Article on EA financials leaves little doubt what Madden 19 focus will be

[4thQtrStre5S]

Quote: Originally Posted by bucky60

You're a little confused. "Predatory Pricing" is when a well established company/product undercuts an upstart to remove the competition. It's not when an upstart tries to be competitive with an established product.

Do you have a source? For one, was the pricing of 2k's game below cost? I am not seeing anything that states, "upstart" vs "established"

Had 2K's football game continued, would they have had to increase prices to make up for the previous pricing of $19.95?

I believe the pricing was below what 2K could truly afford, or very close to it, when making a competitive product. I definitely believe it was below EA's cost. I also believe the tactic of dropping the price as far a it had, apparently down from $50 the previous year, was not a purely competitive move. EA did drop their price to $29.95 I believe.. Maybe as low as they could go compared to costs?


I feel the tactic was predatory in its intent. Hence I believe it forced EA to seek the exclusive in retaliation. 2K killed itself in the football gaming genre.



Predatory pricing is a two-step strategy for securing monopoly profits. During the first step-the predation stage-a firm charges a price below its costs in the hope of driving its competitors out of the market by forcing them to sell at a loss as well. If it succeeds, the firm can proceed to the second step-the recoupment stage. After it has the market to itself, the now-dominant firm charges a monopoly price in an effort to recoup the losses it sustained in the predation stage and to earn a steady stream of monopoly profits into the future. Predatory pricing violates section 2 of the Sherman Act, which prohibits the use of anticompetitive conduct to acquire or maintain monopoly power. Predatory pricing is one form of anticompetitive conduct. Many judges and scholars, however, believe that predatory pricing does not occur because the two-step strategy combines significant up-front costs with a low probability of success. This skepticism has led courts to impose a recoupment element for section 2 predatory pricing claims. The recoupment element requires an antitrust plaintiff bringing a predatory pricing claim to prove that the defendant will be able to acquire monopoly power and to charge a monopoly price for long enough to make the whole scheme profitable. Antitrust liability becomes a function of the defendant's profitability. This Article discusses the evolution of and rationale for the recoupment requirement. It shows how recoupment analysis by courts is often flawed, largely because judges incorrectly assume that market entry, which can prevent recoupment, is easy. This Article then illustrates the many ways in which recoupment can occur, including recoupment in other markets and recoupment through cartel or oligopoly pricing. Despite these various modes of recoupment, federal courts have sometimes structured the recoupment requirement in a way that is literally impossible to satisfy. This Article advocates more fine-tuned recoupment analysis. After exploring the judicial misapplication of the recoupment requirement, this Article challenges the underlying premises of the element by showing how predatory pricing can hurt consumers and competition even if a firm engaged in predatory pricing is unable to eventually recoup its losses. Ultimately, the recoupment requirement does not distinguish between anticompetitive and benign (or beneficial) conduct. This Article concludes by explaining how eliminating the recoupment requirement in predatory pricing litigation would better serve the purposes of antitrust law.


Visual Concepts created the 2K game before selling it in 2005 to Take-Two; Visual Concepts created 2K5.
: https://en.wikipedia.org/wiki/Visual_Concepts

https://en.wikipedia.org/wiki/ESPN_NFL_2K5

[CM Hooe]

We really don't need to go down the 14-year-old exclusivity rabbit hole again, guys. It's not relevant to the discussion of the current creative direction of Madden at all. Let's get back on topic.

[SageInfinite]

Quote: Originally Posted by CM Hooe

We really don't need to go down the 14-year-old exclusivity rabbit hole again, guys. It's not relevant to the discussion of the current creative direction of Madden at all. Let's get back on topic.

I agree we don't need to go down the hole again, but as long as Madden is the only NFL game it will always be relevant. It will always find it's way back into the conversation.

[roadman]

That's one take, another take is, since things haven't changed in 14 years, unless the NFL changes their business model, it will be business as usual.

