Does Nintendo lose money on their Gamecubes?
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FriskyTanuki
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No, they make a lot of money per GC from what I've heard. One of my gaming teachers says that they cost about $28 or so to make, so they make about $70 per console.
Dr Mario Kart
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I've heard something like that also, someone told me that the Gamecube costs 20 something to make. Which sounds awfully ridiculous dont you think.
FriskyTanuki
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[quote name='Dr Mario Kart']I've heard something like that also, someone told me that the Gamecube costs 20 something to make. Which sounds awfully ridiculous dont you think.[/quote]
Not really, it's not a powerful system by any means, and not having a DVD player or hard drive or some of those other expensive saves a lot of money.
Not really, it's not a powerful system by any means, and not having a DVD player or hard drive or some of those other expensive saves a lot of money.
Wshakspear
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[quote name='CrashSpyro123']it's not a powerful system by any means[/quote]
huh???
huh???
[quote name='CrashSpyro123']No, they make a lot of money per GC from what I've heard. One of my gaming teachers says that they cost about $28 or so to make, so they make about $70 per console.[/quote]
I'd love to see your teacher try to get work as a purchasing agent for any large consumer electronics company. I guarantee you the GameCube cost substantially more to make than $30 per unit.
Nintendo insists they never sold anything for a loss but if they are honest (and many semicinductor industry analysts don't believe they are) they have at best broken even on their hardware.
If you really believe the GC only costs $28 to produce, ask yourself why the company with the smallest installed base of this generation hasn't seen fit to cut the price to $70 or even $50 in pursuit of creating a greater base for software sales? A hell of a lot of more PS2 owners might be enticed into adding a GameCube to their entertainment center if the price of entry were reduced. Getting the price of RE4 down to a collective $100 (throw in a minimum memory card) plus tax before the PS2 version becomes a viable alternative and thus opening up the door for a lot of other GC exclusive titles to be sold makes better marketing sense than overvaluing the hardware. A Donkey Konga bundle for the same price would also be attractive.
When you are in a razor and razor baldes business like the video game industry, it is wildly stupid to try making a high margin on hardware at the cost of your potential software sales where margins are even higher.
And no, throwing in a game like Metroid Prime or Mario Kart
D does not make up the difference. We're talking about the cost to Nintendo, not the claimed retail value. Bundling a game that was already in profits from normal sales costs Nintendo about $2. They aren't giving up a royalty as they would with tha third party product and the loss of the normal SRP value is only virtual and more than made in the value of expanding the platform's installed base.
Nintendo hasn't been shy about cutting retail prices in the past. No one doubts we'll see the GBA SP for $50 down the road. The only question is whether the next $99 GameBoy will be an enhanced GBA or a new platform software-wise.
I'd love to see your teacher try to get work as a purchasing agent for any large consumer electronics company. I guarantee you the GameCube cost substantially more to make than $30 per unit.
Nintendo insists they never sold anything for a loss but if they are honest (and many semicinductor industry analysts don't believe they are) they have at best broken even on their hardware.
If you really believe the GC only costs $28 to produce, ask yourself why the company with the smallest installed base of this generation hasn't seen fit to cut the price to $70 or even $50 in pursuit of creating a greater base for software sales? A hell of a lot of more PS2 owners might be enticed into adding a GameCube to their entertainment center if the price of entry were reduced. Getting the price of RE4 down to a collective $100 (throw in a minimum memory card) plus tax before the PS2 version becomes a viable alternative and thus opening up the door for a lot of other GC exclusive titles to be sold makes better marketing sense than overvaluing the hardware. A Donkey Konga bundle for the same price would also be attractive.
When you are in a razor and razor baldes business like the video game industry, it is wildly stupid to try making a high margin on hardware at the cost of your potential software sales where margins are even higher.
And no, throwing in a game like Metroid Prime or Mario Kart
D does not make up the difference. We're talking about the cost to Nintendo, not the claimed retail value. Bundling a game that was already in profits from normal sales costs Nintendo about $2. They aren't giving up a royalty as they would with tha third party product and the loss of the normal SRP value is only virtual and more than made in the value of expanding the platform's installed base.Nintendo hasn't been shy about cutting retail prices in the past. No one doubts we'll see the GBA SP for $50 down the road. The only question is whether the next $99 GameBoy will be an enhanced GBA or a new platform software-wise.
