Aielyn said:
In microeconomics, there's a concept called complements. Two products are complements if reducing the price of one increases the demand for the other (thereby allowing the price of it to be raised). Read This to get a good idea of this concept. That link also explains that, when one wishes to maximise the demand, one tries to turn the complement into a commodity. For something to be a commodity, it needs to be something that is fairly standardised, following a simple path of price reducing and power increasing. Now, the complement for videogames are the gaming consoles themselves. As such, third parties want the gaming consoles to be commoditised, thereby minimising the cost of the consoles, which would increase the demand for games. But when a particular product distinguishes itself, it works against commoditisation. Nintendo's consoles and handhelds have always had strong product differentiation, through Nintendo's first-party content. But with the Wii, Nintendo took it one step further, going low-power and adding a completely new control scheme. Nintendo has been eschewing the standards in favour of maximising product differentiation. This causes the price of Nintendo hardware to remain high (note that the Wii price has held almost stationary, while the 360 and PS3 keep reducing in price and having all sorts of things added). On the other hand, the 360 and PS3 are pretty much standardised. And so, third parties want to maximise demand for games, and thus want gaming consoles to be commoditised. This puts them at odds with Nintendo, who wants to maximise demand for their gaming console. Note that if Nintendo did as third parties want, and dropped the price, the net impact would be less profit for Nintendo, and more for third parties. Note that neither Sony nor MS mind their consoles being commoditised. I mean, they're even willing to sell things under cost price in order to maximise install base. This is because gaming consoles are not their core businesses. Indeed, gaming consoles are complements to both MS's and Sony's core businesses, so they have cause to sell at lower prices, and have their consoles become commodities. So in the end, it's not the Wii's "weakness" or uniqueness that is driving away third parties. It's the fact that Nintendo wants to make a profit in consoles, since it's their core business. Nintendo bypassed this problem in the NES/SNES era by being rather draconic with third parties, and Sega did the same thing, since they also had consoles as their core business. When Sony came along, they were happy to commoditise their console, so third parties rushed to the PS. Lesson: Never assume that things are simple cases of "what makes the most profit now?" |
This is one of the best posts I've seen on these boards in a long, long while.
Werekitten's post was pretty insightful, too.
"The worst part about these reviews is they are [subjective]--and their scores often depend on how drunk you got the media at a Street Fighter event." — Mona Hamilton, Capcom Senior VP of Marketing
*Image indefinitely borrowed from BrainBoxLtd without his consent.
Leatherhat on July 6th, 2012 3pm. Vita sales:"3 mil for COD 2 mil for AC. Maybe more. " thehusbo on July 6th, 2012 5pm. Vita sales:"5 mil for COD 2.2 mil for AC."
