Posts Tagged‘market’

Canon, Nikon Should Abandon The Compact Market.

When was the last time you picked up a compact camera? I’ve got one sitting in my drawer beside me (the Sony DSC-HX5V that I reviewed all those years ago) and it’s been there for the better part of 2 years, not seeing the light of day. I’d hazard a guess that everyone has at least one digital camera lying around their house somewhere that simply doesn’t get used anymore and it doesn’t take a genius to figure out why. When the picture quality of your smartphone is comparable to your pocket cam there’s really no reason to bring it along, even more so when your smartphone has all those convenient options for sharing them instantly. With that in mind it seems a little odd that the major camera manufacturers still bother making them as it seems clear where the future of that segment is.

Canon and Nikon

Indeed if you check out the recent financial results of both Canon and Nikon they both cite the lagging sales in compacts as a contributing factor to their recent decline in sales and profit. It’s not just isolated to them either, pretty much everyone in the camera business has been hurting recently and it seems to be all directly related to their continued presence in the compact market. Now I’m not saying that this market needs to disappear completely, there’s still people out there to sell them too, however when your bottom line is having an axe taken to it because of one particular product line it’s time to rethink your presence there. Indeed when the major player’s interchangeable lens system cameras are doing so well in comparison it seems inevitable that this is the direction they should take, although some would think otherwise.

Nikon’s president Makoto Kimura doesn’t want to abandon this sector and instead wants to “change the concept of cameras”, potentially with a non-camera device. As some analysts have picked up on this sounds an awful lot like they might be trying to enter into the smartphone market somehow but in all honesty that’s the last thing they should be doing. If Nokia’s attempt at bringing better camera technology to the mobile platform is anything to go by then I can’t imagine Nikon’s going much better, especially considering the luke warm reception their Android based pocket cam received.  It would be far, far better for them to simply drop the whole sector together and then refocus their efforts on further improving their mirrorless and DSLR ranges which will always have a strong market behind them.

I’m not advocating that they just straight up stop making them, there’s still a bit of money to be made here, but it’s obvious that even super cheap compacts aren’t enough to pull consumers away from their smartphones. Instead they should gradually taper away their involvement in the area, reducing the number of models they produce significantly. It’s very possible that there’s a sustainable niche in there somewhere which could support a couple models and reducing the available product lines would show that. If they became unsustainable then it’d be time to drop that area completely and then put those resources to use in their other imaging sections. There’s also the possibility of licensing out their technology to smartphone manufacturers in order to get at some of the action that they’re currently missing out on although whether any of their tech is applicable is an engineering question I can’t answer.

This isn’t necessarily a bad thing for compact makers, all it means is that part of their market has been eaten away by technological advancements in other fields and it’s time for them to adapt. I think they’re all well placed to whether this change as their businesses outside their compact range are all strong, even growing in most cases. Whilst the loss of the compact sector won’t necessarily mean a boost to the DSLR/mirrorless sector it will mean they’re spending less money on a shrinking sector, something which seems like smart business sense. Hopefully they take this path sooner rather than later as I’d hate to see my favorite camera manufacturer suffer unduly because of it.

The Windows 8 Hate Is Starting To Get Old, Guys.

I’ve been using Windows 8 for a good 6 months now and as someone who’s use all previous Windows versions going back to 3.1 it’s easy for me to say that it’s the best of the lot so far. Sure I don’t use the Metro interface a lot but that’s mostly because it’s not designed for the current platform I’m using it on (a PC that doesn’t have a touch interface). Still it seems I can’t go a day where someone, usually an executive from a large OEM, is bashing Windows 8 in one way or another. Considering that nearly everyone I talk to, including people who aren’t that technically inclined, seems to say the direct opposite of what they say I figured it was something worth looking into.

Windows 8 Shadows

A lot of the criticisms seem to stem from the awkward launch that Windows 8 had. Now I’m not going to try and be an apologist for this as it’s well known that even Microsoft was disappointed with the initial release. For those of us who endured the Vista launch however it’s pretty obvious why this occurred as whenever a new Windows release deviates heavily from the previous one (whether in terms of interface or underlying architecture) the sales are always lackluster as their biggest customers, the enterprise buyers, don’t want to take the risk until all the teething issues have been sorted out. More crucially though is that whilst the launch might have been an all round disappointment it didn’t take long for Windows 8 to gain some significant steam, getting on par with Windows 7 after 90 days.

