[activitypea]

Unless Sennheiser can prove that the 555s are being sold at a loss, there is no "cross-subsidizing" happening here. You talk as if "the markets" and "the economy" are some naturally occuring phenomena that are matter of fact and non-negotiable.

[flushit]

> Unless Sennheiser can prove that the 555s are being sold at a loss, there is no "cross-subsidizing" happening here.

Nope. That's part of the misconception here. It suffices that they are being sold for less profit than the target profit margins of the company. And that's very likely the case, given the situation with the premium-tier offering. Every reasonable company cancels projects not bringing in enough profits, since shareholders want to see a return on investment. Non-zero profit is not enough.

> You talk as if "the markets" and "the economy" are some naturally occuring phenomena that are matter of fact and non-negotiable.

I'd indeed claim that market mechanisms can be treated like natural laws, just like gravity or natural selection. You can steer them with taxes or other incentives, just like you can steer how gravity or natural selection impact you. But the mechanisms themselves work no matter if you like them or not, or if you find them "evil" or not.

And I say this as a lefty who is in favor of radical inheritance tax and such. It's important to understand the thing you try to regulate.

[activitypea]

> Every reasonable company cancels projects not bringing in enough profits, since shareholders want to see a return on investment. Non-zero profit is not enough.

I see very little reason in cancelling profitable projects. Also, framing my comment as a "misconception" is kinda indisgenious. This is a philosophical disagreement, hard to frame my point of view as objectively wrong.

[flushit]

> I see very little reason in cancelling profitable projects.

Happens all the time everywhere. Money wants to maximize profits. If company A brings you 2% return and company B 5%, then the money will gravitate towards company B. It's not that company A doesn't have profitable projects, perhaps all of their projects are profitable. But just less so than company B, on weighted average. And that's not bad. A reasonable society prefers to use its resources optimally. That's where market mechanisms and society objectives align, and that's why we are embracing a market-based economy. (There are other factors than profits of course, and that's where government regulation comes in. But all else equal, the above example of companies A and B holds and illustrates my point.)

I encourage you to try a management role in a for-profit business and after a few years we can chat again.

> Also, framing my comment as a "misconception" is kinda indisgenious.

Sorry, I didn't mean to offend. I just see this line of arguments now and then and it seems to me that there is some fundamental knowledge of the involved mechanisms lacking.

[ip26]

The cross-subsidy means that while they have gross margin on the 555, it would not be enough to cover R&D & make net profit without the additional sales of the higher margin 595. In other words, they could not afford to develop & bring the 555 to retail by itself, even if the sale price is higher than the simple cost of manufacturing.

[activitypea]

That wouldn't be cross subsidy, that would be selling at a loss, right? I don't think any item has ever been sold for the sum of its bill of materials. The price is always bill of materials + labor + some profit, and here "labor" includes R&D.