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January 12, 2005

It Is Indeed a Strange and Terrible World We Live in...

They are selling DVD players for $20 in the drugstore.

Posted by DeLong at January 12, 2005 07:30 PM

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Why not? They're small commodity electronics.

Once upon a time it was news when they had $20 calculators in drugstores. And the $20 boombox. Etc.

Posted by: J Thomas at January 12, 2005 07:57 PM

Yes, I rather think that that's his point.

Posted by: David at January 12, 2005 08:20 PM

It's a very screwed up world.

$20 DVD players have very little quality, and when they break, cannot be repaired. And where do they end up? And where does that box end up? And where does the oil for the packing foam come from?

And what happened to the job of electronics repair dude? And what happened to the industry of suppliers of parts, books, etc. to repair these things?

And do the economists measure the $20 DVD has a bigger and better basket of goods or as a worse one? And do the economists say that Sony is more productive or worse? And do they judgmentally say that that productivity increase is a good thing?

How will we get to a world where disposable products can be disposed of properly?

Posted by: jerry at January 12, 2005 08:44 PM

yes, but when blockbuster makes you "buy" your late DVD, what else are you supposed to do?

Posted by: Diana at January 12, 2005 09:06 PM

Mass refusal to buy crap would cut the trade deficit by 80%.

It would also destroy the economy in the near term, but a house built on crap isn't meant to stand.

Cranky me.

Posted by: Ottnott at January 12, 2005 09:09 PM

Since the license fees charged by the owners of the various hardware and software technologies required to make a DVD player total nearly $10, this is almost certainly a "loss leader" item -- but obviously the retailer can't be taking too large a loss.


I have seen several articles saying that many Chinese companies make no profit due to excessive competition. Presumably they can stay alive only because they are financed by state banks that can't pull the plug on them because that would force them to recognize the loan as unrecoverable.

Going to http://www.china.manufacturers.globalsources.com and searching on "dvd player" there are 250 manufacturers of home DVD players in China.

Category Manufacturers
Home DVD players 250
Portable DVD players 105
Car DVD players 59
Car CD/VCD/DVD changers 2
Home DVD recorders 38
Karaoke players/systems 10
Home theater systems 148

Posted by: jm at January 12, 2005 09:12 PM

I doubt that the Chinese have any REAL figure on how much it costs them to make a DVD player. Is there anyway to figure out how much it costs to ship one from China to your drugstore? I suspect that is the wholesale cost, or is that is being subsidized also?

Posted by: MonkeyBoy at January 12, 2005 09:23 PM

Did that DVD box say Apex on it? That is the California based company selling lots of cheap color TVs, DVD players and such. It is the sales arm or cousin of a China based TV manufacturer that went bust in the last couple of weeks. That was one of the companies that anti-dumping duties were stuck on. Also it is claimed they, Apex, were not buying DVD technology licensing fees which is certainly one way to save money.

Competition to make that consumer stuff in China is certainly intense. The $20 DVD player is certainly not made by a Japanese factory in China but probably a locally owned Chinese company. It is amazing how low some of those prices go. It is not just the local banks that can benefit but local government/political officials who collect salaries or have relatives collecting pay for no show jobs.

Posted by: christofay at January 12, 2005 09:33 PM

I recently bought a $50CDN DVD player... and yes, you do get what you pay for. The remote buttons were awful, the setup menu was really weird, etc. I'm going to give it away when I'm employed again and can afford something decent.

Posted by: Darren at January 12, 2005 09:48 PM

This is a most interesting topic. I know very little about a company like Apex as described above. Does anyone have a theoretical breakdown (sans amortization et al) of the costs attributable to the $20 dvd player on the California shelf?

Posted by: Hardie at January 12, 2005 10:51 PM

the part that messes with my head is that you can't get a disney movie dvd for less than $25. hurray for government granted monopolies!

Posted by: quinn at January 12, 2005 11:07 PM

These are estimates. For a high capacity 40 foot shipping container freight rate China to California $3,000 / 4,000 dvd players for perhaps $0.75 per dvd player for freight.

Box perhaps $0.50.

For the rest, it's a nest of subcomponents, pc boards, loading mechanism, plastic shells, metal parts. The retailer is selling at very little mark-up. If the thing breaks, bring it back to the retailer and ask for a refund. With satisfaction guaranteed, many companies are taking stuff back.