Several other high profile people have gone on record saying that the Surface is also seeing lackluster sales. This coming not long after many people have called the ultrabook market a failure (which is not unjustified) makes it look like Windows 8 ‘s introduction can’t have any impact on what looks like a declining PC market. Now I’m not going to argue against those numbers however if you look at past Windows releases, take 7 for instance which was released in Q4 of 2009, you’ll see that whilst there was a small boost (which wasn’t out of line with current trend growths) the previous quarter it was back to where it was before. What this means is that while you’d expect people to be buying a new computer in order to get the latest version of Windows many in fact don’t. This doesn’t come as much of a surprise as the system requirements between Vista, Windows 7 and Windows 8 aren’t that great and indeed any PC bought during the time that these operating systems has been available would be more than capable of running them. Indeed many computers have reached the level of good enough half a decade ago for the vast majority of the population so the lackluster growth isn’t surprising, nor is it anything to worry about in my point of view.

I think the reason for the backlash is due to two reasons, both of which the blame does actually lie with Microsoft. The first is a bit of speculation on my part as I think Microsoft promised a boost in PC sales to the various OEMs in order to get them on board early with Windows 8. This is pretty much par for course when you’re working with OEMs on a new and risky product as otherwise they’ll be waiting until the product catches on before they throw their hat in the ring. Now whilst Microsoft could probably handle Windows 8 not getting a lot of OEM support for a while it would have been likely that Windows 8 wouldn’t have caught up to 7’s sales in the first 90 day period, severely stunting its future growth. Whilst they wouldn’t have a Vista level disaster on their hands it would’ve been much worse than what they’re dealing with now.

Secondly I get the feeling that many of the OEMs aren’t too enthused about the Surface and I don’t blame them. I said a while back that Microsoft needed to keep their product in the premium range in order to not piss off their partners and they’ve done that to some extent however with the exorbitant license cost for OEMs it’s incredibly hard for them to make a comparable tablet for the same cost as the low end Surface RT. This has no doubt generated a bit of animosity towards Microsoft with many OEM executives bashing Surface at every chance they get despite it selling out almost immediately upon release. Whether Microsoft can repair this relationship remains to be seen however as the platform’s long term survivability will be made or broken by their OEMs, just like it has been in the past.

Microsoft took a risk with Windows 8 and by most accounts it appears to be paying off for them, unlike their previous experience with Vista. It might not be the saving grace of the PC industry nor might it be a runaway success in the tablet market however Microsoft is not a company that plays the short term game. Windows 8 is the beginning of a new direction for them and by all accounts it’s creating a solid foundation with which Microsoft can further build on. Future Microsoft releases will then be able to deliver even more capabilities on more platforms than any other ecosystem. This isn’t the first time they’ve been on the back foot and then managed to managed to dominate a market long after it has established itself (Xbox anyone?) and I’d be really surprised if they failed this time around.

 

Dealing With The “Skills Shortage”.

Canberra is a weird little microcosm as its existence is purely because the 2 largest cities in Australia couldn’t agree on who could be the capital of the country and they instead decided to meet, almost literally, in the middle. Much like Washington DC this means that all of the national level government agencies are concentrated in this area meaning that the vast majority of the 360,000 or so population work either directly or indirectly for the government. This concentration of services in a small area has distorted many of the markets that exist in your typical city centres and probably most notable of them all is the jobs market.

To put it in perspective there’s a few figures that will help me illustrate my point more clearly. For starters the average salary of a Canberran worker is much higher than the Australian average even beating out commodity rich states which are still reaping the benefits of the mining boom. Additionally Canberra’s unemployment is among the lowest in Australia hovering around a staggering 3.7%.  This means that the labour market here is somewhat distorted and that’s especially true for the IT industry. However, like the manufacturing industry in the USA, there are still many who will bellyache endlessly about the lack of qualified people available to fill the needs of even this small city.

The problem is, as it always has been, simple economics.

