I can guarantee you that Gillette never took multi-billion dollar losses on their razors. It doesn't cost much to give away a few free razors. The handles can't cost more than a few cents to manufacture, it's just stamped metal and plastic.

I liked reading this OP! It was interesting and it had some major points to it that I agree with.

The Razor&Blades model was wrongly applied for video games. 

SOFTWARE SELLS HARDWARE!

^This is the golden rule of the industry. Not "hardware sells software".  They were not supposed to force hardware sales, hoping that once they have a console,the users will automatically buy games. Software is the tool to get the customers, and hardware is the material product.

Software should be the razor, given away for free, or for very low price, and it should convert people to buy their profitable hardware product. 

@Grimes: Well, it's no more than two or three decades ago when the razors were far more expensive manufacture than they are today. Not to speak what they were hundred years ago, when Gillette started using the model. Besides, it's not only the cost of manufacture, but also the distribution that ups the cost.

The point in "giving away few razors" is in giving away stuff you could charge for. And even the razors that are given away make profit, because people buy blades for it.

@Alterego: LMAO.

The Wii looks sexy from all angles, PS3 looks sexy from most angles, and 360 needs a face lift;p

I don't think it proves it, since Sony has showed with the PS2 that the razorblade tactic can work out nicely.

What it proves, and it is quite obvious, is that a profit-from-the-beginning model is very healthy for the company, specially if the console takes flight, like the Wii. However, Nintendo also had profits with the Gamecube, a console that I owned and really liked, but was never much of a seller.

Hopefully SONY now understands that high priced consoles, sold at a loss is a bad idea. (and before anyone brings up PSPGo, that high priced but profitable)

While loss leading was acceptable in previous generations we have reached the point where graphics are now "good enough" for the average consumer. Because of this next-gen consoles really need to focus on becoming as powerful as possible, while only costing $299-$399 to manufacture in order to allow SONY/Microsoft to break even or even slightly profit from hardware at launch.

I think all this investment in tech by MS and Sony will pay off in the long run. It might not be going exactly as the expected nonetheless. Nintendo was very sly when they decided to make their console different and tapped into another market, but, of this newly created market, who will buy the next Nintendo console? I don't think all the casuals will follow suite and buy the next-gen consoles like us "core" gamers do. A while ago, we heard some spokesperson from square (I think?) saying that in the future, 20 - 30 years from now, consoles will basically be giant networks where we can all interact. I think Sony and MS have made far bigger strides in this than Nintendo has.

Haha thats kinda funny, when I turned 18 Gillette sent me a free razor, I had always used one of those electric shavers before but it was starting to get irritating to my skin and I used the razor they sent with their shaving gel and I've been a loyal customer ever since, because I can't find a better razor or shaving gel than that.

And yeah the razor blade model is pretty piss poor for the gaming industry since games aren't a necessity for men, hand its not like they're giving you anything free, you're still paying more than some peoples whole paychecks to get one, and if your attach rate isn't outrageously good, you're going to end up with a ton of losses.  Which is exactly how things have been going down, honestly they need to work on making cheap, reliable hardware that does what its supposed to do and yet still be profitable from day 1.

this is a wrong misunderstanding.

nintendo made profits, but that includes software sales, and very profitable sales of the GBA.

nintendo didn't have the engineering power of sony to create a expensive console, so decide to change to a new market.

the gamecube was sold 99$ i don't see that bringing huge profits.