Somewhere in this thread I saw $10 for royalty expenses which I tried to point out in my note about Apex are easily skipped. Apex sells lots of this type of home entertainment electronics. You can see Apex boxes in Walmart for example. It's not just dvd players, a couple of weeks ago when I was in Massachusetts there was a $20 karaoke machine advertised in the CVS drugstore circular. Now I'm back in Taiwan.

Posted by: Chris at January 13, 2005 12:04 AM

Apex players have often been the choice of the geek everywhere, as they often had none of the artificially imposed restrictions on capabilities such as Macrovision and Region Encoding (or these could be removed with a firmware update).

They also tended to play a variety of movie formats such as VCD, also MP3s, and did well with a range of recordable media.

I know many people that have them - some swear by them, some replace 2 or 3 before they get one that works.

Basically, they offered what the savvy customer wanted at a low price point.

Posted by: MadJock at January 13, 2005 12:20 AM

I saw one in the grocery store here in Belgium. €39.99. Strange indeed.

Posted by: Scott Martens at January 13, 2005 03:08 AM

I understand the wastefulness of buying a $20 DVD player. But can't that be said about things like lipstick, creams, designer shoes? A lot of women have more than 10 lipsticks, many pots of cream, dozens of eye pencils, eye shadow pots, etc. Designer shoes (example: Gucci) go for between $250-$700 these days and are often purchased by women with over 50 pairs of shoes. Same goes with handbags, although bags are even more expensive - a significant number sell for over $1000.

Posted by: EsmeV at January 13, 2005 04:03 AM

I need to be enlightened...

Three years ago, you sell a DVD player for $200. With that $200 you buy, let us say, 7 tons of iron ore from CVRD.

Now, when you sell that same DVD player, you get only $20. In the meantime, the price of CVRD iron ore has risen 50%. So with your DVD player proceeds, you can now secure only 1/2 a ton of iron ore. Now...when does the merry-go-round stop and who gets hurt when it does?

Posted by: MTC at January 13, 2005 04:53 AM

Here in Chicago (or at least Hyde Park) they sell Barack Obama's book (Dreams from My Father) at the Walgreens. It costs about $14.

Posted by: Julian Elson at January 13, 2005 05:04 AM

There is no problem with $20 DVD players (or those that are free with the purchase of the Freddy Kruger DVD collection) as long as we pay the full cost of garbage disposal when we throw it away. But I am afraid that is a cost we are mainly leaving to the future generations.

Posted by: enfant terrible at January 13, 2005 06:56 AM

Brad -- This is a very interesting (to this layperson) program on risk and the middle class. Hacker's terrific. On now, repeats through the day on Sirius, available online in about four hours......

10:00 Risk in the U.S. Economy

The average income of middle-class families has been on the rise for decades, but some experts say the economy that made this possible has also transferred risk from government and businesses to those same Americans. A look at the rewards and risks of today's economy.


Peter Gosselin, reporter for the "Los Angeles Times"

Jacob Hacker, associate professor of political science at Yale University, fellow at the New America Foundation, and author of a forthcoming book entitled “The Great Risk Shift."

William Niskanen, chairman of the Cato Institute and former acting chairman of President Reagan's Council of Economic Advisers.

At: http://www.wamu.org/programs/dr/

Posted by: PW at January 13, 2005 07:34 AM

We have two Apex TV's. Both have a better picture than the name brand TV's we have (or have had). I got one of those cheap DVD players for my exercise room. It has more features and plays more smoothly than the $150 DVD player we got a few years ago. (The remote key layout is crappy, but that gets replaced with a universal remote anyway.)

Consumer electronics is a buyer's paradise - don't knock it. The one underserved niche that I can see is for simpler, well built/well designed stuff (at a slightly higher price point). What Apple does. I wish Apple did phones - their cell would have a nice, well thought out interface, not a feature-encrusted monstrosity. It'd be worth the extra money.

Posted by: jimBOB at January 13, 2005 07:44 AM

general question: why do so many folks write "price point" when just "price" would do? Same thing with toast, for that matter.

Posted by: David at January 13, 2005 07:52 AM

My question is, if the DVD player is on sale in a drug store, does that mean movies should be regulated like drugs?:

Posted by: verbal at January 13, 2005 08:32 AM

And I heard of a place where third rate economists were going for about $300. Amazing what competition from the second and third world will do.

Posted by: nancy at January 13, 2005 08:46 AM

If third rate economists are going for only $300, why doesn't National Review upgrade their fourth and fifth rate economists?