Once that becomes a reality, the NFL changing the way it does business, the topic will become more relevant.

[bucky60]

Quote: Originally Posted by 4thQtrStre5S

Do you have a source? For one, was the pricing of 2k's game below cost? I am not seeing anything that states, "upstart" vs "established"

https://www.ftc.gov/tips-advice/comp...-or-below-cost

"Instances of a large firm using low prices to drive smaller competitors out of the market in hopes of raising prices after they leave"

Are you saying Madden wasn't well established and NFL2K wasn't an upstart?

Quote: Originally Posted by 4thQtrStre5S

I feel the tactic was predatory in its intent.

Not according to the Federal Trade Commission

[4thQtrStre5S]

Quote: Originally Posted by bucky60

https://www.ftc.gov/tips-advice/comp...-or-below-cost "Instances of a large firm using low prices to drive smaller competitors out of the market in hopes of raising prices after they leave" Are you saying Madden wasn't well established and NFL2K wasn't an upstart? Not according to the Federal Trade Commission

I believe there is a little more to it as I pointed out in the definition and explanation in my previous post.. Sega was hardly an upstart. The lower price would also have to be maintained over time. EA settled a lawsuit in 2012(?) due to something similar with an increase in product price with Madden, which I believe may have stemmed from their price drop to $29.95???...

Market share determines dominance. I do not know the market share for 2005 between the two companies.

But I will leave with this - In review of my initial post, I should have phrased my comment better. I did very much leave my comment in a manner that was not as true to what I was thinking when I did create the comment. Legally, was Sega going to see a lawsuit? I don't know and since the game was stopped after 2005, it doesn't matter now.

The pricing choice is questionable, IMO. I would like to see the costs and other financials. Could Sega take down EA? Probably not...But the tactic was very much within the frame work, being its extremely low price, of being predatory.

The FTC page is a rather limited explanation.. (EDIT: from justice.gov) key word: potential rival

In most general terms predatory pricing is defined in economic terms as a price reduction that is profitable only because of the added market power the predator gains from eliminating, disciplining or otherwise inhibiting the competitive conduct of a rival or potential rival. Stated more precisely, a predatory price is a price that is profit maximizing only because of its exclusionary or other anticompetitive effects.3 The anticompetitive effects of predatory pricing are higher prices and reduced output (including reduced innovation), achieved through the exclusion of a rival or potential rival. But such a definition does not state an operational legal rule.5 It is therefore necessary to base the legal rule on tractable measures such as cost, market structure, and recoupment.

A key premise in developing an enforcement policy for predatory pricing is the expected frequency and severity of its occurrence. That determination necessarily rests on the twin guides of empirical evidence and economic theory. In Matsu****a and Brooke the Supreme Court found that predatory pricing was speculative and “inherently uncertain,”5 and noted its “general implausibility.”6 Moreover, in Matsu****a the Court embraced the view that a “consensus” of commentators finds that predatory pricing is “rarely tried, and even more rarely successful,”7 and other courts have embraced this view,8 including a later Supreme Court in the Brooke decision.9 The consensus to which the Court referred rested essentially on empirical studies by John McGee and Roland Koller, published in 1958 and 1969;10 and the Court cited each work explicitly.11

https://www.justice.gov/atr/predator...egal-policy#26

[reyes the roof]

I look at it more like the type of promotion a cable company will do for first time customers where they give a huge deal for your first year. Offer the game cheap to get new eyes on your product, then next year go back to regular price

[bucky60]

Quote: Originally Posted by 4thQtrStre5S

I believe there is a little more to it as I pointed out in the definition and explanation in my previous post.

Not according to the FTC.

Quote: Originally Posted by 4thQtrStre5S

Sega was hardly an upstart.

MFL2K was a fairly new game. Madden was well established.

Even with your definition, you would have to argue that 2K was trying to remove EA/Madden from competition instead of just trying to get some footing and some of the market share.