Home Book Reviews The Content Trap, Part II: Concerts – Product Connections
The Content Trap, Part II: Concerts – Product Connections

The Content Trap, Part II: Concerts – Product Connections

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content trap imageWhen the record industry downturn began with the introduction of file-sharing services like Napster, studios’ profits decreased and major chains filed for bankruptcy. However, musicians didn’t care as much as one might have surmised, primarily because their CD royalties were limited. At the same time, their share of concert ticket prices was close to 50%, providing nearly 70% of their income. With  greater exposure through file-sharing, top musicians saw their incomes skyrocket to as much as $100 million annually and $1 million per concert.

Dr. Anand writes that to understand the relationship between CDs and concerts, you have to understand the business principle of complements. In other words, two products are considered complements if the user’s value from consuming both is greater than the sum of the values from consuming each by itself. CDs and concerts are therefore complements since as the price of CDs goes down and recorded music reaches more individuals, concert demand increases. Before the Internet, concerts promoted CD sales and file-sharing grew; free music promoted concerts, in turn.

Anand also notes how the iPod and iTunes complemented each other. iPod sales were insignificant until Apple launched iTunes, and keeping music costs as low as possible drove more iPod sales. Other complements include the Kindle and Amazon’s ebooks, the iPhone and the App store, and GM cars and GMAC (its auto financing subsidiary), among others. Anand offers four lessons about complements: first, expand your vision, not narrow it; second, dare to price low – but know where to do so; third, exclusive connections — from industry complements to product complements; and, lastly, ask not what your core business is, but know when you’re someone else’s complement.  Complements should not be confused with substitutes, which have the same value as each other.

Anand says, “We’re not good at recognizing connections.” Often, positive connections are mistaken for negative ones or negative connections are suspected when a connection doesn’t exist. He notes three reasons for this inability to recognize connections: mindset, language and data.

Anand acknowledges that connecting is “far from straightforward.” Product spillovers and piggyback strategies happen after the fact, not before a company has built connections in another area.  The structures companies create to exploit synergies are often fixed, whereas they need to be flexible to pivot with ebbs and flows of connections and in order to adapt to spillover and piggyback strategies. Managing products as portfolios is a better strategy than managing individual products in silos.

Anand adds that brands provide informational connections. The stronger the informational ties across products, the stronger the brand and the benefits of brand marketing. However, the typical recourse of spending more money to market your product is not the right solution. Companies are better off when they recognize, exploit, and create product connections. To do that, companies must spend more time thinking about the products they offer and their competitors. Success versus failure is not natural but is based on management’s choices. In short, companies should expand to preserve.

*Author’s note: Unless otherwise noted, the factual observations and images included herein are the intellectual property of Dr. Bharat Anand and/or Random House Publishing Group.

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Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In July 2016, he retired as APUS president and continued as CEO of APEI. In September 2017, he was reappointed APUS president after the resignation of Dr. Karan Powell. In September 2019, Angela Selden was named CEO of APEI, succeeding Dr. Boston who will remain APUS president until his planned retirement in June 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. During his tenure, APUS grew to over 100,000 students, 200 degree and certificate programs, and approximately 90,000 alumni. In addition to his service as a board member of APUS and APEI, Dr. Boston is a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, a board member of the Presidents’ Forum, and a board member of Hondros College of Nursing and Fidelis, Inc. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. Dr. Boston lives in Owings Mills, MD with his wife Sharon and their two daughters.

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