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khyber
Joined: 16 Jan 2003
Location: Compunction Junction
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 Posted: Wed Nov 23, 2005 5:08 pm Post subject: micro. LOSES money on xbox 360? |
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http://www.businessweek.com/technology/content/nov2005/tc20051122_410710.htm
Now, I wouldnt' say businessweek is ignorant on the matter but it just doesn't make sense that microsoft would bother selling anything that would OUTRIGHT lose them money....<oh...it's answer later in the article....weird>
and yet...
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| An up-close look at the components and other materials used in the high-end version of the Xbox 360, which contains a hard drive, found that the materials inside the unit cost Microsoft $470 before assembly. The console sells at retail for $399, meaning a loss of $71 per unit -- and that is just the start. |
....apparently there was more.. |
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Bulsajo
Joined: 16 Jan 2003
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| Posted: Wed Nov 23, 2005 5:36 pm Post subject: Re: micro. LOSES money on xbox 360? |
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| khyber wrote: |
Now, I wouldnt' say businessweek is ignorant on the matter but it just doesn't make sense that microsoft would bother selling anything that would OUTRIGHT lose them money....<oh...it's answer later in the article....weird>
and yet...
| Quote: |
| An up-close look at the components and other materials used in the high-end version of the Xbox 360, which contains a hard drive, found that the materials inside the unit cost Microsoft $470 before assembly. The console sells at retail for $399, meaning a loss of $71 per unit -- and that is just the start. |
....apparently there was more.. |
I didn't read the article yet, but-
Sure they lose on the unit, but they'll profit on the games and peripherals... plus, even at a loss, every xbox360 'loss' means one less eventual sale to PS3, or so the business plan probably goes. You're locking a customer into a system, a range of products, so taking a loss at the beginning doesn't matter, and it's worth a 'loss' to lock a customer into your system instead of your competitor's (um, so I am basically saying the same thing twice).
Is that the gist of the article? |
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Swiss James
Joined: 26 Nov 2003
Location: Shanghai
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| Posted: Wed Nov 23, 2005 5:47 pm Post subject: |
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didn't Sony take a hit on the PS2 when it was first released?
Seemed to pay off for them, I think they call it "the Razorblade model"; sell the initial razorblade handle for cheap, and then bump up the price of the replacement blades. |
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cubanlord
Joined: 08 Jul 2005
Location: In Japan!
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| Posted: Wed Nov 23, 2005 7:19 pm Post subject: |
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most video game unit producing companies take a negative hit on their consoles because the consumer cannot afford to high of an initial price offer, nor can the business afford to make it too cheap because their losses would be astronomical. They usually employ (as most any manufacturer does) a price skimming approach. This guarantees maximum ROI.
As someone previously stated, software and peripherals are where the money is made; especially in the software department. Once produced, as many of you already know, it is duplicated for pennies per each CD. This is a gamble, however affective, these companies take. |
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pdxsteve
Joined: 29 Sep 2004
Location: Bundang
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| Posted: Wed Nov 23, 2005 7:41 pm Post subject: |
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Most sub-$150 inkjet printers are sold at a loss also. The profit is made when you have to buy those ridiculously priced ink cartridges. I just bought replacement cartridges for my printer and they they (1 black, 1 color cartridge) cost more than the printer itself.
Gillette's marketing strategy has long been to "give away the razors, make the profit on the blades".
The goal is to reduce the "sticker shock" of the inital outlay, to enable more users to buy the unit and then be locked into paying for proprietary consumables.
It's a sound business strategy when there is a long-term potential for revenues through consumable parts sales; or, in the case of the X-Box, through new releases of games, game controllers, peripherals, value-added subscription services, etc. |
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itaewonguy
Joined: 25 Mar 2003
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| Posted: Wed Nov 23, 2005 9:00 pm Post subject: |
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anyone seen the lastest prices on EBAY for the 360.. its selling for 1500-2000 dollars!!
WTF!!! and people are buying them!!!
microsoft will make the money from the games! |
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joe_doufu
Joined: 09 May 2005
Location: Elsewhere
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| Posted: Wed Nov 23, 2005 9:08 pm Post subject: |
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| They make the profit by selling licenses to the software developers. With game consoles there's a network effect... game developers will make their games for the consoles that have the most users, thus console makers are in a race to get the first ten million units out to the public, not to make the most profit per unit. |
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mindmetoo
Joined: 02 Feb 2004
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| Posted: Wed Nov 23, 2005 9:56 pm Post subject: |
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| On top of the "loss leader" model, you have to remember Xbox was a direct response to Sony's plan to turn PS2 into a Windows-free portal to the Internet. If people find out they can play games and access the net via the PS system, they won't buy a computer or bother to update their computer and Windows o/s. |
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Wrench
Joined: 07 Apr 2005
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| Posted: Wed Nov 23, 2005 11:01 pm Post subject: |
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| Can't forget that they are going to loose a small fortune on all the defective units that poping up. |
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Gord
Joined: 25 Feb 2003
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| Posted: Thu Nov 24, 2005 2:12 am Post subject: |
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| pdxsteve wrote: |
| Gillette's marketing strategy has long been to "give away the razors, make the profit on the blades". |
Gillette's marketing strategy was to provide something to the U.S. military so that people on the front lines would use as a safer, disposable product rather than relying on open blades in a combat zone. This then lead to a change in consumer buying habits that previously had not embraced the concept of buying disposable products.
While often credited with "give away the razors, make money on the blades" in the modern media, it has never been a marketing strategy they used.
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| The goal is to reduce the "sticker shock" of the inital outlay, to enable more users to buy the unit and then be locked into paying for proprietary consumables. |
This only works when the unit they are buying is viewed as the market leader thus buying a second unit would be wasted money. While few people who own a PS2 also own a Gamecube or Xbox (for example), the dominant majority of Xbox and GC owners also own PS2s. |
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khyber
Joined: 16 Jan 2003
Location: Compunction Junction
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| Posted: Sat Nov 26, 2005 12:16 am Post subject: |
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| wow... so apparently i am retarded. |
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Pak Yu Man
Joined: 02 Jun 2005
Location: The Ida galaxy
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| Posted: Fri Dec 02, 2005 6:17 pm Post subject: |
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a while ago they were talking about making these baddies region free (console and games).
Does anyone know if they are? Meaning can I buy a couple of these here in Korea and take them back home and sell them?
Will they work with Canadian games? |
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Bulsajo
Joined: 16 Jan 2003
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| Posted: Sat Dec 03, 2005 7:36 pm Post subject: |
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| khyber wrote: |
| wow... so apparently i am retarded. |
Yes, but a lovable and endearing sort of retard.
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