Azelover said:
That's from the market being sick. Normal product profits from the retail sale on top of marketing costs, Sony used to lose money or break even without counting marketing. Consoles used to be a generation behind computers and arcades, with Sony that gap became even and the profit(and reliability in many cases) erased or diminished. There are benefits to that model, but also downsides. We've just about had all the benefit it could bring gaming at this point, or at least the larger chunks of it, and are now left with mostly the downsides. The problem with the razor/blade model in gaming is it eliminates risk taking from the point of view of design and overall approach. A console like the DS would never have been made if Sony was in control of the handheld market, and that includes a lot of its edgy software like Brain Training which didn't profit with game sales(counting marketing). Profit with the hardware breathes room to innovation and new types of approaches. With Sony's model everybody selling hardware is scared shitless all the time, fearful of steping a mere inch outside of guaranteed sales. |
When people say that most consoles have been sold at a loss, it is true but they don’t seem to know or acknowledge the nature of that loss; and how drastically different it has become in the past handful of years.
Traditionally speaking, most manufacturers (including Nintendo) have taken a loss on their hardware around the time of a system’s launch because producing a console for below $200 has always been a challenge; and that was the price most manufacturers were aiming for. Often the loss that the company was taking would be "recovered" when they sold a system because the margins on games and controllers were large enough that accessorizing your console easily covered the loss on the hardware. Even the heavily hyped PS2, which was supposed to be costing Sony a small fortune at launch, realistically was probably only costing Sony about $100 per console sold for the first 6 to 12 months of production; and after that, the PS2 probably spent most of its life selling at a profit.
The console which is (probably) the most responsible for changing the dynamic of hardware releases is the XBox; because Microsoft choose a scaled down PC for hardware because of their limited R&D time, their inexperience in console manufacturing left them with very poor contracts for cost reductions, and they choose hardware (mainly the hard-drive) which don’t really reduce in price over-time. Microsoft bled $5 billion on the XBox 360 which was (in a large part) from excessive hardware losses and marketing costs.
The PS3, PSP and XBox 360 are (probably) the only console’s ever released by an experienced console manufacturer which have maintained hardware losses much beyond the first year of a console’s life. This is probably acceptable if you are a massive multinational corporation who brings in billions of dollars of recurring revenue from other sources of income, but for most companies this is a strategy for being pushed out of the market.
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