I spent a good chunk of my career working directly for the public service, jumping straight out of university in a decent paying job that I figured I’d be in for quite a while. However it didn’t take long for me to realise that there was another market out there for people with my exact same skills, one that was offering a substantial amount more to do the same work. Like any rational person I jumped at this opportunity and have been continuing to do so for the past 6 years. However I still see positions similar to mine advertised with salaries attached to them that are, to be fair, embarrassing for anyone with those kinds of skills to take when they can get so much more for doing the same amount of work. This has led to a certain amount of tension between Canberra’s IT workers and the government that wishes to employ them with many agencies referring to this as a skills shortage.

The schism is partly due to the double faceted nature of the Canberran IT market. One the one hand the government will pay you a certain amount if you’re permanently employed with them and another if you’re hired as an outside contractor. However these positions are, for the most part, identical except that one pays an extraordinary amount more at the cost of some of the benefits (flex time, sick/annual leave, etc.). It follows that many IT workers are savy enough to take advantage of this and plan their lives around those lack of benefits accordingly and thus will never even consider the lower paid option because it just doesn’t make sense for them.

This hasn’t stopped the government from trying however. The Gershon report had been the main driver behind this, although its effects have been waning for the past 2 years,  but now its the much more general cost reductions that are coming in as part of the overall budget goal of delivering a surplus. The problem here however, as I mentioned in the post I just linked, is that once you’re above a certain pay grade in the public service you’re expected to facilitate some kind of management function which doesn’t really align with the requirements of IT specialists. Considering that even outside of Canberra’s arguably inflated jobs market such specialists are able to make far more than the highest, non-managerial role in the government it comes as no surprise that the contractor market had flourished the way it did and why the implementation of the Gershon report did nothing but decimate the government’s IT capability.

Simply put the skills/labour shortage that’s been experienced in many places, not just Canberra, is primarily due a disconnect between the skills required and the amount organisations are willing to pay for said skills. The motivation behind the lower wage costs is obvious but the outcome should not be unexpected when you try to drive the price down but the supply remains the same. Indeed many of the complaints about a labour shortage are quickly followed by calls for incentives and education in the areas where there’s a skills shortage rather than looking at the possibility that people are simply becoming more market savy and are not willing to put up with lower wages when they know they can do better elsewhere.

I had personally only believed that this applied to the Canberra IT industry but in doing the research for this post it seems like it applies far more broadly than I had first anticipated. In all honesty this does nothing but hurt the industry as it only helps to increase tensions between employers and employees when there’s a known disconnect between the employee’s market value and their compensation. I’d put the challenge to most employers to see how many good, skilled applicants they get if they start paying better rates as I’d hazard a guess their hit rate would vastly improve.

Maybe I’m Answering the Wrong Questions About Gen Y’s and Property.

I’ve long been of the opinion that many of my fellow Generation Ys are suffering from a crisis of desire in regards to the Australian property market. It’s an understandable phenomenon as most of us grew up in what are now quite nice suburbs, central to a lot of services and now considered to be an extremely desirable place to live. It then comes as no surprise that our generation would want to replicate this with their first home purchase and regrettably this leads many to believe that the property market is unaffordable, which at that level it most certainly is. Buying out in the mortgage belt, like most of their parents did back when the time came for them to do so, has been my solution to the issue for quite some time now but some recent reading has pointed me towards http://fhareversemortgagecalculator.com/ which in turn pointed me in another direction, one that I hadn’t considered previously.

To give you some background on where this thought came from I’ll point you in the direction of a really solid article from The Atlantic on the drastic change in spending habits between Gen Y’s and their predecessors. In it Thompson lays out the idea that perhaps Generation Y has replaced the home and car as the most desirable objects with modern technology like smart phones. This is coupled with an increasing tendency towards sharing those same goods (called collaborative consumption) that have such a high capital cost which means total ownership plummets whilst use sky rockets. It’s an interesting idea and I was wondering if the trend translated across to Australia.

Turns out part of it does.

Whilst I couldn’t find any good information around car ownership with Australia being a country that’s heavily focused on property ownership there was a lot to dig through in regards to Gen Ys attitude towards property. Shockingly, at least for me, the vast majority of Generation Ys do intend to buy, somewhere on the order of 77% which is actually above previously generations. Faced with the decision of not being able to get the home they own many will consider a cheaper investment property initially in order to be able to leverage it later into the property they actually want. That’s not the interesting part though, what I found out is that 72% of Australian Gen Ys would buy a house with a friend or family member. Whilst I’ve known people who’ve done this I had no idea that it would be so common and that’s an intriguing insight.

