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Forums - Gaming - Natal less than $50

sieanr on 13 July 2009
wiifan75 said:
nordlead said:

They can easily sell Natal at a loss, they will get their money back very quickly from what they will make on Natal games. This is, after all, part of the traditional console pricing model.

stupid analysts. This isn't the traditional pricing model at all. It is the new one that has only worked with limited success for Sony. Overall the model has been horrible for them due to the huge losses posted by the PS3. Microsoft is also yet to make any money on this model (in gaming).

I couldn't agree with you more.  You beat me to that punch.  I can't believe some fool thinks losing money up front is "Traditional".  That is exactly why Nintendo is always in the game and relevant.  They priced out a product that was affordable to make.  They make money on every console.  That's a traditional model.  Only fools lose money up front to make it on the back side.  It's too risky and it's very evident now.  The jump this generation for graphics was too much I think.  It should have been stepped into slowly.  I just don't think this should have been the HD generation.  If PS360 would have been a little more conservative and gradually increased it's power and graphics over another generation, then I think Sony would have remained #1 and Nintendo might have been contemplating software sales only on PS4 & 360.5.  Just a thought.


Because it exactly what most video game companies have done?

Its called the razor/razorblade model of business, and its what Sony did during the PS1 and PS2 gen, not just with the PS3. Most other companies, Nintendo and SNK excluded, have also sold their hardware at a loss for atleast a while. At the start of the Genesis era the head of Sega of America insisted on following this model, much to the anger of Sega of Japan. Eventually SOA had virtually 50% of the US market, while SOJ was far behind Nintendo and NEC/Hudson.

But its not just video game companies that have profitted, and flourished off this model. Besides the aftermentioned video game and razorblade industry, ommunication companies do essentially the same - free installion and DVR/modems/phones up front, then the money is made back through a subscription. Basically you can think of the costs for the hardware being subsidised by the people who buy games and accessories, or subscribe to a service.



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NJ5 on 13 July 2009

You know sometimes underpricing things makes people not recognize their value.

Anyway as I've been saying what MS needs is a killer app for Natal. Something that the mainstream recognizes as a big deal (sorta like Wii Sports). Otherwise Natal will fail or be a niche product.



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theprof00 on 13 July 2009

sounds more like it is going to be supported very little for some reason.



nordlead on 13 July 2009
sieanr said:


Because it exactly what most video game companies have done?

Its called the razor/razorblade model of business, and its what Sony did during the PS1 and PS2 gen, not just with the PS3. Most other companies, Nintendo and SNK excluded, have also sold their hardware at a loss for atleast a while. At the start of the Genesis era the head of Sega of America insisted on following this model, much to the anger of Sega of Japan. Eventually SOA had virtually 50% of the US market, while SOJ was far behind Nintendo and NEC/Hudson.

But its not just video game companies that have profitted, and flourished off this model. Besides the aftermentioned video game and razorblade industry, ommunication companies do essentially the same - free installion and DVR/modems/phones up front, then the money is made back through a subscription. Basically you can think of the costs for the hardware being subsidised by the people who buy games and accessories, or subscribe to a service.

I'm more than aware of how the model is supposed to operate. I wasn't aware that Sega used the model too, as I thought Sony was the first to introduce it. And as I pointed out, they had limited success before blowing everything. Microsoft has never made the model work and they have both games and XBL to make money back on.

The problem with the razor/razorblade model in videogames, is a handful of things. One, you have no guarantee that anyone will ever buy enough games (what like 10 3rd party games for the PS3 at launch). With razors and communications, you know people will keep buying. Either they buy enough razor blades right off the start to break even, or you force them to sign a contract for 2 years so you know you'll make a profit. Also, no one buys used razor blades and you can't resell the internet But you can buy used video games from e-bay or wherever.

I can't really think of any markets that I know use the razor/razorblade model and make a profit while still having the same potential issues as videogames unless they are completely dominating the market (like the PS1 and PS2 did).




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NJ5 on 13 July 2009

The razor/blades model sucks for selling consoles. Look at Sony's profits from the 2000-2005 era (post PS2, pre PS3)... around $3 billion.

They made like $30 from each PS2 customer. That's pretty shameful for a console with 75% market share.

 



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AdventWolf on 13 July 2009

Wow nice price.



Reasonable on 13 July 2009

I'd say the price isn't the issue - it's what it launches with.

I think the hardcore 360 owners will likely get it whatever, but if they want to see expansive sales it's going to need to have games that drive interest.



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Keep_the_change on 13 July 2009

He also reconed that the Wii would be a failure...



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TWRoO on 13 July 2009
lanjiaona said:

Interesting this. Michael Pachter reckons that the Microsoft Natal add on for Xbox 360 will retail at under $50. You can see how this might be not far from what happens:

  • The cheaper it is the more they will sell, this is called price elasticity of demand. Microsoft need to sell lots to get the installed base over critical mass. Really they need every 360 owner to buy a Natal.
  • They have to take on Wii in the living rooms of the world and Wii comes with a gesture interface as standard. So 360+Natal needs to be price competitive with Wii.
  • They can easily sell Natal at a loss, they will get their money back very quickly from what they will make on Natal games. This is, after all, part of the traditional console pricing model.
  • Natal is vastly technically superior to the Sony and Nintendo gesture interfaces, if they get a large enough installed base they could be on to a must have technical and social phenomenon. Then 360+Natal would snowball.

Of course this is the opposite of the normal high tech pricing model where you fleece the early adopters to pay for the R&D and only go mass market when you have covered your investment and screwed your manufacturing costs down.

Consoles use this early adopter model combined with the razor blade/ inkjet printer model where the games subsidise the consoles. So Microsoft have good experience with sophisticated pricing strategies.

In what way is it traditional.... as far as I am aware the PS1 launched in Japan making a profit, and was only breifly sold at a oss because Sony wanted to fuck Sega over so they dropped the price for the Western launch
Then the PS2 Xbox and GC all launched at a loss, though the GC one was probably not long lasting as I think it was only $9 loss. Finally the Xbox 360 and PS3 have done it (oh, forgot the PSP)

It is not a traditional way of doing it, because it was only really started properly in the 6th generation.

If that is true then it means it costs a lot more to make.... so $50 is unreasonable if it costs 3 times that amount to produce, there is selling at a loss, and selling at a money shredder.



KungKras on 13 July 2009

This is the first time I have heard patcher being reasonable.

first, Microsoft operates very different from other companies, their priority is to make custoumers, not money. As long as they gain market share they can pour almost infinate money into a project to take over an industry. Microsoft could afford to sell a Natal that costs $200 to make for about $50 if it means that they can stomp Nintendo and become industry leaders and make up for the losses later.



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