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Subject:  Re: TEN STOCKS TO RULE THE WORLD (II) Date:  3/26/2000  3:54 PM
Author:  TinkerShaw Number:  1790 of 8810

Would you be willing to classify the reveues that Gemstar derives from the advertising as in a gorilla game or a godzilla game?

I would classify the ad revenues as a Gorilla game and not a Godzilla game and here is why:

A Godzilla game involves a networking effect without a proprietary draw. Meaning that for example the more people that use EBay the more that future customers will be drawn to EBay. This networking effect is not because of any proprietary lock on the market. But the result is largely the same as seen in a Gorilla market - value will tend to the extreme and not the mean (ie, EBay will continue to pull in the majority of wealth in the sector and profits for EBay will not tend to zero or the mean as more competitors enter the market). The basis of EBay's power is its first to market with a critical mass of users.

This is opposed to Gemstar which has a proprietary lock on the market due to its IP. The non-proprietary - EBay, AOL, Yahoo! - type lock on the market does not seem to exist for GMST. One IPG is as good as another as long as they all function. My use of the IPG does not depend on the fact that a critical mass of other people also use it. The reason I use it is because it is provided in the products I buy. Without the IP GMST would hold no market power. Its guides would not achieve critical mass to advertisers. GMST would lack the market power necessary to compel the distribution of its guides.

In conclusion: since the basis of GMST's market power is proprietary IP and not a networking effect involving a critical mass of people, GMST is in a Gorilla game.


P.S. Of course it could be argued that GMST has a backwards Godzilla power. Meaning that if no one guide achieved critical mass sufficient for maximizing ad revenues then everyone in the industry would need to standardize around one guide to create sufficient critical mass. Since GMST is the only guide achieving critical mass in the market, the industry would have to turn to GMST's guide. It would seem though that if GMST had to rely on this sort of Godzilla power the terms it would receive in revenue sharing would not be nearly so generous. Given the disparate interests involved it would also be very difficult to get all the concerned parties to standardize around any one solution.

So GMST a powerful Gorilla and a weak Godzilla.
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