Economics of video cards

From Amit’s Thoughts

In shopping for a new gaming computer, I wanted to do some research on video cards. The main vendors for consumer (gaming) cards are ATI and NVIDIA. What do these companies offer? Why do they offer these products?

ATI has the Radeon line; NVIDIA has the GeForce line.

ATI has several generations, named Radeon, Radeon 7xxx, Radeon 8xxx, Radeon 9xxx, Radeon Xxxx (example: X800). ATI is at the end of the line with “X”; they’ll have to do something else soon. NVIDIA has several generations, named GeForce 256, GeForce 2, GeForce 3, GeForce 4, GeForce 5xxx, GeForce 6xxx. Notice that they switched to something closer to ATI’s naming scheme. I wonder if their next generation will be the GeForce 7xxx, which will overlap with ATI’s numbers, so maybe they too will change naming schemes.

Within each generation they have several lines (low end, high end, etc.). ATI’s Radeon 9xxx comes in 9000, 9100, 9200, 9250, 9500, 9550, 9600, 9700, 9800. NVIDIA’s GeForce 5xxx comes in 5100, 5200, 5300, 5500, 5600, 5700, 5750, 5800, 5900, 5950 (I guess they ran out of numbers). The lines differ in functionality (vertex and pixel shader models, DirectX support, OpenGL support, antialiasing, shadow and lighting effects).

Within each of these they have variants. The Radeon 9600 comes as 9600, 9600 PRO, 9600 XT, and 9600 SE; the Radeon 9800 comes as 9600, 9800 PRO, 9800 XT. The GeForce 5600 comes as 5600, 5600 Ultra, 5600XT, and 5600SE; the GeForce 5700 comes as 5700, 5700 Ultra, 5700LE, and 5700VT; the GeForce 5900 comes as 5900, 5900 Ultra, 5900XT, and 5900ZT. Note that they aren’t really consistent in the variant names. NVIDIA doesn’t even use the same variants in each of their products. And whereas ATI’s 9600 XT is better than the 9600, NVIDIA’s 5900 XT is worse than the 5900. These variants differ in GPU speed, memory bandwidth, number of pipelines, and amount of memory. They also have “mobile” variants that consume less power and are therefore useful for laptops.

It also turns out that the same game will look different on different video cards. The rendering algorithms behave slightly differently due to differing spatial and temporal anti-aliasing techniques, anisotropic texture mapping, “shader” models, and support for various features in DirectX and OpenGL. (From what I read, NVIDIA is better at OpenGL and ATI is better at DirectX.) So you can’t only compare performance and price.

So there are lots of video cards to choose from, and each one of them available from multiple vendors (ASUS, Leadtek, ELSA, etc.). As far as I can tell, the vendors decide on things like fans, heat sinks, video in/out, DVI vs. VGA, etc. So you really have hundreds to choose from, and no really good way to evaluate them all. I can read Tom’s Hardware or ExtremeTech, but they tend to be a bit too much for me.

So in the end, I read about several product lines (GeForce 5700, GeForce 5900, Radeon 9800, Radeon X800) and a little bit about the variants and ended up choosing one. But I wasn’t happy about it.

Why do the video card manufacturers do this? I think confusion helps their profits. If I read reviews by searching for nvidia geforce 5900 review, and if I find products by using a comparison shopping engine, what will end up happening is that I will decide on a line based on reviews and then choose the cheapest variant in that line.

In practice this means that video card manufacturers should try to maximize the difference between the “plain” label and the cheapest variant. It should be better to make the plain GeForce 5900 a high end card so that it gets good reviews, but make available some very cheap variants. In fact, the GeForce 5900 comes in one higher variant (Ultra) and two lower variants (XT and ZT). The Radeon 9600 on the other hand comes in two higher variants (PRO and XT) and one lower variant (SE). So maybe my theory doesn’t hold up.

The difference between variants is so large that in many cases, the low end variant of a higher line is cheaper than a high end variant of a lower line. (Check out pricewatch.) When I last looked at this stuff a few years ago, the GeForce 4 MX was cheaper than the GeForce 3. I had thought I was getting a really good deal, and then I learned more about the “MX” variant—it was somewhat less powerful than the regular GeForce 4.

There will be some enthusiasts who pick the “best” card (whatever that means), but most of us will end up confused. Actually, most of us will use on-board video and don’t have to worry about this. I think that’s an important part of the economics here—the manufacturers want to confuse the people in the middle who are willing to spend more money but do not know what they are doing.

This is all a form of price discrimination. The video card manufacturers make lots of variants to increase the cost of evaluating the cards, so that only enthusiasts find the best deals. They make their profit from the rest of us. I’ve read that price discrimination can increase overall economic efficiency, but that doesn’t help me feel any better about all the time I spent trying to pick a video card.