[beardedscotsman]

The consoles used to be sold at a loss, that was back a long time ago, Xbox 360, PS3 I believe were the last generation to be sold at a loss. The next gen Xbox at the time was sold for a 20% markup on cogs or there about at the time.

Games sold on the consoles have around a 15 usd flat royalty for big titles, not sure how that affected low cost games at the time. The 360 needed 5 games to brake even, but I believe they had an attach rate of around 3 at launch and that was unreal and unexpected at the time.

[nindalf]

3 was unexpectedly high or unexpectedly low?

[tialaramex]

Unexpectedly low. Conventionally you're selling this product to Gamers™ who will have at least one annual franchise they buy, (e.g. a sports game) and then pick up a few titles at the start plus one or two big titles. So you hit your desired attach rate and then it's profit. But if people buy your console, plus one game, and then are happy, with that model you are screwed.

It's actually doubtful whether they were really selling at a loss per se even then, most likely the notional loss represented amortizable R&D. Which is a loss on your annual balance sheet but - if you understand your business, can finance the R&D cost affordably and have a steady nerve so as to stick with the plan - this can be profitable eventually. The era of straight up dumping (exporting products for less than their BOM price, which may be illegal in some international trade rules) was last century. In the Sega era it really was possible you'd spend $100 on the actual product, sell it for $80 and figure you'll make up for it on royalties.

[beardedscotsman]

No, a 3 attach rate was huge, I said in a previous reply other consoles at the time were around 1.25. Over the lifetime older consoles needed around 5 games per console to break even and Xbox 360 hit that super fast compared to the competition.

This needs to be noted that it’s average as in 5 games per unit sold. So two consoles and 10 games sold to one person. The attach rate is a term related to games sold with the console at time of console purchase.

360 for sure was selling for a loss on cogs, that was rectified with the Xbox one that I believe was 400 cogs for 500 retail. It frustrated a ton of folk because 360 was 300 retail, but this was a clear change to make the console profitable without sales since they were worried people were buying it as a media device, hence the media focus of the Xbox one.

Just to be clear they managed to reduce the cogs with the Xbox 360 small and sold them at a profit without license sales.

[tialaramex]

I've never seen this idea of attach rate as "related to games sold with the console at time of console purchase". I've seen people say attach rate is %of platform which took the game (so e.g. some First Party Nintendo titles score very highly because if you own a Nintendo Wii U, you are very likely to take the Wii-U specific franchise titles) and use tie rate for games per console unit. But never the description you've used.

[WillPostForFood]

In industry, attach rate (aka software tie ratio) is typically the number of titles purchased for the console over the lifetime of ownership, not just at purchase (though that number is tracked as well).

[beardedscotsman]

Ok, we used a different term and associated attach rate as with console purchase. Either way, just take what I said as games sold with console purchase.

[beardedscotsman]

Three was huge at the time. Before Xbox 360 the attach rate was estimated at 1.25 for previous consoles. Often due to low games at launch or including a game with the console. Xbox 360 broke this at the time with a huge launch portfolio and a whole set of HD games, it was really exciting and beating PS3 to launch was a big bonus. Shame the Xbox One had disastrous leadership that turned the console into a media device and forgot that people bought it for games primarily. This is a whole different conversation though.