It's a normal threat in business, but when customers are paying for products or services, the old companies still have some movement. If Dell is charging $1,000 for a computer and another company comes along with a way better computer for the same $1,000, Dell can drop the price to $500. Then the consumer has to decide if the better computer is worth more money, and you can bet that Dell will keep a lot of customers by doing that. But if Dell is giving away that computer for free, and another company comes along with a better (define "better" however you want) computer that is also free, they're screwed.
The computer example is obviously not a realistic example, but you can apply it to any market where people are already paying for something instead of getting it for free.
The computer example is obviously not a realistic example, but you can apply it to any market where people are already paying for something instead of getting it for free.