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Gaming - Natal less than $50 - View Post

TWRoO on 13 July 2009
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lanjiaona said:

Interesting this. Michael Pachter reckons that the Microsoft Natal add on for Xbox 360 will retail at under $50. You can see how this might be not far from what happens:

  • The cheaper it is the more they will sell, this is called price elasticity of demand. Microsoft need to sell lots to get the installed base over critical mass. Really they need every 360 owner to buy a Natal.
  • They have to take on Wii in the living rooms of the world and Wii comes with a gesture interface as standard. So 360+Natal needs to be price competitive with Wii.
  • They can easily sell Natal at a loss, they will get their money back very quickly from what they will make on Natal games. This is, after all, part of the traditional console pricing model.
  • Natal is vastly technically superior to the Sony and Nintendo gesture interfaces, if they get a large enough installed base they could be on to a must have technical and social phenomenon. Then 360+Natal would snowball.

Of course this is the opposite of the normal high tech pricing model where you fleece the early adopters to pay for the R&D and only go mass market when you have covered your investment and screwed your manufacturing costs down.

Consoles use this early adopter model combined with the razor blade/ inkjet printer model where the games subsidise the consoles. So Microsoft have good experience with sophisticated pricing strategies.

In what way is it traditional.... as far as I am aware the PS1 launched in Japan making a profit, and was only breifly sold at a oss because Sony wanted to fuck Sega over so they dropped the price for the Western launch
Then the PS2 Xbox and GC all launched at a loss, though the GC one was probably not long lasting as I think it was only $9 loss. Finally the Xbox 360 and PS3 have done it (oh, forgot the PSP)

It is not a traditional way of doing it, because it was only really started properly in the 6th generation.

If that is true then it means it costs a lot more to make.... so $50 is unreasonable if it costs 3 times that amount to produce, there is selling at a loss, and selling at a money shredder.