Comment by mcmcmc

Let’s say you’re looking to break into the Fun as a Service market. The incumbent offers 100 hours of Fun per year as a free service and charges enterprise prices above that. If you want to start a Fun as a Service competitor, to have any chance of competing for new signups you also have to front 100 hours/year for anyone who wants to try it at a 100% loss, before you can even start making money.

It’s the same principle behind predatory pricing, which is illegal but rarely enforced. The goal is to make it too expensive for new players to enter the market, or to force existing competitors out.