[Fsfe-france] Dynamic Pricing: DVD versus CD Strategies

[Laurent GUERBY]

Un point de vue d'economiste sur le sujet du prix des CDs et des DVDs.

Laurent

http://bigpicture.typepad.com/comments/2005/03/dynamic_pricing.html
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Dynamic Pricing: DVD versus CD Strategies
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Ironically, many of the films mentiooned here now sell for less than
their soundtracks. Two hours (or longer) of a movie, plus additional
audio commentary, a documentary of the making of the film, outtakes,
special features etc., all cost less than a mere 45 minute audio only
songs from the film. 

We've stated this before, but it bears repeating: Consumers have very
quickly figured out that CDs are a peculiarly weak value propostion. Is
it any surpise that CD sales have slid while DVDs have grown
explosively? How is it that the widespread availability of films on Bit
Torrent haven’t dented their sales? A simple possible explanation is
pricing structure. 

By pricing DVDs strategically, the film and television industry captures
marginal sales and maximizes revenue. The only comparable pricing
structure in the music industry are budget CDs. These are typically much
older than the DVD price discounts (6 months versus many years). Even
worse, they are packaged differently, specifically marketed as
“budgetline” -- with less desirable cover art and labelling. (There’s
nothing quite like sending a message to your price sensitive clients
that you are 2nd rate consumers, and we hardly value your business).  

Compare the differening approaches the two industries take. DVD sales
are dynamically priced. Sellers are aware they have price sensitive
consumers. They offer the exact same product -- albeit on a less timely
basis. 

CD sales are static, maintaining the same price over the life of a disc.
On those select discs when price discounts do occur (budget line), the
industry purposefully makes changes to make the product less desirable. 
        
DVD sales in the secondary market have grown dramatically, paralleling
the explosive growth of DVDs themselves. But the ongoing discounting
process continues, with prices sliding as
low as $5 per DVD. This dramatically reduces the impact of the secondary
market.

More on this, and an some interesting conclusions via our study of
secondary markets, next week.
[...]
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