Sony to eBayers: Flip This

Sony to eBayers: Flip This

Our buddies at Evil Avatar are reporting that EB Games is canceling any preorders that appear on eBay in accordance to Sony's wishes. According to the report, Sony and eBay are compiling a list that'll make its way to EB's offices in the near future, effectively closing many "aspiring entrepreneurs'" businesses before they had a chance to prosper.

In the distance, once the sound waves from North Carolina reach you, you'll hear my capitalist heart breaking and my inner internet nerd cackling with sadistic glee.

I remember, way back in 2000, when the first PS2s made their way onto eBay and sold for well over $1,000 in the first week. My best friend managed to get his hands on one the old fashioned way, by standing on line overnight outside a Best Buy. He called me the second he got the machine into his car and locked the doors. The first thing he said to me was "Some old guy offered me $500 for it outside the store."

Back then, I didn't get why people would pay so much for something just to have it before everyone else, and I still don't. But I also don't see a reason not to exploit that. I'm not one to espouse the virtues of the free market, but in the case of luxuries like the PS2, Xbox 360 and now the PS3, they really are worth whatever people will pay for them. The people being "victimized" by eBay flippers aren't dehydrated people being charged for water, they're the guys who don't want to stand out in the cold to get into the club like everyone else.

Boo hoo.

Of course, it's possible that some of the people buying into the eBay thing were outside EB when the PS3 preorders became available, but the flippers were there first, which effectively shrank the supply of PS3s available at their normal, exorbitant retail price. But let's look at a more established version of what's going on here: ticket scalping.

While it's illegal in many states, eBay takes advantage of the lack of a federal law prohibiting scalping to dance through 50 different versions of red tape, expecting users to know how much they can pay over a ticket's face value in their given jurisdiction. While they do have an official policy demanding resellers adhere to local laws, there's very little oversight. Case in point, I paid $400 for four tickets to a Yankees-Red Sox game in the Bronx. The face value of all four tickets was $80. This transaction was against state law, but given the amount of other tickets to the same game on sale, eBay seemed willing to relax its policies for the commission they take from each sale.

But really, everyone benefited from the transaction. My trip to New York was a spur of the moment thing, and without someone who made a business of working a gray-market commodities exchange, I wouldn't have been able to enjoy the game. I'm going to go out on a limb and say most people looking for PS3s on eBay are in a boat similar to mine. I call mine the S.S. Lack of Foresight.

So what's the difference here? eBay is obviously OK with scalping, despite the fact it's illegal. Why work with Sony on killing the PS3-scalping market? And moreover, why does EB games care what people do with their preorders after they get their money? Why does Sony?

Something has to be afoot here, and it sounds expensive. The easy assumption would be that Sony's concerned about the PR fallout from people paying even more for an already expensive machine, but the fact people are willing to actually buy the chance to get a PS3 on release day tells me this type of scalping doesn't deter sales; if anything, the constant news stream reporting people overpaying on the machine just drives up the value in people's minds. No, this type of crackdown on aftermarket retail bears a closer resemblance to Sony's recent aggression toward Hong Kong retailer Lik Sang than it does a gesture of goodwill toward gamers.

If Sony's done much of anything lately, they've been trying to draw their customers deeper into their sphere of influence. Between the Rootkit, creating their proprietary competitor to iTunes, Blu-Ray's draconian DRM measures and the Lik Sang lawsuit, how surprising is it to see them going after preorder flipping, closing off another avenue of commerce that they can't guide and shape they way they choose? It's nothing new in their corporate history: Their strategy has always been to draw people into their brand with one device, which usually only communicates with formats and devices developed by Sony.

The PSP relies on proprietary media, and the majority of its firmware upgrades are attempts to stop hackers from being able to crack the device's operating system in order to install homebrew programs on it. Their handling of their SD cards has them under investigation by the U.S. Department of Justice. Is it much of a stretch for them to want to control all aspects of trade in regard to the PS3, the machine that might bankrupt the company if it doesn't sell exactly right?

The PS3 is what's known as a loss leader. Sony plans on losing money on every PS3 sold and making up that money when a customer purchases peripherals and games. What happens when half of your early adopters, the people whose acceptance leads to mass-market appeal, can't afford to buy as many games as they originally could because they had to blow an extra $1,000 on actually getting the PS3? You're going to lose a lot more money per sale than you originally had planned.