Keep in mind that the cost of the Xbox comes from it being rushed into existence and borrowing a lot from off the shelf PC parts. (Which is also why it's so large.) It got the job done but in many ways the system has a lot of functionality that is wasted on its primary purpose. The hard drive is a major feature but the cost was very high when considering that the average Xbox owner uses less than 20% of it. This why Microsoft has gone to M-Systems for a more cost efficient silicon based solution for the same functions and possibly offering hard drives as optional features for high-end functions that not every Xbox buyer will want. (So long as Microsoft has their deployemnt options worked out at launch the developer community will be happy as opposed to what Sony did with their HDD meandering for years.)
The PS2 hardware was a big money loser at launch but Sony made a bet on certain features and won. The massive installed base and subsequent software sales made it all worth the capital cost. The new version of PS2 is still paying back the costs of the chip set revision but it is poised to eventually fall to $100 and under for a very long life akin to its predecessor.
Coming in 33% lower for cost of entry was a big bet on Nintendo's part for the GameCube. This was fine when it was considered a three-way race but at this point maintaining the status quo is not ding the GC software market any favors. If there was room to cut the GC retail price, they would.
The PS2 hardware was a big money loser at launch but Sony made a bet on certain features and won. The massive installed base and subsequent software sales made it all worth the capital cost. The new version of PS2 is still paying back the costs of the chip set revision but it is poised to eventually fall to $100 and under for a very long life akin to its predecessor.
Coming in 33% lower for cost of entry was a big bet on Nintendo's part for the GameCube. This was fine when it was considered a three-way race but at this point maintaining the status quo is not ding the GC software market any favors. If there was room to cut the GC retail price, they would.
FriskyTanuki
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http://www.cube-europe.com/news.php?nid=4634
Ok, we’ve all heard the rumours about how much it costs for Nintendo to make a GameCube. If you’ve been living under a rock here’s the low-down. $20US at first might seem a little unrealistic, and I know many people will shrug this off as not a rumour, but an absolute load of bullocks. But I’m here to encourage you to start thinking a little more seriously about it. What if it was true?
Put your mind to it. The Xbox (which is reported to make a loss on each console sold), has a 10gb hard drive, DVD compatibility, CD compatibility, and an in-built broadband modem. That’s a heck of a lot of extras, add to this Xbox’s better specs, and you have a pretty expensive little unit. It currently retails at $179.99US, shop around and you’ll get this same price with two quality games thrown in for free. Now for the GameCube. It’s a stock-standard games machine. No extras, it just plays the best games in the world. It retails at $149.99US, and a select number of stores will give you a new release game for free. As you can see, all we have is a $30US gap, and I’ll be damned if anyone could but all the extras that the Xbox has for this price.
How much could it really cost Nintendo to put together a GameCube? How much (taking into consideration their corporate deals) could Nintendo buy a processor, a flipper, and some ram for, some cheap plastic to but it all in, and a can of indigo spray paint? If you ask me, the answer isn’t too far over the $20 mark. A more realistic figure would be something around the $30-$40 price line. The bottom line is that Nintendo are making a heck of a lot of profit, even with its “poor” sales numbers. Need proof? Look no further than the recent net profits announced last week - a cool .5 billion dollars thankyou very much. So what are Nintendo doing with it all?
Sure, most of it could be going towards advertising for their upcoming releases. But hey, it obviously isn’t. Perhaps it’s going into the development of the next Zelda, Metroid, and Mario games? But lets not forget the income of the Game Boy merchandise. Nintendo are still making quite a lot of money, and are in no means in any danger of being forced to close down its operations. Nintendo have a lot of money behind them, and I’m not talking about a figure in the 100’s of millions. No, no, no. I’m talking an amount in excess of 10’s of billions.
