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by electromagnetic
5714 days ago
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The 360 has recently started making a profit, why? Because they released the 360 making a loss, and dropped the price rather quickly. They then dropped the price even more. And even more. IIRC they've always made money off of the special edition elite consoles, they've been making a profit off of the elite as a whole for a while now, however these represent a small amount of their sales compared to the big sales of the arcade consoles they had. PS3 made huge losses to try to stay competitive with 360, and never really dropped much in price and lost huge market share because of it. However, both have been ridiculous profit makers for their parent companies as the entire devision makes wheelbarrow loads of cash from selling games for ridiculous prices (again something Sony fucked up with by getting greedy in the beginning, although Xbox eventually followed). |
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Sorry, this is completely untrue for the XBox which has haemorrhaged cash for it's entire life as a division, not just on hardware sales. I've linked to the figures in my post above.
The PS3 is in a similar position - it moved into profit on the hardware sales earlier this year and total losses are estimated at around $3 billion to date. I can't find any figures on the whole division profitability (other than that it is profitable) to know how likely it is to recoup this, though there are statements that they do expect it to make money over it's full life (though I suspect it will be questionable how much for an investment of that size).
If you're wondering how this can be possible, the console subsidies at launch were of the order of $250 - $300 per console. That's a lot of money to make up off of game sales and live subscriptions (remember you're making it off the profit on each game - maybe $10 - $20, not the revenue of $50).
> PS3 made huge losses to try to stay competitive with 360, and never really dropped much in price and lost huge market share because of it.
In terms of global (not US) market share the PS3 will pass the XBox360 shortly which isn't great news for the 360 given that it launched a year earlier so had a head start. Given that Microsoft's sales figures are based on shipped to retailers and Sony's are on sold to consumer's it's possible that the PS3 is already in the hands of more people (rather than sat on shop shelves). In the US the figures are better (18 million vs. 12 million) which might explain why you think it's doing well but that picture isn't reflected in Japan (1 million vs. 5 million) or Europe.
But if you're wondering where the next generation of consoles are, these figures should make it clear - they're nowhere. Both companies need to eek out the life of the current consoles for financial reasons before looking at further significant investment.
Indeed it may be the case that the XBox360/PS3 generation of consoles will prove to be a one off in terms of the level of investment made given the difficulty in recouping it, and that future consoles will be based on smaller, cheaper increments in power and functionality.
Just to be clear, I'm not knocking MS for the sake of it (I actually really like the look of Kinnect and give them great credit for the innovation) but the economics of consoles aren't quite what some people seem to think they are.