Date:
Sunday , June 15, 2008
Author:
Kyle Bennett
Google +1

NVIDIA Dictates Advertised Video Card Pricing

Did you wonder why your GeForce purchasing experience may have changed? Have you wondered why you might have seen all cards priced the same or not priced at all? We have some answers for you on that front and it is called "UMAP."

Introduction

Many HardOCP.com readers have noticed lately that their GeForce video card buying experience has changed at major etailers such as Newegg and TigerDirect. The reason for these shopping changes is that NVIDIA is attempting to control pricing that is “advertised” to you. Now you might be wondering why a fabless silicon GPU developer is dictating pricing controls to the companies selling you video cards or how that is even possible. You also might be wondering why comparing prices at your favorite etailer has become a huge pain in the ass. The easy answer to that question is NVIDIA’s Unilateral Minimum Advertised Price Policy, better known as “UMAP.” The not-so-easy answer gets a bit convoluted as to what the purpose of the program actually is, and whether or not it is legal. One thing is for sure; going to your favorite etailer and easily comparing prices on many GeForce branded video cards just got much more difficult.

I Map, UMAP, We All Map

The current NVIDIA UMAP Policy document is provided below and I highly suggest you read the policy in full if you intend to intelligently discuss this issue in the HardForum. We do know that a new MAP Schedule has been distributed since last week but NVIDIA did not provide it to us in time for publication as it had committed. In fact, we extended NVIDIA the opportunity to provide an official press statement for our article, which they committed to do, but we never had any more communication after our initial UMAP discussion last week with Derek Perez, NVIDIA PR, and Timo Allison, manager of worldwide channel programs, who is responsible for the UMAP implementation.

Article Image Article Image

Everyone’s Doing It

If you went to TigerDirect towards the end of May you would have noticed that all of a sudden, pricing on almost all SKUs across the 9600 GT, 8800 GT, and 9800 GTX families were the same in their respective group. This was TigerDirect following the above policy in order to not have its supply of NVIDIA video cards cut off at the source. TigerDirect’s shopping cart implementation has changed greatly since then. And yes, even though NVIDIA is not directly selling to Newegg or TigerDirect they can impact whether or not they get NVIDIA GPU video cards. Newegg told NVIDIA to “go pound sand,” or at least that is how it was communicated to HardOCP.com, then when NVIDIA threatened to cut off marketing funds paid directly to Newegg, the company changed its tune and followed the policy.

Policy, PITA, or Artistically Produced?

The UMAP policy is however “full of holes” that can easily be exploited, and we are not so sure that is exactly how it was designed. As of writing this both TigerDirect and Newegg had structured its shopping carts to abide by the letter of the UMAP policy. Timo Allison with NVIDIA specifically told us, “It is really important to point out in the policy that it is the minimum advertised price program and has nothing to do with actual sales price of the product so our partners are free sell the product for whatever they want to as they always are.” So while NVIDIA is not dictating sales prices, they are dictating the prices that you and I first see when shopping for video cards. The days of going to Newegg and TigerDirect and comparing prices of full GPU families is gone. Search those companies for “8800 GT” now days and you will not get a page full of pricing on just about every 8800 GT card it carries. Instead you will still get the items listed, but you will likely find many that do not show the prices, and our guess this is exactly what NVIDIA wants. Comparing prices on these MAP Schedule products is much more difficult now since the etailer cannot simply show you the price it is going to charge you for that particular item. So Newegg or TigerDirect can still charge you whatever the company wants to, they just can’t show you the price up front. The difference now is you have to “ask” for the price, usually in the form of “click here to see the price” or by adding the item to the shopping cart. At Newegg, it seems that “sort by lowest price” still works, you just can’t actually see the price till you make another click on the item to open up a separate pricing window, which is unreasonable considering how many cards you might be looking at.

It seems that you can still add all the items to your shopping cart to get a list of prices, but the sorting mechanisms that we have had access to previously are gone. When you make it more difficult for people to make purchasing decisions on price, you can bet that less people will make a purchase based on price. Logically if that is not happening customers should be flocking to the brands they are familiar with. According to our sources, sales volumes of NVIDIA partners “authorized” to sell in North America have gone up since UMAP’s implementation.

Guys Talk, You Hear Things

There are more than a few people inside the industry with opinions about NVIDIA and UMAP, but not a hell of a lot of them want talk about this on the record fearing repercussions from NVIDIA; even the ones that had good things to say about UMAP! Some think that the policy has been put in place to run the card builders that sell on price, out of North America; those board builders are not officially signed off on by NVIDIA to sell in the U.S. Palit is a great example of one of those companies and we have been informed by several sources that Palit is also the largest purchaser of NVIDIA GPUs in the world. Palit has moved into the U.S. marketplace although it has not been through “official” NVIDIA channels.

Update - June 17, 2008: Palit has informed us that it is in fact an "authorized" USA board partner of NVIDIA's sharing the same benefits and blessings extended to other USA partners. NVIDIA has confirmed this. My apologies for the erroneous statement made to the contrary. There are however more than a few company names that we can insert in place of Palit's, but for the time being we will leave well enough alone.

Others think that UMAP will cause the authorized builders in the U.S. to suffer since the “gray market” NVIDIA card builders selling here will have an unfair advantage due to much lower product costs since most of the USA partners offer services and warranties not shouldered by the gray market builders.

Others think this is NVIDIA trying to have its cake and eat it too, in that they are profiting from selling to all these companies that are now coming in and diluting their authorized partner shares here in the USA. Some say this is a sort of red herring that attempts to show that NVIDIA is trying to protect its USA partners, when it fact the UMAP policy is worthless. It has been mentioned to us that NVIDIA is only concerned with how many GPUs NVIDIA sells in the quarter, and if a company or two goes out of business in the process, so be it. One gentleman laughed at me when I suggested that NVIDIA sell less GPUs to the “offending” companies selling on price in the USA. “NVIDIA limit its own sales in a soft quarter?!?!? HAHAHHAH!”

What is interesting here is that while we refer to some of these companies as “gray market” builders, these companies have just as much right to be selling in the USA as anyone else with NVIDIA GPUs. From our experience when NVIDIA sells that GPU to Company X, there is little legal right NVIDIA has as to what is done with the GPU after it leaves NVIDIA’s stock.

In talking to all these people I never once heard any of them mention that UMAP had anything to do with being more competitive in the marketplace. Not once was it explained to me that NVIDIA was shoring up for a fight with AMD or Intel on the graphics front or felt that UMAP had anything to do with competition outside of the NVIDIA brand.