So do I have a theory as to what they are going to do with this money? Of course I do
At the moment it is being saved up. I’m betting that Nintendo’s sole purpose with the GameCube now is to provide them with a bit more recourses to work with. In a sense, the GameCube’s purpose now is to gear Nintendo up for their next one! Nintendo are not going to make the same mistake three times in a row with their console. The next console we’ll see from Nintendo is going to be hi-tech piece of equipment. It will provide and exceed what the new console gaming market demands. Nintendo are going to throw an insane amount of money behind it, money you never knew they had! I’m estimating a figure in the billions will be put into developing this console, and everything to do with its launch. Things to expect will be some massive launch games, a massive online plan ready to go on launch, and a console that will far exceed everyone’s expectations – at a very reasonable price.
Think about it. It’s not a question of if. It’s a do-or-die for Nintendo. Their next console IS their last chance at winning back their former respect, if they don’t make an impression this time around, it’s gonna be the big ugly arse for our beloved Nintendo. But I’m predicting it won’t be! It’s going to be Nintendo’s return to glory, mark my words...
It's all just rumors, so unless comes out and tells us, anyone could be right.
Ok, we’ve all heard the rumours about how much it costs for Nintendo to make a GameCube. If you’ve been living under a rock here’s the low-down. $20US at first might seem a little unrealistic, and I know many people will shrug this off as not a rumour, but an absolute load of bullocks. But I’m here to encourage you to start thinking a little more seriously about it. What if it was true?
Put your mind to it. The Xbox (which is reported to make a loss on each console sold), has a 10gb hard drive, DVD compatibility, CD compatibility, and an in-built broadband modem. That’s a heck of a lot of extras, add to this Xbox’s better specs, and you have a pretty expensive little unit. It currently retails at $179.99US, shop around and you’ll get this same price with two quality games thrown in for free. Now for the GameCube. It’s a stock-standard games machine. No extras, it just plays the best games in the world. It retails at $149.99US, and a select number of stores will give you a new release game for free. As you can see, all we have is a $30US gap, and I’ll be damned if anyone could but all the extras that the Xbox has for this price.
How much could it really cost Nintendo to put together a GameCube? How much (taking into consideration their corporate deals) could Nintendo buy a processor, a flipper, and some ram for, some cheap plastic to but it all in, and a can of indigo spray paint? If you ask me, the answer isn’t too far over the $20 mark. A more realistic figure would be something around the $30-$40 price line. The bottom line is that Nintendo are making a heck of a lot of profit, even with its “poor” sales numbers. Need proof? Look no further than the recent net profits announced last week - a cool .5 billion dollars thankyou very much. So what are Nintendo doing with it all?
Sure, most of it could be going towards advertising for their upcoming releases. But hey, it obviously isn’t. Perhaps it’s going into the development of the next Zelda, Metroid, and Mario games? But lets not forget the income of the Game Boy merchandise. Nintendo are still making quite a lot of money, and are in no means in any danger of being forced to close down its operations. Nintendo have a lot of money behind them, and I’m not talking about a figure in the 100’s of millions. No, no, no. I’m talking an amount in excess of 10’s of billions.
So do I have a theory as to what they are going to do with this money? Of course I do
At the moment it is being saved up. I’m betting that Nintendo’s sole purpose with the GameCube now is to provide them with a bit more recourses to work with. In a sense, the GameCube’s purpose now is to gear Nintendo up for their next one! Nintendo are not going to make the same mistake three times in a row with their console. The next console we’ll see from Nintendo is going to be hi-tech piece of equipment. It will provide and exceed what the new console gaming market demands. Nintendo are going to throw an insane amount of money behind it, money you never knew they had! I’m estimating a figure in the billions will be put into developing this console, and everything to do with its launch. Things to expect will be some massive launch games, a massive online plan ready to go on launch, and a console that will far exceed everyone’s expectations – at a very reasonable price.
Think about it. It’s not a question of if. It’s a do-or-die for Nintendo. Their next console IS their last chance at winning back their former respect, if they don’t make an impression this time around, it’s gonna be the big ugly arse for our beloved Nintendo. But I’m predicting it won’t be! It’s going to be Nintendo’s return to glory, mark my words...
