Microsoft and Sony are destroying their (and each other's) gaming business

[Ail]

I fail to see how Sony bundling those games is bad financially for them.

First lets not forget that the amount of MGS4 copies sold through the bundle is going to be very small compared to the total number of games sold ( if MGS4 sells 3 millions copies, it's not going 3 millions copies bundled, I would guess 200k, maybe a little more but any case the percentage of the copies sold through the bundle won't be that high and Sony will still get full royalties on all the others copies).
So even bundling AAA games they won't loose that much royalties on those games..

So basically they giving up royalties and a little more only on the copies that will result in the sale of a PS3, hardly a bad thing....

From a marketing point of view bundles are great.

They create an urgency and force customers to buy now ( because bundles are usually limited in time) whereas otherwise some of them would probably have waited for a later time and a price drop to make their purchase ( and the earliest a customer buy the console, the more games he is likely to buy in the console lifetime).

And finally in terms of costs for the customer a bundle is like getting the console 60$ cheaper whereas the extra cost for Sony is probably a lot less than 60$ ( and who doesn't like the idea of I'm going to give you a 60$ discount but it's actually going to cost me less).

The reason is that  bundled software with hardware is sold as hardware so suddenly you have removed the shop's margin on the software from the equation ( which means that if lets say Best Buy has a 20$ margin on 60$ games, bundling the game only costs 40$ or less to Sony).

 

In the end a bundle is just a way to make a time limited price cut with the trick that the console manufacturer actually doesn't reduce his prices that much...( in a way the one getting screwed are the game shops as they loose their margin on every game sold through the bundle).