Posted by: Kuas at January 13, 2005 09:50 AM

I agree with Esmey, makeup is wasteful too. Guys, tell your girlfriends either you don't like it or it doesn't matter. Once I found out my guy hated lipstick, perfume, and didn't much care for the other stuff either, I stopped wearing it except to work. Now I rarely bother with it at all.

We have lots of things that are wasteful in our lives, lots of times we buy the cheap crap instead of something more expensive that will last if we take the time to take care of it. And China is going to own our asses because Americans have this attitude. We gotta change it, people... it's about SUSTAINABILITY.

Posted by: donna at January 13, 2005 10:15 AM

A third rate economist will always remain third rate, until they tell us what Machiavelli had to say about fish.

And I hear he could really sling the shit at the bar and the woodpile, and dammit, he smelled really good too, like ash wood.

Posted by: nancy at January 13, 2005 10:58 AM

I guess I miss the issue. Don't all consumer electronics eventually end up as commodities? I mean eventually people will mock me because i spent $250 on an ipod on 2004, and in 2014 you'll probably be able to get one with twice the memory, twice the speed, and twice the features for half the price. People who can see the future realize that DVDs and players are almost already a thing of the past. With tivo, dvrs, and on demand becoming more and more affordable and accessable in more and more places it makes sense that as more affluent consumers move away from dvd players, and as the costs of producing them decline with outsourcing and lower demand for the compenets in the player that the price would come down to commodity type numbers where the lowest cost producer, selling to a lower income market will eventually be all thats left (isn't this what happened with VCRs? 20 years ago they were the technology of the future, now you cant give the things away).

Posted by: philip at January 13, 2005 01:14 PM

“I agree with Esmey, makeup is wasteful too. Guys, tell your girlfriends either you don't like it or it doesn't matter. Once I found out my guy hated lipstick, perfume, and didn't much care for the other stuff either, I stopped wearing it except to work.”

Who gets to define what’s wasteful? My enjoyment could be another person’s waste. People the world over come to the US to enjoy the freedom to be “wasteful.” If a woman wants to own 50 pair of shoes instead of 10 pair of shoes, and a set of golf clubs, why is she being wasteful? Most of the women I have known don’t dress for guys; they dress to impress other women.

Here is my own personal definition of “wasteful.” The stuff you buy that you never use, or only use once. I bought a new electric shaver because of its advanced self-cleaning feature. It cost about $150 (with extra cutter block and foil). That’s a lot for an electric shaver. But I use it every day, and now I don’t face the tedium of cleaning it after every shave. Some people might call my purchase wasteful, but I don’t care.

Posted by: A. Zarkov at January 13, 2005 01:58 PM

I love Donna's comment. Now I can tell my husband that, in the name of sustainability, I really must have that $1200 Gucci bag from the 2005 Cruise Collection. And the $475 matching shoes. After all they *do* last a long time and I won't have to buy another pair for years. Yeah, right.

Posted by: EsmeV at January 13, 2005 02:01 PM

Does the company selling the cheapjack units have an interest in a pressing plant or some other part of the DVD distribution chain?

Posted by: paul at January 13, 2005 02:42 PM

20 bucks, they allow communication with the dead, and they're almost entirely edible.

Posted by: Snarkasaurus Rex at January 13, 2005 04:13 PM

FWIW, I managed to get a $15 DVD player ar Coconuts last year. It was the day after thanksgiving, though.

Posted by: erg at January 13, 2005 04:26 PM

"And what happened to the job of electronics repair dude? And what happened to the industry of suppliers of parts, books, etc. to repair these things?"

See "Broken Window Fallacy"

Posted by: radek at January 13, 2005 04:56 PM

Now, if only they'd come up with a $20 hearing aid and $1/month cell phone.

Posted by: Randolph Fritz at January 13, 2005 09:01 PM

I'd just like to point out, as someone who buys outrageously expensive shoes, that they do, in fact, last damn near forever and hence never have to be replaced.

For example, I have a pair of expensive (expensive becuase of the labour to make them, as they aren't a well known designer label) boots that I've had for 3 years and still look brand new. No cracks, no holes, nothing.

Posted by: Adam at January 13, 2005 09:09 PM

This has nothing to do with the Broken Window Fallacy.

My $240 home theatre breaking and my wanting to fix it for say $50 bucks is a vital part of the economy, is completely different than saying that a thief breaking a window that I then need to replace also makes that thief a vital part of the economy.

