take advantage of the other functions.
When a new category is established, producers must demonstrate an immediate value. If the price is too high, the result is zero penetration. Consumers need time to learn the benefits of new technology. For instance, when cell phones first came on the market, the question was: "Why do I need this? Maybe I can talk in the car?" That narrow use grew phenomenally, until the unit price was subsidized by a monthly fee.
Some may question the use of a subsidy model for this next-generation space. But you cannot evaluate a subsidy model in a static way. In the beginning, cell phones weren't sold on a subsidy model. A unit initially cost $300, $400, or $500, and then consumers paid for service on top of that. People soon become accustomed to the devices and began using service more. We see a similar model; by going to the market with a competitive price, ZapMedia encourages consumers to learn how to master convergence technology.
Many specialized services have subsidized their cost up front with monthly subscriptions. I agree with CommVerge editor Maury Wright (see "Subsidynesia") that subsidy models used in a dollar-shifting effort are hard to pull off. The ZapMedia model is quite different. Throw a CD into the ZapStation; it'll load the artwork and track information into a jukebox environment. Compare this to having to self-program a 200-CD changer, without the artwork. This difference alone is worth $9.95 a month to some people.
So, with ZapMedia, the consumer is paying for something of value rather than a reallocated charge. What's important to us is that we're avoiding a prohibitive upfront payment and are providing a real service as consumers acclimate to a convergence of multimedia sources.
Can a subsidy model support a successful appliance business? Time will tell. But by building a compelling product and offering a valuable service, we believe customers will be interested—once they discover how it can change their lives for the better.
Author information
Eric Hartz is CEO and President of ZapMedia.
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