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RE: Pricing of DVD vs. Video.
- To: <email@example.com>
- Subject: RE: Pricing of DVD vs. Video.
- From: "Popham, Karyn" <KPopham@sph.uth.tmc.edu>
- Date: Sat, 27 Apr 2002 21:08:28 EDT
- Reply-To: firstname.lastname@example.org
- Sender: email@example.com
Here's my understanding of the situation: When VHS is first released, it's "priced for rental," $60 and up: the video stores pick up their multiple copies of the new releases and, since private parties can't or won't afford the price, they go and rent from the store. Everyone's happy. After the video stores have had their run with it, the tape is then released "priced for purchase", which is typically well under $25. This approach maximizes the income stream to the party releasing the video, keeps the video stores happy because they in effect have an exclusive for six months or a year, and keeps the customers happy because they know that eventually the price will come down. >From surveying my local video stores, it is clear that while they are >stocking DVDs, the bulk of their business is still VHS. Until the >penetration of DVD players escalates dramatically, that's likely to stay >the case. Result: the video stores don't automatically purchase dozens of >copies of hot new releases in DVDs. Result: pricing DVD "for rental" >doesn't get the company as much revenue stream as pricing it "for >purchase" from day one. It's all about maximizing profits. Consumers often don't grasp the economics of a situation from the profit-maker's point of view. Conversely, as we've discussed on the Free Online Scholarship site, the profit-makers sometimes don't understand the situation from the consumer's point of view. In the latter case, the producer usually doesn't understand the potential market IF the item was reasonably priced; they assume a limited market and price accordingly. Which is why A Very Big Company passed on producing personal computers--they couldn't see the market potential, because they couldn't see to what purposes ordinary people would put number-crunching machines. What's the number-one use of computers? Entertainment. Playing games, instant messaging, and all the ways people use them to pass the time and enjoy themselves. What's the number-one use of VCRs? Renting movies from the video store. Is that what the inventors THOUGHT it would be used for? Nope. They thought they were selling convenience (time-shifting), not entertainment. Popham's law: Any technological advance can be highly profitable if you can turn it into a form of entertainment. Cheers, Karyn Popham UT SPH Houston