A f irm may charge lo wer ro yalties o r o f f er a

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Unformatted text preview: ects create mo no po lies, go vernments may balk at allo wing a f irm to leverage its advantages in ways that are designed to deliberately keep rivals f ro m the market. Seed the Market When So ny launched the P S3, it subsidized each co nso le by selling at a price estimated at three hundred do llars belo w unit co st.C. Null, “So ny’s Lo sses o n P S3: $ 3 Billio n and Co unting,” Yaho o ! To day in Tech, June 27, 2008, http:/ / tech.yaho o .co m/ blo gs/ null/ 96355. Subsidizing co nso les is a co mmo n practice in the video game industry—game player manuf acturers usually make mo st o f their mo ney thro ugh ro yalties paid by game develo pers. But So ny’s subsidy had an additio nal benef it f o r the f irm—it helped sneak a Blu-ray player into every ho me buying a P S3 (So ny was backing the Blu-ray standard o ver the rival HD DVD ef f o rt). P S3 has struggled with f ierce co mpetitio n, but initially seeding the market with lo w-co st Blu-ray players at a time when that hardware so ld at a very high price gave eventual winner Blu-ray so me extra mo mentum. Since So ny is also a mo vie studio and manuf acturer o f DVD...
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This document was uploaded on 01/31/2014.

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