Heather Lord of Amherst said the act of reselling the machines for $2,000, $3,000 or more on eBay demonstrates a class divide between those who have thousands of dollars to purchase an item that costs much less and those who don't.Anyone want to take another shot at why Sony left tens or even hundreds of millions of dollars on the table?
'The industry is manipulating the consumers,' said Lord, who also wasn't early enough to walk away with a console.
The campers at the front of the line saw it differently.
'Finally, the poor are taking advantage of the rich,' said Chris Brodeur, a UMass student who had been waiting in line since Wednesday morning with plans on selling his console.
Those who are paying thousands of dollars over retail may, indeed, be being taken advantage of, said Dan Hsu, editor in chief of Electronic Gaming Monthly magazine, by phone....
Buying a brand-new system at launch can also be frustrating for consumers due to the lack of strong titles available right away, with only one game title, 'Resistance: Fall of Man' being a standout.
'Do you want to pay $600 to play one game?' Hsu asked.
19 November 2006
Follow Up
The local paper follows up on its PS3 story:
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6 comments:
M: That's my preferred conclusion, too. I like economics and would prefer that it not be completely irrelevent to the real world.
But I still don't get it. Here's the situation:
1. Sony is going to sell out of PS3s.
2. Notwithstanding that fact, it insists on maintaining its MSRP.
3. As a result, there is a classic shortage caused by a too low price, with people paying as much as 5 times the MSRP in the after-market.
4. Sony could increase the price and still sell out, even for a pretty steep increase.
5. All of the additional revenue would fall to the bottom line.
6. A higher price would calm the market and force the ultimate purchaser back into Sony's preferred distribution channel. In fact, if Sony doesn't mind the systems being sold on ebay, why didn't they just dump the whole first tranch onto ebay and get perfect price discrimination?
Mr. Cohen;
You're ignoring transaction costs, which I think dominate this issue.
I never ignore transaction costs. I love transaction costs. I'm a lawyer: I am a transaction cost.
But I don't see how I'm ignoring them here. Of course, you could be using "transaction costs" to mean the answer given by economists when they can't figure our any other reason. The term I use for that is "bankruptcy costs."
Don't they make the big money on the games? The reason to gie away the consoles is to prime the pump for their game business.
It's also about market share.
Duck: That is, more or less, everyone's answer, but it is a completely unsatisfying answer for reasons that I seem to be completely incompetent at communicating.
Let's put it this way: The "It's the games, stupid" answer ignores another decision that Sony is making at the same time. It has decided to sell the system before having enough units in warehouses or the pipeline to satisfy demand at its chosen price-point and before there are any really good games. In other words, Sony is choosing to sell the units (supposedly at a $250 loss per unit) knowing that a grey market will develop in which people will either have to win a lottery or pay several times list price. Since there are only a limited number of units, all these other reasons make no sense. They're going to sell out no matter what, they're going to sell the same number of units (i.e., all the have) no matter what. In fact, by allowing the grey market to develop they are probably reducing the number of games sold, while losing money on each unit and leaving, conservatively, tens of millions of dollars on the table.
Why?
The people waiting in long lines to buy now or buying at outrageous prices in the aftermarket are the hard-core gamers. They set the trends for the game market, they create the buzz. Their reviews of the system will drive sales for 2007. You can't think of it as a commodity business, it's more akin to the high fashion clothing market. You need to have the right people playing, or wearing, your brand.
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