Given that Sony went so far into debt to build the PS3, their debt was downgraded to BBB-plus (three steps above "junk") with a negative outlook, it makes sense that they don't want to have even more red in their corporate ledger. If that means leaning on EB and eBay to get less expensive consoles back in the hands of spend-happy early adopters, so be it.

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I would disagree with your comparison of eBay resale of launch PS3s/whatever and ticket scalping. The concerts/live shows/sport events are one of a kind things - either you see them live now or never again. But if you don't buy a PS3 on launch day (and I still don't see a single rational reason why you should), you can buy the functionally same PS3 in a week, month or even four years (that one will be much cheaper). That is my only slight objection to your argument, other than that, I quite agree. Why pluck down gazillion dollars to have a machine on a launch day when even the launch titles are not that tasty? When I look at my stack of still-unfinished great PS2, PC and DS games I can tell that PS3 must bring something truly amazing to make me even think about purchase. And it's not happenning so far. And PS3 is launching here in Europe in March, anyway :)

That said, I wholeheartedly agree with your point, that this Sony/EB cooperation is not about free market, ant it saddens me. I would call it Sony's exploitation of its market status and power, but if people don't care (i.e. don't sue), then it will mean that they accept it.

I see your point about the scalping analogy, but they way I look at it, launch day is an event in itself. I think part of the reason people buy 0-day stuff is to be part of a select few who are able to experience whatever it is people experience on launch day, and that's partially why they're willing to pay more for it.

Glad you liked the article :)

Despite EB/Gamestop Denial, PS3 Preorders Still Being Canceled

Yesterday, I reported on a rumor saying EB/Gamestop was working with Sony and eBay to cancel people's preorders if they were trying to sell them on eBay for a higher price. According to Next Gen, that's not officially the case. Chris Olivera, EB/Gamestop's Director of Public & Media Relations went on record, saying, "Are we canceling pre-orders that appear on eBay? The answer to that is no."

Next Gen didn't provide any additional material, which leads me to believe Olivera is either very terse or his "But" was off the record. But, despite his categorical denial, people who work in EBs are claiming that they've been instructed to cancel people's preorders if their receipt has made it onto eBay.

According to the comments on a Digg post discounting the rumor, numerous workers have said as much. One, who goes by the name "traviswood," said, "I work at EB and we are infact calling people. 4 of our 8 preorders were Americans (We are Canadian) and they showed up on Ebay, today they were informed to come to the store to get a their preorder refund." An American worker, alias "Klisk," said his New Jersey store is "canceling [preorders] on ebay. Maybe it's more of a district/manager thing than a corporate thing?" That could be the case.

Why is this happening in Canada and New Jersey? Are conscientious district managers standing up for their customers without global corporate knowledge? Has Sony bypassed EB/Gamestop's upper levels and appealed directly to regional and local managers? It's doubtful; when companies that big start avoiding proper channels, men in very expensive suits start speaking Latin to one another in front of juries.

However, if Sony isn't involved, the question still is: Why?

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Joe:
However, if Sony isn't involved, the question still is: Why?

A local-level push could, in fact, represent some employees displaying somewhat higher customer service than what the corporate world typically requires. To a large corporation, a sale is simply a product sale - in theory, the console purchase is no different if it's someone that wants to enjoy it themselves, buying it as a gift, or buying it to scalp on eBay. That's not how other customers see it though.

Were I running a business, I'd much rather have some pissed off profiteers than alienated regulars. It's not like the systems aren't going to sell out, so it makes a lot of sense that they'd rather sell them to local customers that are likely going to come back later.

It's a very weird scenario in which the people supposedly being hurt by the profiteers are the ones perpetuating the problem. It doesn't bother me if people are flipping systems for profit because I have no desire to be the first kid on the block with one. The only people who drive this practice are those that "must have it now"... and so, with any competition among consumers, it drives the price up and encourages this business scheme... and they just happen to be the only ones affected by this scheme.

That said, if I had a business in videogames... Virgil's opinion makes the most sense to me so I can understand why EB "might" be stomping out eBay sellers, but I still feel that Sony had some influence in some manner. Maybe a future cost-cut incentive for the distributor or something. It doesn't make sense that a company like EB had a change of heart "at the very last minute". I don't really buy that.

I wonder if they'll be so diligent about the Wii preorders... yeah, right. ;-)

 

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