Sony backs down on Fresh Start

Apparently Sony has backed down on it’s proposed $50 charge for removing the junkware that usually comes preinstalled on computers. The new Fresh Start option when you buy your Vaio laptop allows you to choose to have a clean OS, without all the usual trial software and other adware, for an extra $50 over the usual price. If you look at Gizmodo’s comments you’ll see the predictable outrage of consumers over having to pay more to avoid something, rather than paying to gain something. However, to an economist, this looks like a simple case of price discrimination much as you see with business class flights on a plane. What’s the difference here?

The problem for Sony is that they framed the consumers’ choice really badly. To Sony there are two key factors in their price setting decision: first, the junkware is a revenue stream for them and so leaving it off the computer costs them money. Secondly, there is a group of consumers who are willing to incur some time cost to remove all the junk from their computer. Sony can increase revenues by charging them a higher price and providing a computer with the work done for them. From that point of view it all makes sense.

The problem is that people aren’t entirely rational when making decisions. In particular, people have ideas about fairness and equitable distribution of rewards that make them willing to sacrifice a personal gain in order to prevent another person from gaining more. That makes it important to frame the consumer’s choice in terms that make their choice appear ‘fair’.

Here Sony made the mistake of framing Fresh Start as a option to pay more to avoid getting something that you didn’t want in the first place. That makes it seem as though Sony is taking advantage of consumers, which triggers their inequity aversion and causes them to rebel against the extra charge. If, instead, Sony had made Fresh Start the default and offered a $50 discount for getting some adware on the computer it would appear fairer to consumers, despite the decision being the same, and they may have been less hostile to the idea. It’s not just what you say that matters, it’s how you say it.