It's all just rumors, so unless comes out and tells us, anyone could be right.
Heyricochet
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That guys thoughts are horribly flawed. Everyone knows that the Xbox was loosing money at $300, and now at $180 MS is bleeding cash. The thing is that they have the cash reserves to take it, so next generation when they've gotten their act together hardware wise, and now that they are gaining more and more key software developers, thats when MS will make money back. GC costing 20 bucks? Even 30-40? Thats a joke. Silicon may be pretty cheap, but it ain't that cheap.
AnthonyRoundtree
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[quote name='CrashSpyro123'] ...it's not a powerful system by any means...[/quote]
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FriskyTanuki
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[quote name='Heyricochet']That guys thoughts are horribly flawed. Everyone knows that the Xbox was loosing money at $300, and now at $180 MS is bleeding cash. The thing is that they have the cash reserves to take it, so next generation when they've gotten their act together hardware wise, and now that they are gaining more and more key software developers, thats when MS will make money back. GC costing 20 bucks? Even 30-40? Thats a joke. Silicon may be pretty cheap, but it ain't that cheap.[/quote]
Yeah, it was pretty much known that Microsoft would take losses this gen because they can take it and then go for it next generation to make money. It's all speculative as to what they actually cost since none of them will ever tell us.
Yeah, it was pretty much known that Microsoft would take losses this gen because they can take it and then go for it next generation to make money. It's all speculative as to what they actually cost since none of them will ever tell us.
Monsta Mack
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Me likes this topic!
guyver2077
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are you crazy.,,
Nintendo didn't cut much (if any) costs by not making the GC be able to play DVD's. The lense and hardware are pretty much straight DVD equipment. All that's holding the GC back from playing DVD's is the physical size of the place you stick the discs in and a little DVD playing firmware.
[quote name='CrashSpyro123']
Not really, it's not a powerful system by any means, and not having a DVD player or hard drive or some of those other expensive saves a lot of money.[/quote]
Hello? Mcfly? Resident Evil 4 is more than enough to show how powerful of a system it is.
Not really, it's not a powerful system by any means, and not having a DVD player or hard drive or some of those other expensive saves a lot of money.[/quote]
Hello? Mcfly? Resident Evil 4 is more than enough to show how powerful of a system it is.
Morrigan Lover
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[quote name='CrashSpyro123']Not really, it's not a powerful system by any means.[/quote]
Everyone laugh at the n00b!
Nintendo lost money on each gamecube sold at lauch. But the cost of supplies dropped so that they were supposedly breaking even at the $100 price point in early 2004.
Everyone laugh at the n00b!
Nintendo lost money on each gamecube sold at lauch. But the cost of supplies dropped so that they were supposedly breaking even at the $100 price point in early 2004.
GuilewasNK
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I think it would be more likely to assume that the current cost for Nintendo to make a GCN is around $70 - $80 per cube. The price of the components used in these systems goes down over time so that wouldn't be too far out of the realm of possibilty. Unfortunately we don't sell Gamecube at the college bookstore I work at so I wouldn't know how much cost it is to retailers before they sell it. WE have sold some PC hardware before at only a 5% markup just so retail stays down, but you have to sell a LOT like that to make any money.
scargums
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ok, so for htis generation, sony and microsoft designed their systems expecting to lose money initially, ms much more so than sony based on sales, but the idea was to build a huge fanbase and continue to attract more people away from nintendo into their own camp so that next generation they would not have to lose money again on hardware, as the installed fanbase is clearly there now.
my quiestion is, has anyone considered the fact that maybe nintendo didnt do this (design the system to lose money to make it more attractive to buyers) because they have been planning to do this in the next generation instead of this one? by doing this, they could agressively try to sell the cube while making a profit on every one, and all the while save up this money (add it to the enormous pile they already have) in order to develop a killer system they can lose money on to bring buyers back to them in the next gen when at least MS will have to be more conservative in order to make money. Sony will likely lose money on ps3s but those arrogant
s know they will make it back so they likely dont even care and will continue to be aggressive. i see next gen being nintendo versus sony, with the xbox not being in the picture once the latter two are released.