I’ve long held the position that the median house price on a single income is unaffordable in Australia and it appears that Gen Y is aware of that, at least on some level. Collaborative consumption of the housing resource then is our way of reacting to this, in effect shrinking the affordability gap by spreading the pain around a bit. Indeed I did something very similar to this when we bought our first house in Canberra by renting out two of the rooms to friends for the first year. The experiences from others are similar as well with the sharing arrangement usually only being temporary (on the order of years, not decades) before they’re able to part ways into a home of their own.

This means my hammering away at the point that Gen Y is suffering under a crisis of desire (they still are, at least in my opinion) probably isn’t going to help them change their minds. What I should probably be focusing on instead is the ways in which to structure these kinds of sharing arrangements in order to make the desired property more affordable or what strategies they can use in order to get themselves into a position to make it affordable. As you can probably tell I’m still wrestling with the best way to approach this and the ultimate idea will have to be a post for another day.

Is Project Glass Google’s iPhone?

As someone who’s been deep in high technology for the better part of 2 decades it’s been interesting to watch the dissemination of technology from the annals of my brethren down to the level of the every day consumer. For the most part its a slow process as many of the technological revolutions that are unleashed onto the mass markets have usually been available for quite some time for those with the inclination to live on the cutting edge. Companies like Apple are prime examples of this, releasing products that are often technically inferior but offer that technology in such a way as to be accessible to anyone. Undoubtedly the best example of this is their iPhone which arguably spawned the smart phone revolution that is still thundering along.

When it was first released the iPhone wasn’t really anything special. It didn’t support third party applications, couldn’t send or receive MMS and even lacked some of the most critical functionality of a smart phone like cut and paste. For those brandishing their Windows Mobile 6.5 devices the idea of switching to it was laughable but they weren’t the target consumer. No Apple had their eye on the same market that Nintendo did when they released the Wii console: the people who traditionally didn’t buy their product. This transformed the product into a mass market success and was the first steps for Apple in developing their iOS ecosystem.

With the beachhead firmly established this paved the way for other players like Google to branch out into the smart phone world. Whilst they played catch up to Apple for a good 3 years or so Google was finally crowned the king early last year and hasn’t showed any signs of slowing down since then. Of course in that same time Apple created an entirely new market in the form of tablet computers, a market which Android has yet to make any significant in roads too. However whilst Google might be making a token appearance in the market currently I don’t they’re that interested in trying to follow Apple’s lead on this one.

Their sights are set firmly on the idea of creating another market all of their own.

For products that really bring something new to the table you really can’t beat Project Glass. Back when I first posted about Google’s augmented reality device it seemed like a cool piece of technology that the technical elite would love but if I honest I didn’t really know how the wider world would react to it. As more and more people got to use Glass the reaction has been overwhelmingly positive to the point where comparisons to the early revisions of the iPhone seem apt, even though Glass is technically cutting edge all by its own. The question then is whether Google can ride Glass to iPhone level success in creating another market in the world of augmented reality devices.

There are few companies in the world that can create a new market that have high potential for profitability but Google is one of the few that has a track record in doing so. Whilst the initial reviews are positive for Glass it’s still far from being a mass market device with the scarce few being made available are only for the technical elite, and only those who went to Google I/O and pony up the requisite $1500 for a prototype device.  No doubt this will help in creating a positive image of the device prior to its retail release but getting tech heads to buy cutting edge tech is like shooting fish in a barrel. The real test will be when Joe Public gets his hands on the device and how they integrate into our everyday activities.

Don’t Get Me Wrong, Kickstater is Great, But…

The idea behind Kickstarter is a great one: you’ve got an idea and you’ve got the fixins of a potential business going but the financial barrier of bringing it to market are keeping you from seeing it through. So you whip up a project on there, promise people rewards or (more commonly) the actual product you’re intending to sell and then wait for backers to pledge some cash to you. For the backers as well its great as if the project doesn’t get fully funded then no one has to donate any money, so your potential risk exposure is limited. Of course Kickstarter take their slice of the action, to the tune of 5% (plus another 3~5% for the payment processing) so everyone comes out a winner.

