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[1887.58 --> 1892.36] Social media and PR support, marketing reports, and marketing development funds. |
[1892.62 --> 1896.24] So, let's get back to sales rebate programs and marketing development funds for a minute here. |
[1896.24 --> 1896.68] NBF is huge. |
[1896.68 --> 1900.86] The way the tech industry works, and there's a reason for it, |
[1901.00 --> 1904.80] because if you gave every mom and pop computer shop a $1 discount, |
[1905.12 --> 1907.82] they would take it straight to price and sell the product for cheaper, |
[1908.12 --> 1910.80] which, as a consumer, you might go, wow, that's great. |
[1911.46 --> 1915.10] But it isn't necessarily, because we talked about this previously |
[1915.10 --> 1920.30] when Intel wasn't providing the support that we feel like they should |
[1921.14 --> 1926.66] on their previous generation chipsets, in terms of patching for Spectre and Meltdown. |
[1926.68 --> 1936.48] The problem with just charging the bare amount is that it doesn't give you the business war chest that you need to, |
[1936.58 --> 1938.80] well, to go to war in the event that you have to. |
[1939.54 --> 1946.58] And it's one of those things where it kind of relies on a business to behave in a manner that is in good faith, |
[1946.58 --> 1948.16] acting in the consumer's best interest. |
[1948.16 --> 1953.92] But a business that is making a healthy profit is in a better position to, as an extreme example, |
[1954.34 --> 1958.34] still exist a year later when you come back for warranty support. |
[1958.78 --> 1962.86] You actually need the companies that you buy things from to make a profit. |
[1962.86 --> 1964.84] Does that make sense? |
[1964.90 --> 1965.00] Yeah. |
[1965.12 --> 1965.32] Okay. |
[1965.56 --> 1969.74] So anyway, the problem with the IT industry is that it tends to be, |
[1969.80 --> 1973.24] and it's kind of a cultural thing, I'm not going to get any deeper into it than that, |
[1973.38 --> 1975.68] but it tends to be a race to zero industry. |
[1976.16 --> 1977.38] Volume, volume, volume. |
[1978.40 --> 1983.26] Take down as much margin as you can so you can take the volume that your competitor would have been doing, |
[1983.60 --> 1986.82] force them under, and then someday we'll raise the prices. |
[1986.82 --> 1989.20] And you do eventually see that. |
[1989.28 --> 1993.94] Like the hard drive industry enjoyed a short period of great margins when basically everyone was gone, |
[1994.14 --> 1996.96] and then they were supplanted by the SSD industry in the mainstream. |
[1997.48 --> 1999.90] And to be clear, hard drives are still doing fine in the cloud. |
[2000.12 --> 2005.56] They're not going away or anything, but that business is a B2B business, which tends to be lower margins. |
[2005.70 --> 2009.22] So there was like a golden hour there for the hard drive industry. |
[2009.98 --> 2010.60] Here, do you need this? |
[2010.90 --> 2011.02] Yeah. |
[2011.02 --> 2011.54] Yeah, go for it. |
[2011.66 --> 2011.78] Thank you. |
[2013.72 --> 2014.12] Right. |
[2014.12 --> 2017.90] So the way that the tech industry works is that the pricing is fixed. |
[2018.84 --> 2025.86] You just say, okay, look, a Core i5 8600K, that's $200 US. |
[2026.86 --> 2033.48] And then the way that you actually provide promotions or the way that you make someone like a formerly, |
[2033.66 --> 2040.10] so when I worked at NCIX, the way that NCIX was able to differentiate from mom and pop chops was not the sticker price. |
[2040.10 --> 2048.12] It was the backend support because every CPU we sold, we got a couple percentage kickback at the end of a quarter. |
[2048.82 --> 2054.64] And every CPU we sold, well, you know, during Black Friday, we might get $5 or $10 off. |
[2054.86 --> 2060.60] Now, all of a sudden, mom and pop, in order to compete with us, have to sell below cost, giving us an advantage. |
[2060.60 --> 2063.64] That's the way that you actually stay competitive. |
[2063.94 --> 2072.14] And to be clear, this isn't some kind of like subversive cloak and dagger nonsense because within sort of the mainstream stores that you shop at, |
[2072.26 --> 2081.34] Best Buy, Newegg, I mean, okay, some of these are kind of dated references, Tiger Direct, Memory Express, Canada Computers, Micro Center, Amazon, |
