CompuServe Messages

Taking out a four year loan to pay for a piece of software that will obviously be antiquated in under a year isn't a very prudent business decision. Quite obviously the software market, especially 3D animation software is phenomenally shaky and it's possible to spend $100,000 on a package one morning only to find that it sells for half that the next day. This is nothing new. It's been that way for many years. Also pricing strategies are very intricate and aren't necessarily designed to "screw" the end user. If I put a quarter mil into development and have no desire other than to recoup my outlays, then I have to come up with a good figure of what I think my customer base will be in volume.If I decide only 500 people will buy the product then, obviously I'll price the product in the $500 range. But low and behold 2,000 people buy the product and I've made a million dollars 3/4 mil profit. What do I do? Give some of the money back? What about the 2001 customer, do I charge him the same $500, knowing that it's pure profit for me? Let's say it's now two years down the road and I have substantial competition to contend with. I'm not selling any units at $500 because my competition is getting all my potential new customers at $300 a pop. Should I not lower my price to stay in the market? Obviously if I lower the price they'll be someone whining about not waiting for the two years so that they could've saved $200 dollars. The fact of the matter is that I'll obviously lower the price to stay in the market and there's nothing wrong with making a profit. No-one's out to screw the buyer. Goods are priced at what the market will bear, and the vast majority of people who spend $X on a software package are possitive that they will get at least $X worth of use out of the program in the short run. Most graphic companies make sure they'll recover their investment in software in under a year. Purchasing decisions need to be based primarily on what value one places on the product not what the market will do a year down the road. Obviously if you're trying to make some parallel regarding the MS/SI merger, in addition to many other factors, there are phenomenal economies of scale associated with MS control of that product line. The industry as a whole will probably follow suit and lower their prices but not without some harm coming to R&D. Look at what the Yost Group did to AT&T's Topas, DGS and the rest of the PC based market. At $10,000 a copy these companies made enough money to compete and fund R&D, but when they were faced with a market that suddenly shifted towards products priced at $3000, they were put under phenomenal strain and ended up cancelling their product line. This wasn't due to the fact that they weren't making the profit margin they desired, it was because they were going in the red trying to put a product of equal quality out for that price point. Didn't someone mention an economics degree earlier in this thread? This is Econ101.