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Selling the base product at a loss to make it up in accessory/operational purchases is as old as razors and razor blades. My favorite example was I think it was
by floatrock 5y ago
Selling the base product at a loss to make it up in accessory/operational purchases is as old as razors and razor blades. My favorite example was I think it was one of the early xboxes was being sold for less than the cost of the hardware, expecting to make up the difference in licensing on game sales. Well, a bunch of college CS labs realized the cost advantage, starting buying them in bulk, loaded linux onto them, and used them as cheap GPU clusters.
I see this model as a financing hack... the reason you can buy an HP printer for like $40 isn't because the hardware costs $40, it's because you're effectively paying interest on an invisible loan every time you buy inkjet cartridges. The longer the manufacturer has you buying cartridges, the bigger return on their initial (invisible) loan.
What makes this model shitty to the consumer is there's no cap on the "interest". The "loan" ends once the plastic gear somewhere deep inside the machine breaks and your customer needs to get a new one. Then you're back to competing against everyone else offering the same invisible loans on the Best Buy shelf. If you're lucky, the consumer doesn't see the stockholm syndrome they got themselves into last time and they choose your product again because it's familiar.
It's not helpful to call this an "unethical proprietary practice". It's more helpful to see this as the useful "low teaser rate" financial hack it is, then try to think up new financial models that might be a bit more honest (while still being sufficiently profitable that it makes business-sense to switch).
- datagram 5y ago> My favorite example was I think it was one of the early xboxes was being sold for less than the cost of the hardware, expecting to make up the difference in licensing on game sales. This is still common practice: Sony and Microsoft generally either sell their consoles to break even or at a loss. The only difference between then and now is that they've made it much harder to run alternate operating systems. As far as I'm aware, Nintendo is the only console manufacturer that actually tries to profit off of hardware sales.