[2081.34 --> 2084.66] the programs are basically across the board pretty similar. |
[2085.30 --> 2090.48] And whenever someone finds out that someone else got a program that they didn't, there's outrage. |
[2090.96 --> 2095.54] And usually the brand ends up kind of doing something to make it up to you, and then the other guy complains about that. |
[2095.60 --> 2097.68] It's all negotiations. It's business as usual. |
[2097.68 --> 2114.84] Now, the problem here is that with GPUs in particular, NVIDIA maintains a lot of control over the pricing at every level to the partners and to the end users through tools like these kinds of rebates. |
[2115.32 --> 2123.14] So they sell the chipset to the vendor at some price X, but then NVIDIA could decide a week later to go, |
[2123.14 --> 2128.82] Well, you know what, here's a sell-through rebate, effectively lowering the price without actually lowering the sticker price, |
[2129.12 --> 2137.64] meaning that someone who has a multi-week, in some cases, lead time between acquiring chips and then turning them into boards, |
[2137.92 --> 2146.64] delivering them to retailers, and eventually selling through them might effectively have a bunch of stock that's overpriced now and no real recourse for getting rid of it. |
[2147.00 --> 2150.72] And so it's at NVIDIA's discretion to support you to get rid of it. |
[2150.72 --> 2158.48] Which is a fairly strong but indirect way to sort of choke out a company. |
[2158.82 --> 2159.26] That's right. |
[2159.72 --> 2165.14] So game bundling, MDF, and sales rebate programs are basically like saying, |
[2165.70 --> 2170.92] you'll never make money on graphics cards again if you were to remove all that stuff. |
[2172.16 --> 2172.30] Yeah. |
[2173.38 --> 2173.86] Okay. |
[2173.86 --> 2180.20] I forget where we were going with this, but partner brand aligned exclusively with NVIDIA. |
[2180.58 --> 2183.34] Partners have the ability to sell and promote products from anyone, |
[2184.02 --> 2189.12] but allegedly this behind-the-scenes documentation says they'll get all of this support cut. |
[2189.38 --> 2192.48] And to be clear, the public documentation doesn't say any of that. |
[2193.38 --> 2193.66] Okay. |
[2193.66 --> 2199.88] HardOCP has been told that if a company does not participate in GPP, they feel... |
[2199.88 --> 2200.62] Not by NVIDIA. |
[2200.92 --> 2201.08] Yeah. |
[2201.78 --> 2205.76] As if NVIDIA would hold back allocation of GPUs from their inventories. |
[2205.88 --> 2212.30] This has not been spelled out contractually, but the feeling is that it's done on a wink and a nod. |
[2212.80 --> 2220.30] To be fair, they said that the stuff we just mentioned, losing all these different things, was in the documentation. |
[2220.98 --> 2222.62] This is a feeling. |
[2222.62 --> 2223.02] Yeah. |
[2223.08 --> 2224.46] The allocation bit is a feeling. |
[2224.98 --> 2230.06] And then the next part that we're going to talk about is also a feeling? |
[2230.34 --> 2230.46] Yeah. |
[2230.76 --> 2237.74] So it was expressed to HardOCP that publishing that article could damage HardOCP's relationship with NVIDIA. |
[2238.60 --> 2239.68] Which, knowing... |
[2239.68 --> 2240.94] Well, we've gotten to the end of it now. |
[2241.08 --> 2242.54] I guess we're in the same boat. |
[2242.84 --> 2243.04] Yeah. |
[2243.42 --> 2244.26] Look at that. |
[2244.46 --> 2245.62] But knowing... |
[2246.14 --> 2249.26] And like, okay, to jump all the way back to the beginning of this conversation, |
[2249.26 --> 2251.10] in terms of... |
[2251.10 --> 2252.74] Like, there's always... |
[2252.74 --> 2255.60] There's very extremely, massively often... |
[2255.60 --> 2258.46] I'm not going to say always because someone's going to call me on that in some weird way. |
[2258.78 --> 2263.12] But there's basically always a selfish reason for everything. |
[2263.36 --> 2263.48] Yes. |
[2263.48 --> 2265.40] Whether a selfish reason is tiny or huge, whatever. |
[2265.50 --> 2265.60] Yeah. |
[2266.48 --> 2270.56] Saying, hey, if you release this, NVIDIA's going to be mad. |
[2271.24 --> 2275.56] Saying that to HardOCP was probably pushing them to release it. |
[2275.56 --> 2277.94] Um, then again, maybe not. |
[2278.26 --> 2280.28] Kyle's been in the industry a long time. |
[2280.54 --> 2281.52] And he's deeply connected. |
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