Why Worldspace is exiting the World

WorldSpace radio is shutting down. I am not surprised. I had predicted this some time ago. Now that the service is folding up, its time to analyse what went wrong, why the business model didn't work.

The reasons are straightforward. If the mass listener was the apparent target segment, the value proposition just didn't cut ice with him. Because he doesn't want to pay (he has access to free FM) and the justification of variety for the price charged isn't agreeable to him. 'Variety at a price' contravenes the 80-20 principle. 80 percent of listeners tune into 20 percent of music going around. Its the same old movie music that they want, and listen to. Not classical, not jazz. Not instrumental. FM gave listeners exactly that, sans a price.

Now if the niche listener is target segment, the business model isn't financially viable. Inflows from subscriptions isn't be enough to keep operations afloat. Which means other streams of revenue have to be explored. Radio advertising perhaps. but then again, its a Catch 22. Advertisers will come only if there are enough listeners. Listeners will come only if the service is free. 'Free' requires the business model be supported by advertising revenues and not subscriptions.

The larger lesson in the Worldspace story is one of business models. That you can't have consumer align themselves to the way you do business. Instead its your business model that must align itself to what consumers need. And also, that the model you pursue must supersede competing models that aim at creating and delivering value to your set of consumers.

Comments

yogesh said…
Three reason why it fail, simple,

1) WSR has never sold content to listners,
2)Quality and price of RX was too high
3) Installation Quality and conplications
4) After Sales Sevice ...they acually fail to deliverd


Remember the total sales acquisation is over 1 million, they could not able to retain subscriber... for the above reason not for free services.
At the time of Worldspace launch, there was hardly 1 FM station. World Space strategy made sense at that time when consumers didn't have choice and the company made merry.

They should have altered their business model with the onslaught of free FM stations. At last count, all metro cities have at least 8 free to air FM channels.
Prof.Ray Titus said…
Yogesh,

The first two points mentioned go to the heart of Worldspace's business model; the latter two point to post-purchase dissonance.

KST,

Agree; an 'altered' model may have worked, or an addition of a mass model with the niche one could have sustained business operations.
vrinda said…
how wierd is the fact that big companies, with actually good products so to say, still don't get the 3 golden words of marketing - CONSUMER IS KING!!!And that too, with all our marketing geniuses harping in several books authored by them on the same bottom line, and with CMOs from the best B schools having read that bottom line a zillion times over. In ur lingo Prof. Ray, aren't they dodos of the highest order? =)
vrinda said…
This comment has been removed by the author.
Ansh said…
I don't agree that a business cannot work on its own terms ... You have to communicate to the consumers what they want --- case in point - Apple or older than that - Polaroid.

True you constantly need to innovate and reinvent yourself.

I don't think that the presence of the free channels is so much of a deterrent; With the right kind of communication to the consumers, that could have easily been overcome
Prof.Ray Titus said…
Ansh,

When you say 'communicate' better to consumers, what you must mean is 'target consumers'.

You see, Worldspace can 'communicate' all it wants, but I ain't buyin' music at a price. You probably may, that's what will make you Worldspace's 'TARGET' consumer. They'll waste their advertising dollars on me!

Again, the larger question is whether there are enough numbers amongst the likes of you (assuming you'll buy) to make WS's business model financially sustainable.

My guess is, no.

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