Encouraging GPU Price Gouging: $100 Upcharge Now A 'Sale'
Posted on September 11, 2017
It’s illegal to outright fix prices of products. Manufacturers have varying levels of sway when establishing cost to distributor partners and suggested retail prices, acted on much lower in the chain, and have to produce supply based on expectations of demand. We’ve previously talked about how MDF or other exchanges can be used to inspire retailers to work within some guidelines, but there are limits to the financial and legal extension of those means.
This context in mind, it makes sense that the undertone of discussion pertaining to video card prices – not just AMD’s, but nVidia’s – plants much of the blame squarely on retailers. There’s only so much that AMD and nVidia can do to drive prices at least somewhat close to MSRP. One of those actions is to put out more supply to sate demand but, as we saw during the last mining boom & bust (with emergent ASIC miners), there’s reason for manufacturers to remain hesitant of a major supply commitment. If AMD or nVidia were to place a large order with their fabs, there’d better be some level of confidence that the product will sell. Factory-to-shelf turn-around is a period of months, weeks of which can be shipping (unless opting for prohibitively expensive air freight). A period of months is a wide window. We’ve seen mining markets “crash” and recover in a period of days, or hours, with oft unpredictable frequency and intensity. That’d explain why AMD might be hesitant to issue large orders of older product, like the RX 500 series, to try and meet demand.
The undertone of content pertaining to AMD GPU prices in particular, with much focus on Vega, has driven a paraphrased dialogue of “we’re trying to do what we can to stop miners from getting these cards.” Early press briefings with the company, including those conducted at the Vega press event, explicitly included phrases like “we can’t hold a gun to [retailers’] heads” to get prices lower, or discussion about getting cards into the hands of gamers, not miners. Hands clean, it’s on the retailers. Statements issued to press have indicated that AMD “has no control” over the pricing situation which, although largely true, does seem mismatched with new initiatives.
It would seem odd, for instance, that AMD’s official social media accounts should suddenly embrace these higher prices, posting tweets such as:
“Need a new GPU? Grab this @XFX_Playhard RX 570 from @BestBuy for only $279 and get the Quake Champions Pack free! http://bit.ly/2gNkI8x”
$280 – that’s a full $100 over the original launch target of the RX 470, and roughly $100 over available RX 570s just months ago. Best Buy has so generously reduced the cost-to-consumer of the product by a full $20 – about 10% -- and benevolently gifts us a “free” game, not to speak of said game’s retail price. Or the fact that Best Buy calls it a PS3 code, not a PC code. You’d think the extra charge on the card begets proofreading. Best Buy deserves ire for its price inflation, but it’s also difficult to determine how much of the pricing “adjustment” falls squarely on Best Buy – it’s fully possible that distributors, AIB partners, or all in the chain have adjusted for mining demand.
AMD has now become the proverbial accessory to a crime against consumers: Best Buy might be robbing the bank, but AMD is holding the bag open as the retailer furiously stuffs it with cash. AMD’s tweets are openly encouraging – just a few months after condemnation to a room of press – these inflated prices, using phrasing that boldly includes an adverb such as “only.” The card is “only” $100 over what it was just months ago, just like it’s “only” 10% off of a price hike that’s “only” 67% higher than what it should be. It’s two-faced. Up until these tweets, the company could garner consumer support through trying to help with the demand, trying to help with the prices, and taking the consumer’s side. Now, though, it’s clear that there’s limited action behind that veneer.
We have to grant that AMD is in a tough spot: There are likely agreements in place that require cross-promotion or social exposure to either retailers or board partners (Best Buy & XFX, in this case). AMD can’t very well tell consumers to avoid Best Buy, Newegg, Amazon, or any other retailer, and can’t tell those retailers to sod off. Retailers are a critical part of the ecosystem, and AMD needs to keep ties strong with those retailers and with consumers. It all hangs in the balance, but the balance gets tilted when the company suggests one thing to consumers, then another on social media. That’s the two-facedness of it: The retailers are to blame; oh, by the way, here’s a great deal on an RX 570 for only $280.
We’d encourage our audience to not become a part of this attempt at establishing a new pricing norm. Intentional or not, AMD’s endorsement of these inflated prices helps retailers to establish that new norm, rewriting history such that consumers think prices have always been this way, and that $280 is genuinely a good deal on a once-sub-$200 product. You can always wait: Wait for supply to pick-up or wait for mining to die down. There are also alternatives, like ripping a card out of an older system (in the interim), using an IGP, buying used, or buying competing products – like the $200-$220 GTX 1060 3GB or $280 GTX 1060 6GB cards, which hold price equivalence with an RX 570. The 570 was never really meant to compete with 1060s – that’s the job of the 580, but those range up to $350 for 8GB models. The 1060 6GB cards are still running about $30 higher than they should, but that’s a far cry from a $100+ jump that’s simultaneously condemned and promoted by the maker of the product. Again, waiting is always an option, as 1060 prices are also higher than they should be.
It’s disappointing, really: We recommended the X70 series at launch, starting with the 470 and leading to the 570. The card made far more sense than a GTX 1050 Ti at $145-$165, and wasn’t that much more money. It was also reasonably close in performance to an RX 580, but $30-$60 cheaper at launch. The 1050 Ti has remained stagnant in price, with nearly all higher-tier cards climbing at least somewhat from the spiked demand. That’s nVidia and AMD alike. Some of this disappointment is just a lack of supply mixed with retailer, distributor, or board partner decisions that have driven up prices. The rest stems from AMD’s new endorsement of those prices, which certainly puts ideas in the heads of retail giants: “They’re OK with this. They’ll even promote it.”
Mining provides a cover for some of the pricing scenario, but not this. These tweets, however short the combined <280 characters may be, betray the consumer and perpetuate a new norm of video card prices. We’d suggest that consumers don’t play into this trap. Wait, buy used, buy something else, or repurpose parts. One thing's for sure: A $100 up-charge is not a sale, and it's doublethink to imply as much. That much is on the retailers.