Seeing the good in the bad?

[Dodece]

@sethnintendo

A business strategy is only good or bad in reference to the current situation. Loss leading is a very old strategy, but I think you need to see it in practice outside of gaming to grasp this. What exactly do you think promotional sales are in retail. They are items sold at a loss or a insufficient margin. It isn't that the seller is expecting to make money on this item. They are banking on making money on other items you might buy, good will generation, or simple market dominance to reward the up front loss. You cannot really argue with the effectiveness of this strategy, because it is a standard practice for a reason, and that is that it works.

Granted there are situations where loss leading isn't the best strategy. Like with any strategy it must be viable in the given economic climate, and it must be implemented properly. This generation Sony poorly implemented their own strategy, and came out with mixed results. Microsoft used the same strategy with very good results. Nintendo who followed a straight profit strategy probably had the best results. That said in previous generations that strategy wasn't necessarily a blessing for Nintendo, because it placed them in a bad market position. Being profitable doesn't really matter all that much if in the end you get forced out of the market, and thus close off your opportunity.

Which brings up a valid point, and this needs to be said. Nintendo isn't speaking about courting hardcore, and core gamers for no reason. Which is the market Sony and Microsoft are catering towards. Nintendo was able to survive with its out of the box profit model due to customer retention. Loyal customers overlooked what was offered on the basis of past experience with the brand. Without that their previous console could have been their last. It was thanks to this loyalty that they were able to reach a critical mass. This is part of the mistake that Sony made this generation, and they have seen how fickle consumers can be if they feel betrayed.

Sony is in a difficult position when it comes to this strategy of that there is little doubt. Microsoft on the other hand has shown itself to be quite effective. The difference is they worked a better starting position, and they have a far more robust tail end. This means the strategy worked out well for them. While it worked out poorly for Sony in a final analysis. Regarding your argument against this strategy all I can say is your well meaning, but entirely on the wrong point of reference.

Consoles are consistently becoming more uniform. Unlike previous generations where consoles had some rather obvious differences. So we are approaching a point where face to face power comparison is going to be far more crucial. When you cannot be radically different. It becomes that much more important to be technically better, or at least on the same level. If anything the expectations are creating pressure to match performance.