The market can pose many challenges to the value of intellectual property, creating a fickle environment. Many factors contribute to this fickleness. Here are five factors that pose big challenges:
Obsolescence - As new, innovative products hit the market, old products become obsolete or unusable. Examples of old products that have been replaced with newer designs or inventions include buggy whips, Palm devices, VCRs, VHS tapes, etc. Even the price of Blu-ray technology is cheaper as streaming is becoming more popular.
Regulatory impacts - Regulatory impacts can destroy value quickly. For instance, take a small drug company that is enjoying great success. One day, the drug that is at the center of the company’s success is pulled for regulatory purposes. The company becomes useless and bankrupt.
Market timing – Timing can mean everything in the market. Are you too early? Do you have great technology, but wrong timing? Or is it the right time? For instance, tablet computers have been around for a long time. But, until the iPad appeared, tablets were not overwhelmingly accepted. So what is different about the tablet computer now? Perhaps the market was ready for it. Getting to the market too soon can be just as bad as being too late or having the wrong product. The hardest part about this is that there is no good explanation, other than that the market is volatile.
Concentration – Depending on the industry, there may be a couple of major players or it could be highly fragmented. The fewer players, the higher the value will be for the IP owner–as long as the market accepts the product and company.
Sales cycle - The sales cycle plays an important role because it matters when or how often consumers buy products. A company’s budget can affect purchasing. Also, new products may take a while to attract popularity while consumers evaluate the product or their need for a product.
These market factors are just a few that play into an IP’s value. The market can create great risks, but it can also help owners reap great benefits. Knowing up front what you are facing will help you gauge your chances.