It’s a disruptive service, there’s no denying that. There are many products that wouldn’t have made it through a traditional venture capital process that have become wild successes thanks to Kickstarter. This of course gets people thinking about how those traditional systems are no longer needed, I mean who needs venture capitalists when I can get my customers to fund my project? Well whilst I’d love to believe that all we need for funding is crowdsourcing tools like Kickstarter I can’t help but notice the pattern of most of the successful endeavours on there.

They’re all done by people who were already successful in the traditional business world.

Take for instance the latest poster child for the success of Kickstarter: The Double Fine Adventure. For gamers the Double Fine name (and the man behind it, Tim Schafer) is a recognizable one, having worked on such cult classics as The Secret of Monkey Island, Grim Fandango and releasing others such as Psychonauts and Brutal Legend. Needless to say he’s quite well known and made his name in the traditional game developer/publisher world. Kickstarter has allowed him to cut the publishers out of this particular project, putting more cash in his pocket and allowing him total control of it, but could someone without that kind of brand recognition pull off the same level of success?

The answer is no.

For all the successes that are seen through Kickstarter only 44 percent of them will ever actually get the funding they require. Indeed in the Video Games category the highest funded game (there are a lot of projects in there that aren’t exactly games) before the Double Fine Adventure managed about $72,000. Sure it’s nothing to sneeze at, it was almost 6 times what they needed, but it does show the disparity between relative nobodies attempting a to crowdfund a project and when a well known person attempts the same thing. Sure there are the few breakout successes, but for the majority of large funding successes you’ll usually see someone who’s already known in that area involved somehow.

Now I don’t believe this is a bad thing, it’s just the way the process works. Nothing has really changed here, except the judgement call is shifted from the venture capitalists to the wider public, and as such many of the same factors influence if, when and how you get funded. Name recognition is a massive part of that, I mean just take a look at things like Color that managed to pull in a massive $41 million in funding before it had even got a viable product off the ground just because of the team of people that were behind the idea. Kickstarter doesn’t change this process at all, it’s just made it more visible to everyone.

Does this mean I think you should keep away from Kickstarter? Hell no, if you’ve got a potential product idea and want to see if there’s some kind of market for it Kickstarter projects, even if they’re not successful, are a great way of seeing just how much demand is out there. If your idea resonates with the wider market then you’re guaranteed a whole bunch of free publicity, much more than what you’d get if you just approached a bank for a business loan. Just be aware of what Kickstarter does and does not do differently to traditional ways of doing business and don’t get caught up in the hype that so often surrounds it.

You Just Lost a Customer, Razer.

I like to think of myself as a good customer, having spent a good 6 years on the other side of the consumer equation. Whilst I might be ruthless in my product selection once your product is past that hurdle you’re guaranteed a whole bunch of free marketing from me, usually in the form of recommendations to my friends and sometimes even here on this blog. It’s not much but I’ll be damned if I haven’t swayed dozens of people to products that I’ve bought solely on my recommendation. It goes both ways though so if your product (or business practices) are terrible then you can be assured I’ll be voting with my wallet and encouraging others to do so.

Today, I’m going to do exactly that.

So for my birthday last year my loving wife bought me one of the TRON keyboards from Razer. It’s a very pretty keyboard but it’s unfortunately not all that great for gaming thanks to the extraordinarily large keys and tendency for the keys to get stuck in the on position when several are pressed together. Figuring that it would make a great keyboard for either my spare test machine or media PC I set about looking for a potential replacement keyboard, something more suited to my main purpose of gaming.

I had heard good things about the Razer series of mechanical keyboards. These are preferred for gaming due to their distinct actuation points rather than the rubber domes that are common on most keyboards today (including the TRON keyboard I have now). They’re also renowned for being quite loud due to their mechanical action and the keyboard I had my eye on, the Razer BlackWidow Ultimate  is known for having some of the loudest keys around thanks to Cherry MX Blue¹ type switches. Razer does make the same keyboard in a stealth option which uses the quieter MX Brown switches, something that I’d prefer to have so I don’t get driven insane by the loud clicking.