Truth was, I could get my home theatre fixed for $95, but a brand new equally crappy one was only $125, and so I chose to toss my old one in the waste pile.

But why did it cost $95 to replace it? Because it wasn't built to be fixed. The $95 was $90 for one hour labor plus $5 for parts. If the system was built to be fixed it would have cost $250 instead of $240 and it would have cost $50 to fix: 1/2 hour labor and $5 parts.

Posted by: jerry at January 13, 2005 09:31 PM

Re $95 to replace your home theater, I thought the high cost of labor in the US was the problem. Or rather the "problem" is that labor in China is so cheap that it costs less to make a new one there and ship it over here. I don't think the problem is that products are not built to be fixed. It cost me $100 to have my garage door opener installed; all you need to do is follow the directions in the manual. Installing a light fixture cost $90. Doesn't get easier than that. Also, I bet that even if it took 10 minutes, they would have charged you for an hour.

Posted by: PaulF at January 13, 2005 10:16 PM

No the problem is that these things are not designed to be fixed. One circuit board, everything soldered in, no diagnostics available, no diagnostics manuals made, it's so cheap to make no one expects them to be fixed. They are designed to be thrown away.

That causes waste and actually creates a product subsidy since taxpayer money pays for the waste disposal and the creation of new landfills.

That is the actual broken window fallacy here. If the products were priced at their true cost of production and disposal, the economics would favor creating items that could be fixed for less than the perceived replacement costs.

To your latter point, if there is a healthy and competitive market place, they will charge you for the time that it took. Example: I received a flat tire in Williams Arizona. Replaced the tire and placed the flat tire in my trunk. Drove back to Phoenix. Took the car to Kingston Auto on 32nd St and Bell. Kingston Auto fixed the flat. It took them about 30 minutes. I asked them how much it cost. They charged me NOTHING. I told them I hadn't purchased the tire with them. They said that was fine. That's because there are so many automotive joints around that they fix flats as a way to increase corporate goodwill. And let me tell ya, it did.

According to your argument the evil Americans with the high labor would have charged me $90.

That companies can charge a flat hour for ten minutes work is a sign of a market failure and/or out and out market collusion.

Posted by: jerry at January 13, 2005 10:54 PM

That is, they fix flats FREE as a way to increase goodwill and brand name.

(Kingston Automotive is a family owned repair business in N. Phoenix, do use them!!)

Posted by: jerry at January 13, 2005 10:58 PM


Posted by: Chance the Gardener at January 14, 2005 07:02 AM

On a side note:
does anyone wonder why most band-aids come off upon the 1st contact with water; or become useless and fall off within minutes.

Ever buy a band-aid made in another country. The foreign bandaids stay on forver, and they are not uncomfortable.

The reason is band-aids in USA are made poorly on purpose, so you use them up faster and buy more quicker. Such is the strategy to rip-us-off. What is the morals in that, we have a cut, need help, trust the manufacturer to help cure our wound, instead- there is an actual meanness in making a band-aid poorly on purpose- it is an insult to injury. Their greed increased your chance of infectiion- so pay-up!
Next time overseas buy lots of band-aids and stock up; you will notice what 'quality of life' means.
"Like rinse and repeat twice with shampoo."
people are stupid for putting up with bad products and accepting that this is the way a USA band-aid is made. Try to look at store shelf and find the 'water-proof' band-aids- (they are almost impossible to find).

Posted by: Dave S at January 14, 2005 08:13 AM

"I mean eventually people will mock me because i spent $250 on an ipod on 2004, and in 2014 you'll probably be able to get one with twice the memory, twice the speed, and twice the features for half the price."

Do you actually think they'll still make ipod-compatibles in ten more years?

Surely if Apple is still there (I think quite likely) and still in that business (pretty likely) they'll have upgraded to the point that it won't seem like the same thing at all.

Likely you'll have something with 50 times the speed, 20 times the memory, 10 times the features for the same price, and given what it actually does for you it won't seem like much of an improvement.

Posted by: J Thomas at January 16, 2005 08:30 PM

A few years ago I got a CD-ROM reader for my computer for $50. It wasn't the newest but it met my needs.

Last month I got a $50 DVD player for my daughter's computer; it also read and burned CD-ROMs and it read a collection of formats my old one didn't.

If my old CD-ROM reader goes bad should I pay to have it fixed?

Would it have been worth $60 to have a CD-ROM reader that was easier to repair?

Posted by: J Thomas at January 17, 2005 05:22 AM

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