The Wall Street Journal reports on the holiday buying binge:
There was a 35-minute wait to check out at a Best Buy store in north Dallas at 7:30 a.m. The big draw was a Norcent DVD player priced at $14.99 after two mail-in rebates. The item sold out in 15 minutes.
Meanwhile, BestBuy.com reports its hottest selling DVD is "Harry Potter & Prisoner Of Azkaban," which sells for $19.99.
There is something very odd about the fact that DVD players can be purchased for less than the price of a DVD. The DVD player includes a host of electronic components of unbelievable complexity. The price includes royalties paid by the player's manufacturer to patent holders of both DVD electronics technology and the DVD format itself. But the competition for manufacturing among East Asian corporations is so intense that it drives the price of the product down to little more than the cost of the royalties paid to the patent holders.
The price of the DVD itself also reflects royalty payments to patent holders and a very sophisticated manufacturing process, but we know that DVDs are ultimately very cheap to produce as there are DVDs on sale for a handful of dollars. The crucial difference is that the DVD includes copyrighted material owned by major studios. This copyrighted material is not easily substitutable--one can't simply go to a different studio for comparable material--and the studios have exploited that monopoly-like power to large profit. East Asian manufacturers, and their low-wage employees, on the other hand, have no similar powers.