The issue is that they need a certain amount of revenue per box.
So, they buy a new Core i3 box with 8GB of RAM and they want to get $40 over the next two years to cover the investment. If they have to reduce its price to $30 after 6 months and further as time goes on, they don't cover the investment.
Now, they could price the box at $60 and lower it over time, but then you lose signups since it's a higher price (even if the average price over two years would be the same). You can say: well, have the older servers whose price has already been reduced available for sale as well. That complicates the lineup and is hard to manage. Unlike the new servers, the old servers only become available when someone gives one up which makes the supply unpredictable. With a new server, they can always buy one. Making matters worse, if the old ones have a reduced price, people are more likely to stay with them.
A decent part of this is that a lot of people are probably "needlessly" upgrading. By that, I mean that a lot of people probably aren't upgrading because the new server will make their usage better, but because they have a sense that they should be getting the top that their dollar will get. They were running perfectly fine on the old box, but why not try the new?
Ultimately, this is why VPSs are a lot easier. You can lower prices as time goes on in a reasonable manner. Someone wants the 1.7GB/1GHz 2007 box? That's a fraction of a new piece of hardware we can deploy. On the contrary, if someone wants a two year old model at OVH, they can't deploy a new two year old model: it's only available if someone gives it up. So, it becomes hard to capture the cheap-end of the market unless those signups keep paying for that box.
> Now, they could price the box at $60 and lower it over time, but then you lose signups since it's a higher price
That feels like the crux.
A friend claims Warren Buffett said something along the lines of "it doesn't matter how many insurance policies you sell, if you sell them at the wrong price".
If your customers are losing you money by paying at your published prices, then acquiring more customers isn't a sensible thing to do. Lock the customers in, or price higher at the start. Why chase customers who aren't making you money?
So, they buy a new Core i3 box with 8GB of RAM and they want to get $40 over the next two years to cover the investment. If they have to reduce its price to $30 after 6 months and further as time goes on, they don't cover the investment.
Now, they could price the box at $60 and lower it over time, but then you lose signups since it's a higher price (even if the average price over two years would be the same). You can say: well, have the older servers whose price has already been reduced available for sale as well. That complicates the lineup and is hard to manage. Unlike the new servers, the old servers only become available when someone gives one up which makes the supply unpredictable. With a new server, they can always buy one. Making matters worse, if the old ones have a reduced price, people are more likely to stay with them.
A decent part of this is that a lot of people are probably "needlessly" upgrading. By that, I mean that a lot of people probably aren't upgrading because the new server will make their usage better, but because they have a sense that they should be getting the top that their dollar will get. They were running perfectly fine on the old box, but why not try the new?
Ultimately, this is why VPSs are a lot easier. You can lower prices as time goes on in a reasonable manner. Someone wants the 1.7GB/1GHz 2007 box? That's a fraction of a new piece of hardware we can deploy. On the contrary, if someone wants a two year old model at OVH, they can't deploy a new two year old model: it's only available if someone gives it up. So, it becomes hard to capture the cheap-end of the market unless those signups keep paying for that box.