So of course I started looking around for somewhere to get the keyboard. Strange though all my usual sites don’t seem to stock it, but they do stock every other keyboard. Frustrated I check Razer’s store and it’s available through there for US$139.99. Googling around reveals that the stealth version is exclusive to the Razer online store. Fair enough I thought, the price is a little on the high side but it’s one of those things that you buy once and don’t replace for a good while. Attempting to follow the order screen through to see how much the total would be lead me to a brick wall, not being able to ship it to Australia.

Undeterred I saw that they had an Australian version of the store and the keyboard was available in there. The price, however, was no where near what I expected being a whopping $90 greater than its USA counterpart. Now Australia is renowned for getting gouged on pretty much everything, including in places where distribution doesn’t matter like Steam, but I still don’t tolerate companies that do it. Frustrated I tweeted at Razer about it, hoping for some kind of response but alas I got nothing. I could use a remailer service to get the keyboard here but then I’d be giving my money to a company that obviously doesn’t respect its customers enough to price their products fairly.

So instead I went looking elsewhere for a similar product and not 5 minutes later did I come across the Corsair K90 which ticks all the same boxes and has the better Cherry MX Red switches to boot. It might be more expensive than the stealth Razer in the USA but it’s available here from pretty much everywhere. Corsair also have a history of not treating their customers like crap either, I’ve sent several sticks of faulty memory back to them only to get better memory in return. I’m more than happy to give them my money, especially when it means not giving any more to Razer.

Will Razer respond to this post? Probably not, but it needs to be known that Razer have no respect for Australian consumers if it’s trying to pull crap like this. I’m doing the only thing a consumer can: voice their discontent and then vote with their wallet. If enough people don’t put up with these kind of shenanigans then maybe one day we’ll be able to buy products in Australia at fair market prices rather than at the garbage, price gouging levels we get today.

¹If you’re wondering what the hell I’m on about here check out this guide to mechanical keyboards on overlock.net to get the low down on the different types.

Working Yourself Out of a Job.

One of the most common bits of career advice that I’ve been given is that you have to make yourself valuable to the company or organisation your working for. The thinking goes that if you’re valuable then it’s more likely that you’ll get a promotion and much less likely that you’ll face the chop if things start going south. It’s a good little nugget of advice however I find that many people get the idea of what constitutes value completely wrong, to the point of thinking that they’re valuable when in fact they’re being anything but. I found this to be especially true in the field of IT, especially in the areas that tend to be more insular and less socially apt.

Most often the idea of being valuable goes hand in hand with the idea of being irreplaceable. Usually this happens when someone either designs some system or process that does what is required of it but for all intents and purposes is a black box for anyone but the original creator. This person, although it can be multiple people, now feels safe in their job as since they’re the only one who knows how it works (and how to fix it when it breaks) and this gives them the feeling of being valuable to their company. For a short time they are but in the long term they’re being extremely detrimental, both to themselves and who they work for.

Their negative impacts on the company are pretty obvious. A system or process that relies on a specific person in order to keep it functioning has a major single point of failure. Whilst the system is working and that person is available everything seems fine, but take the unfortunate notion of them getting hit by a bus (commonly referred to as the bus factor). How long would it take an outside person to deconstruct the system or process in order to be able to understand it to the same level that they did? That amount of time is usually quite high, especially if this kind of behavior is allowed to continue unchecked for years. Thus these people who thought they were invaluable to their place of work are really quite harmful, but not just to their place of work.

Making yourself irreplaceable like this however is extremely toxic to your future career prospects. If you’re the most important cog then it’s far less likely that your superiors will want to promote you, why would they want to take you away from a critical process that you’re the expert on? Quite often people mistake getting looked over for a position as their value not being properly recognized when in fact it’s that same “value” they created which keeps them firmly rooted in their place. This also usually goes hand in hand with a lack of skill development meaning that the skills that were once valuable (like in the creation of said system or process) are now no longer so highly sought after, making them an undesirable candidate on the open market.

This is exactly why I’m always working myself out of a job, which I’ve actually done once before. Back when I was working at the Australian Maritime Safety Authority I was hired with a specific purpose. A year later I had designed, implemented and fully documented the system that they wanted to the point where they couldn’t find any more work for me to do. Since I was a contractor I was under no impressions that I would have a job at the end of it and sought employment elsewhere before my contract finished. In the end they did find additional work for me to do, but I had already signed on to my new engagement. It might seem like a bad career move to make yourself redundant, but if you’re a skilled individual there will always be more work available and the reference from the place you left will speak volumes to your worth.

