I know that this is pretty obvious for some of you, but I think it deserves to be discussed in its own thread:

In some ways, 2008 is proving to be a big year for the HD consoles... Third parties are giving them a lot of support, launching big games which are expected to be the climax of those consoles' success. The biggest such games for 2008 are obviously GTA4 and MGS4.

Given this, what do Sony and Microsoft do regarding those games?

- Microsoft does huge price cuts in Europe before GTA4 launches, positioning their console near Wii's price, which is obviously a much cheaper console to manufacture (thanks for that BTW, it enabled me to get their console for GTA4 and a few other interesting games). It's still unclear whether they'll do the same thing for USA, but it wouldn't surprise me if they did.

- Microsoft spends $50 million on downloadable content for GTA4, much of which they'll probably never gain back.

- Sony bundles MGS4 and GTA4 with zero added cost for the consumer vs the console's price. This negates any gain from royalties on those two games. They'll be losing money in two ways when someone buys one of those bundles:

• Manufacturing cost vs retail price. They have gone on the record saying that they are still losing money on hardware, and that they only expect to start breaking even towards the end of the fiscal year.

• The games themselves which they have to buy from Konami/Take 2, instead of taking royalties as it would be expected.

When I put that together with the losses that they have sustained before this point (especially Sony in terms of the current-gen), I get this picture:

This is a like battle between irate giants, who keep pounding each other (and themselves) to the ground at every step, even when they're getting near the climax of their product's life.

They're not just competing, they're competing so fiercely that the only winners in the business seem to be the consumers and a few lucky third parties.

if those two die w'll be stuck with mario and nintendo consoles LOL. if that ever happns, ill be begging for sega to comeback

it was fine for microsoft to do what they did. you didnt have a problem till you found out Sony was bundling the GTA game.

 Nice trolling sir..

is it a problem that i dont i dont like nintendo neos?

Yeah... sometimes capitalism is a good thing... they wouldn´t be throwing money around if they weren´t expecting to get it back at some point.

The MS thing you have a point with, since they are paying out money for price drops, and for the content, but you lost me with Sony.

You act as if Metal Gear Solid 4 and Gran Turismo 5: Prologue aren't bought on their own.

GT5: P has already sold 250k in Japan, w/out being bundled, and I guess if every copy of GT5: P sold in Others last week was bundled you'd make sense, but most, if not all of them weren't bundled, looking at sales. And GT5: P isn't even bundled in the US, so US sales will all help.

And again, with MGS4, Not every game being bought will be the bundle, some won't be bundled. You act as if the eleven million PS3 owners will not buy either of these games, when it's been said that MGS4 "isn't a system seller", and the same has been said about GT5: P. So if it isn't a system seller, then the games must be selling to the people who already own the system.

Tossing in a free game to sweeten the deal means at least for Sony that they have a better chance to move more consoles and that your probably going to be buying more games and maybe if they are lucky Blu-ray movies and that equals $$$ in the long run

You're right that I didn't explicitly discuss the games being bought on their own. However, if you look at the othet stuff happening behind the scenes, it's not hard to see them eliminating most or all of the profit they could get from the royalties on those games: Microsoft's $50 million for Take 2, and Sony's likely financing of MGS4 as an exclusive (although this is not for sure), and their aggressive bundling of both games together with hardware that they weren't making a profit on in the first place.

I just don't see Microsoft and Sony making much (if any) money from those games. Given that the loss-leading business model is about losing money on hardware to make it back on software, I think they may be getting a bit late in the "making it back" part.

You can of course disagree and discuss, which is what this forum and this thread exists for.

You may have a point in some way, but both Sony and Microsoft can afford to do this.
Plus, as you stated it is competition that benefits the consumer. Neither console would be half of what it is (at the prices they are at) if it wasn't for this competition.

You have to see the broader picture when considering the small disadvantages of such competitive moves.