Bad ideas have no reason to succeed. Last week, Steven Mallas wrote about how the movies being released on UMD format for the Sony
The platform just doesn't work on any level. UMDs cost more than DVDs, yet the perceived value of the small-disc media is lower. Apple Computer
Of course, UMD movies aren't the only technology that has seemed to miss the writing on the wall. Remember disposable DVDs? How about renegade video game platforms like the Atari Jaguar or the 3DO? Mainstream products have an uphill battle, and the chances of success are slim unless they truly bring something revolutionary to the table. Yes, the 3DO wooed software developers with cut-rate royalties. Movie discs that gradually eroded were well-positioned at one-way hubs like convenience stores.
It's not enough.
Rather than make this a bleak column about those who took a battering ram to conventional wisdom only to get bonked in the head, I'm going to look at a few cases that actually made it. By studying the successful revolutionaries, you can best learn how to spot the fakers from the true Rule Breakers.
Apple rocks the world
We already know about the iPod success story. The company has moved more than a billion digital downloads through its iTunes store. As of the end of December, Apple has sold a whopping 42 million iPod media players.
It seems so obvious now, but it didn't seem that way a few years ago. Other companies were putting out less-expensive MP3 players that supported a wider range of digital formats. Apple stuck to a more obscure encoding strategy and banked on its proprietary iTunes store to lead the digital-purchasing revolution.
In some ways, the iPod was suffused with the same bravado that had tripped up the closed architecture of Apple's Macs. However, Apple conceded and rolled out iPod software for Macs and Windows computers alike. That opened up the potential market, and in a music market where image matters, Apple's edgy style and innovative features like the iPod click wheel won over the masses.
The postman rings twice -- with red mailers
I have been a Netflix
Drop a viewed rental in the mail, and you'll be waiting at least 48 hours before your next one arrives. If you were the type that often relished the exploration process of walking into a video store with no idea what you would be watching that night, Netflix was a shock to the system, requiring a bit more pre-planning than the consumer was used to.
However, Netflix had its greatest market penetration in its Bay Area base. It realized that the key there was that folks were getting next-day deliveries at cheap postal rates after Netflix received a return. In building out dozens of distribution centers around the country, Netflix was able to provide faster turnaround times. It may not be the instant gratification that video on-demand promises, but thanks to its potent recommendation software, Netflix is able to uncover celluloid gems that will be right up your alley.
The spirit of satellite radio
Would the public be willing to put up with buying new receivers, coping with sometimes-finicky home connectivity, and paying nearly $13 a month for a superior audio platform? It wasn't going to be an easy sell, especially when most of the country had become accustomed to radio that was ad-supported cost-free.
Things were a little rough coming out of the gate. Sirius
We all know how that turned out. With more than 10.5 million subscribers between the two services, satellite radio has snagged radio's most rabid listening audience. There may be some concerns about each company's financial state, but both are expecting to turn cash flow-positive within the next year or two. As long as the subscribers keep coming, the mostly fixed overhead will stabilize each company's cost structure (beyond absorbing hardware subsidies) when new listeners come on board.
Even with digital media players' growing popularity and terrestrial radio's resolve to fight, satellite radio has posted a net gain of 3.3 million new subscribers over the past six months alone. It doesn't hurt that satellite radio used the perceived roadblock -- the $12.95 monthly subscription fee -- to help bankroll content that radio listeners craved. From exclusive satellite radio sports programming contracts to hooking up with celebrity talk-show stars like Howard Stern, Martha Stewart, and Oprah Winfrey, satellite radio is here to stay.
The microcomputing revolution is at hand
The Apple Newton and the earliest Palm
Who will fail to fail next?
Failing to fail can be lucrative for investors. Just eyeball some of the gains that these near-death revivals have put in, and you'll see that there's serious money in betting on the companies that will thrive against reasonable odds.
Picking out young companies with disruptive technologies has been the hallmark of the Motley Fool Rule Breakers newsletter service, and it's paid off well. The average pick is up 33.3% since the newsletter's inception, crushing the market's more modest return of 8.9% in that time.
Many of these companies should have failed. Their failure to do so has proven to be a successful investing strategy.
You can kick the Rule Breakers tires to see if the premium research product is right for you with a free 30-day trial subscription. XM Satellite Radio is an active recommendation in the Motley Fool Rule Breakers newsletter service. Palm and Netflix have been singled out toMotley Fool Stock Advisorsubscribers.
Longtime Fool contributor Rick Munarriz is a consumer of many of these disruptive technologies and he owns shares in Netflix. T he Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