It all comes down to the misguided notions of value that people tend to hold and the idea that being replaceable somehow diminishes your own value. Realistically given enough time and resources anyone is replaceable so it is far better to assume that your job could be done by someone else than believing you’re immune to being usurped. Personally I find the idea to be quite liberating as it has led me to pursue many different avenues with which to improve myself in order to differentiate myself from the crowd. If I had simply made myself irreplacable I’d probably still be working at the same place I was 7 years ago, and that’s not a thought I relish.

Retailers vs Publishers: The Battle For The Second Hand Market.

I’ll admit that I haven’t bought many games used since I’m usually in the store on release day hungering to be one of the first to get my hands on them. Still I realize there’s quite a market for second hand games since not everyone has the disposable income that I do to splurge on the latest and greatest titles. They’re also a significant source of revenue for brick and mortar games retailers as the margins on used titles are significantly higher than their brand new counter-parts and provide an additional sales hook for them to attract customers (I.E. trade-ins for newer games). There are one group of people who aren’t so pleased with the second hand games market however, the publishers.

Second hand titles, whilst generating significant revenue for the retailers, generate almost nothing for the publishers that first distributed the games. The advent of downloadable content mitigated this somewhat as it was usually tied to the console it was downloaded on and not the game itself but it is a pittance compared to what they generate from a new sale. More recently however games publishers have taken a more sinister approach to the second hand market, seeking to make a resold product less attractive than the new unless the consumer ponies up the extra cash to make up the difference.

Sadly this kind of chicanery affected one of my most favorite games, Mass Effect 2. New buyers of the game received a special code that gave them access to the Cerberus Network, a daily news service for the Mass Effect universe plus the gateway to all the DLC available for the game. The code was a one time use deal so anyone buying the game second hand would have to do without or pony up the US$15 for access to it.  Whilst you could argue that you still got the vast majority of the game despite the lack of the additional DLC there was quite a bit of free stuff on there, some of it even on day 1. This meant that anyone buying it without the code was essentially getting an incomplete game, even if it was playable.

Whilst it’s still not the norm to cripple the second hand market like this it is becoming alarmingly common, with several recent titles making used purchases far less desirable through new-only-or-pay-up DLC. It’s still a step ahead of something like Steam which doesn’t allow the sale of second hand titles at all, not even for a trade in on other steam titles. But it’s still a dick move by the publishers who are just trying to squeeze money out of the consumers in any way they can. Realistically though its detrimental to both the publisher and consumer since many trade ins drive new games sales, to the tune of 20%. Cutting that market out completely would harm the new games market significantly, but none of the publishers will admit to that.

It’s also arguably a violation of the First Sale Doctrine although no one has yet tried to test out this particular violation of it in court.

All this does is reduce the perceived value of the product that the publishers are putting forward and will only help to encourage people to seek out alternative methods in lieu of forking out the extra dollars. Whilst I am happy to give up my freedom to sell my games for the convenience that Steam provides (I am a hoarder, though) I know many people who aren’t so willing to make that trade and have avoided purchasing games that remove their right to first sale doctrine. Instead of punishing people for buying second hand they should be encouraging people to buy in early with things like betas and in game items. Of course I find it hard to fault a company that tries to maximize its profits but when it comes at a cost of significant good will I have to wonder if the costs outweigh the potential benefits and the only ones that know the answer to that are the publishers.

And they’re not talking about it, unfortunately.

Owning Vs Renting: Facts and Figures.

I see a lot of people these days claim that they’ll never buy a house because it’s a bad idea, usually using the past year of economic turmoil as an excuse for their actions. Similarly with Australia’s housing market in an apparent bubble (that’s been meaning to burst for years if you believe the doom and gloomers) it would seem that it’s impossible for the first home owner to get into the market without ruining themselves financially. As someone who bought his first house 2 years ago when interest rates were rocketing up to 10 year highs and bought the second just this year I know exactly how the market is functioning and what the causes of this so called “affordability” crisis are. Today I want to step through some of the insights I’ve gained into market and why the media reports are, as always, misleading.

