The economic dynamics are different in the video game business. Every game sold is $10-$20 dollars not to mention selling accessories & the LIVE monthly fee.
There's not really a lot of content you could put on the machine without MS getting money somewhere.
NOT the same with a portable music device. Too cheap and people will just rip it out the storage device to use elsewhere ... or hack it as a portable backup ... or even as a music device, unless you sell a couple hundred tracks per machine or move the needle on the monthly signup (Rhapsody & Napster have about 2 million customer between them after spending $100 million advertising this thing ...). MS can do the math.
They are also launching a new music store and new sub music store plus basically paying wholesale for a Toshiba ... the $99 idea is unflyable.
But wait, there's more. The problem with an "intro" pricing that's low/below costs/money loser is that you can NEVER raise the price because the ONLY people who are buying your product are the budget buyers and will ABANDON you at the first drop of a price rise ... intro pricing can work on a item that costs around $20 - you can sell it real cheap - then add some significant value-added feature later on like a myriad of colors - people are willing to do that but after $40-$50 - no. The buyers you bring to that dance is your partner.
One of the success of the ipod is that it's not the cheapest game in town - if you add up the value of itunes & UI, etc, it is but Apple is selling you a PREMIUM product at a price slightly more than others but not outrageously so ... the rest of the players are all selling on price - that buys you ZERO customer loyalty in the long run ... see Woolworth, Monty Wards, KMart, Walmart?
For Ms to see any success, it has to stand on its own two feet to succeed. You can discount a little here and there but to go outrageously cheap means you have planted a niche and it takes a monumental effort to get out of it (VW's $80,000 sedan failed for this very reason).
Thanks for your thoughts. I think we're in complete agreement. In my previous piece, I noted that buying your way into a market is a long odds shot. But creating price parity with a me-too product is a certain-to-lose strategy because there's no reason for the consumer to ignore the market leader.
There will be a few people who will buy Zune on features and the Microsoft brand. But Apple is going to sell somewhere between 14 and 20 million iPods this Christmas, and it already has 60 million iPods in the field. And at the $250 price point, the question everyone will ask is, "should I take a chance on this Zune thingy or just get what everyone else is getting?" Since there's no price advantage, social proof will drive the vast majority of people to a simple answer: get an iPod. That way when little Billy opens up his present Christmas morning, he doesn't end up asking, "What is this? All my friends have iPods."
Again, thanks for the comments. It will be interesting to see how it turns out, but my call is that Zune 1.0 will be lucky to sell a million units.
Hi,
Once again after crash Nifty has started going up. Now we suggest all rises should be used as an opportunity to exit old long positions.
This bull run will continue for few more days. Overall market is in bearish mood as in medium term its just a small rally due to short covering
and result season.
Happy Trading,
ShareGyan
Commenting by HaloScan
