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heprof00 said said:
That will just cause the 120g to be phased out. Don't you get it? I just explained that the 250g is "a trick". It's a way to get a lot more money out of a minimal investment. While the 120g is loss-leading. They aren't losing that much. In that case, it's not about profits, it's about selling more consoles. However, in the case of the 250g, it IS about profit. It's is about getting a 500% margin on a 10$ upgrade. They are virtually the same console. I've shown you prices over and over, and earlier, you doubted that the HDD is that cheap. I can quote you if you need to be shown.Making the 250g 10$ more expensive than the 120g phases out the 120 because the perceived value is that much higher. However, then they are losing the same amount on the 250 as they are on the 120, and they are back to square one. Your idea is niether helpful or profitable. The help is does contribute is only being used to reinforce your own backwards logic, and the benefit it does contribute is only against other ps3 purchases, which it is already doing.
Again, why charge a customer 310, when the perceived value is 350? The better idea is to simple lower 120g production and get "must-havers" to spend the extra 50$, rationalizing that they will need a bigger hard drive eventually. The average consumer doesn't know the value of hard drive sizes versus price, and it reflects in both the pricing and demand. Just look at an Ipod. Larger sized drives in Ipods are nearly 1000% price inflated, but people still buy them, because the economics is not an issue. Sure, at larger sizes, they are paying less per GB, maybe 10% less, but Apple is making like 50% more. The value is null, but the consumer doesn't see it as losing value, they see more GB and think that the storage is reasonably sized and priced based upon their needs. Again, this goes back to why they need to keep the price at 350$, because it is reasonable to the customer who finds value in having a larger drive. With your idea, the best business decision would then be to introduce a 400GB ps3 and sell it for 399$.
Look, they don't mind losing money to sell more consoles, but why shouldn't they make something back? It's not like they don't have the 120g at 300$. For the majority of the consumers who focus on price, that model exists. For the higher-end consumers, there is the more expensive one. They will sell the same number of 120s and lose some profit on those and sell some 250s and make money on those. It comes close to evening out, and stabilizes losses and looks better on financial statements. While your idea does level the demand for the two (dropping price to 310$) it doesn't contribute any profound benefits, only a superficial one. Additionally, it's better to tell you investors "we are losing 6 cents per every dollar of hardware sold, PLUS we make 20$ per game and peripheral sold" rather than (your idea) "we are losing 18 cents per console and making 20$ per game and peripheral".
I doubted the production cost increase is that low, not the HDD size increase cost. If the profit increase was so substantial, you would think Xbox would of jumped on the HDD increase 'trick' many SKUs ago but instead, they stuck with their 120gb for 2 years before releasing their 250gb 'super elite' model which is priced at $400. Granted, that their HDD is not standard but it is conceptually the same and doubling the space shouldn't be that much more expensive. At this point, PS3's sales is slowly overtaking Xbox, if the there is such a big profit margin, you would think MS would be slightly more price compettive and undercut PS3's 250gb model?
The benefit of lowering the 250gb price is to remove the excess supply of 250gb and tap into the demand for the 120gb (which they are currently not producing enough of ) and other consoles in the market. They lose a lot of money for not meeting demand, and they lose a lot of money for having excess supply both scenerio is occuring on the 120gb and 250gb respectively. Lowering the Price on 250gb is like kill 2 birds with 1 stone. You potentially fix both problems. Yes, the profit margin on the 250gb will greatly decrease but they are getting more console sold which in your logic is more important than profit on console.
BTW: "we are losing 18 cents per console and making 20$ per game and peripheral" sounds a lot better than "we are losing 6 cents per every dollar of hardware sold, PLUS we make 20$ per game and peripheral sold"
Look, the excess supply won't be excess for long. They do not produce as many of the 250s as they do the 120s. They will eventually sell, and then they will phase out the 120s and make the 250s standard at 300$. However, in the meantime, they sold several hundred thousand of them at an extra 50$ and drove down production costs by scaling, so that at the point when they do phase out the 120s, the cost is under 300$.
(also, by that time, they may not actually phase out the 120s, but instead drop them to 250$)
That just means they are just stocking up on 250gb, which further indicates that 250gb is not making money. If only 30% of the 250gb is sold, it doesn't matter if they make money off the 30% because they lose a lot more on the 70% of un sold consoles. The 6cent/dollar assumes all console are sold.
It is worth that much because the market decided its worth in a specific context. I brought this up because the rumble suit is so unlike the regular licensing fees in that it would have caused a major problem. It was never initially paid for, and they wanted production to halt until it was paid. All other licensing fees are just regular fees, (fyi half of the ones you listed on that page are free), and while there may be some scaling based on pricing, it cannot be any higher than 1-2% of the toal (if even that. Probably something closer to .5-1%) As far as the laws go, you cannot just raise prices based on how crucial they are to the system. That's why contracts are in place. Your previous example differs from the norm in every way.
It wasn't really out of the norm, the blackberry keyboard lawsuit was a similar case and that went over the millions of dollars as well. Technology License do cost around that much.
I am sorry but this is the stupidest thing I have ever heard anyone say. 30-50% of the revenue? Do you understand that that would mean that every 120g costs Sony 430-480$? I hope I am taking something completely out of context and you ere just unclear about what you meant, because this is another example of an eggregious error on your part.
I did some quick google search on it: http://www.inventionstatistics.com/Licensing_Royalty_Rates.html
I think Sony fits in the "Well known brand category" so its about 8-12% and "up to 15%" for video game invention. Yeah, our guesses are way off but ~15% is still pretty substantial.
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