Hitting up the ABS for some data on house prices I found that they haven’t updated the price data in almost a year, leaving me with real figures that don’t accurately reflect the current situation. Still I’d hazard a guess that the swing couldn’t be more than 5% either way, otherwise we’d be hearing about it in the news. Taking that all into consideration here’s the median house price for the eight capital cities of Australia (in 1000’s):

  • Sydney:           465
  • Melbourne:   385
  • Brisbane:        398
  • Adelaide:       355
  • Perth:              420
  • Hobart:           300
  • Darwin:           445
  • Canberra:       455

You can see there’s a wild amount of swing between the different cities and that’s with good reason. Canberra for instance is filled with public servants who all have steady, above average incomes and this is reflected in the housing prices. Places like Hobart and Adelaide owe their lower prices to the lower population and hence lower average incomes. So what do these figures tell us? Well typically one city or state will be reported on and you can see how that would lead you to believe that all of Australia is unaffordable, especially when you look at say Sydney. Secondly the median figure tells us that 50% of the houses sold in that quarter were below that price, and the other 50% above. So whilst the median price might look rather scary it is in fact far from it and this is why reporting like this which is using the average price can make things look far more scary than they really are. It only takes a few outliers to completely ruin the average price as an indicator of affordability.

I’ve often talked with friends about the house prices in Australia being a crisis of desire and not affordability. Todays generation Y grew up predominately in suburbs with an easy going lifestyle and are seeking the same thing for themselves when they move out. The problem is those closer in suburbs now attract a premium as the urban sprawl has made them far more central than they were when the gen Y’s parents bought into the market. Taking this into consideration the first home buyer should not be looking at median priced homes and should be looking to the mortgage belts if they want to step into the market. It might not be what they want and so they choose to rent seeking to keep their lifestyle. There’s nothing wrong with this, the issue I have is that most of them throw their arms up in the air and call houses unaffordable when really they’re being unreasonable with their demands.

There are also some more financially inclined among us who believe that renting is more financially sound than owning. Now this is a complicated idea and the answer can vary greatly depending on someone’s situation. However there’s a little bit of comparison we can do to get a feel for how right or wrong this idea might be.

Having a quick look through Allhomes I found I could acquire a typical 3 bedroom house for anywhere from $350,000 to $400,000+, but there were quite a few homes available for somewhere in the middle. Checking the rental market for the same area (I’m using Holt as an example) a 3 bedroom place could be expected to rent for $380 per week. Now the one assumption I’m going to use is that property price as a general rule of thumb increases by about 7% annually, or it doubles every 10 years (see here for some data on the matter). So in the buying vs renting argument over 10 years you’d have:

Renters:

  • Total rent paid: $197,600

Buyers:

  • Deposit of 5%: $18,750
  • Purchasing costs (stamp duty, LMI, legal, etc) of 6%: $22,500
  • Repayments ($2136/month, principal and interest on 30 year term @ 6%): $256,320
  • Total cost: $297,570

Looking at that it comes out to a difference of around $100,000 over 10 years to own rather than rent which works out at about $200/week. The question is if you are renting, could you use that $100,000 to invest and beat the return gained on the house. If the theory holds true the house you bought is now worth around $750,000 or a capital gain of $375,000. If we knock off the $100,000 of extra money you had to spend since you bought there’s a difference of around $275,000 so the question then becomes, could you do this if you didn’t buy? For most people the answer is no, since Australians aren’t particularly good at saving money. Renting makes fiscal sense if you use the difference in what you spend on a house and what you’d spend on renting to make a return of approximately 7% per annum and don’t spend it. Suddenly the extra $200 per week might not seem so unaffordable.

When you take certain figures being reported by the media it’s always easy to get caught up in the hype. The problem with using a single figure to report on these things is that the real situation is hidden under a layer of equations and interpretations. If you go out there, do your research and curtail your desire you will see that the Australian housing market is no where near as bad as the media makes it out to be. I bought a house at a time of sky rocketing interest rates and everyone screaming that the housing market was about to go bust. Here I am 2 years later and the bubble has yet to burst and they’re all still saying the same thing.

Don’t believe everything you read kids.