my quiestion is, has anyone considered the fact that maybe nintendo didnt do this (design the system to lose money to make it more attractive to buyers) because they have been planning to do this in the next generation instead of this one? by doing this, they could agressively try to sell the cube while making a profit on every one, and all the while save up this money (add it to the enormous pile they already have) in order to develop a killer system they can lose money on to bring buyers back to them in the next gen when at least MS will have to be more conservative in order to make money. Sony will likely lose money on ps3s but those arrogant
s know they will make it back so they likely dont even care and will continue to be aggressive. i see next gen being nintendo versus sony, with the xbox not being in the picture once the latter two are released.[quote name='scargums']ok, so for htis generation, sony and microsoft designed their systems expecting to lose money initially, ms much more so than sony based on sales, but the idea was to build a huge fanbase and continue to attract more people away from nintendo into their own camp so that next generation they would not have to lose money again on hardware, as the installed fanbase is clearly there now.
my quiestion is, has anyone considered the fact that maybe nintendo didnt do this (design the system to lose money to make it more attractive to buyers) because they have been planning to do this in the next generation instead of this one? by doing this, they could agressively try to sell the cube while making a profit on every one, and all the while save up this money (add it to the enormous pile they already have) in order to develop a killer system they can lose money on to bring buyers back to them in the next gen when at least MS will have to be more conservative in order to make money. Sony will likely lose money on ps3s but those arrogant shaq-fus know they will make it back so they likely dont even care and will continue to be aggressive. i see next gen being nintendo versus sony, with the xbox not being in the picture once the latter two are released.[/quote]
hmm I highly doubt that they're making money now with the plan to soften the blow for next gen. I also don't think you can count out the next xbox especially since they've been very aggressive getting exclusive deals with japanese developers.
my quiestion is, has anyone considered the fact that maybe nintendo didnt do this (design the system to lose money to make it more attractive to buyers) because they have been planning to do this in the next generation instead of this one? by doing this, they could agressively try to sell the cube while making a profit on every one, and all the while save up this money (add it to the enormous pile they already have) in order to develop a killer system they can lose money on to bring buyers back to them in the next gen when at least MS will have to be more conservative in order to make money. Sony will likely lose money on ps3s but those arrogant shaq-fus know they will make it back so they likely dont even care and will continue to be aggressive. i see next gen being nintendo versus sony, with the xbox not being in the picture once the latter two are released.[/quote]
hmm I highly doubt that they're making money now with the plan to soften the blow for next gen. I also don't think you can count out the next xbox especially since they've been very aggressive getting exclusive deals with japanese developers.
David85
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Well the GC could cost that much to make now because they have outdated tech.,
When the GBA came out it cost $90 at most stores to buy, Nintendo was selling it to them for $88 and making the systems for something like $50 to $60. Then the price goes down the more you make. Plus in the case of the GC they removed some input thing to make the cost even cheaper. Do I believe it cost $20 to make? No, but it's probably only a little more.
When the GBA came out it cost $90 at most stores to buy, Nintendo was selling it to them for $88 and making the systems for something like $50 to $60. Then the price goes down the more you make. Plus in the case of the GC they removed some input thing to make the cost even cheaper. Do I believe it cost $20 to make? No, but it's probably only a little more.
Morrigan Lover
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source: http://cube.ign.com/articles/463/463155p2.html
SO the Gamecube was selling at a small loss at $100 in early 2004.
[quote name='Heyricochet']That guys thoughts are horribly flawed. Everyone knows that the Xbox was loosing money at $300, and now at $180 MS is bleeding cash. The thing is that they have the cash reserves to take it, so next generation when they've gotten their act together hardware wise, and now that they are gaining more and more key software developers, thats when MS will make money back. GC costing 20 bucks? Even 30-40? Thats a joke. Silicon may be pretty cheap, but it ain't that cheap.[/quote]
You do understand that their costs have probably gone down. Probably greatly. I doubt that Microsoft is losing any more money on the Xbox now than they ever did.
You do understand that their costs have probably gone down. Probably greatly. I doubt that Microsoft is losing any more money on the Xbox now than they ever did.
Mookyjooky
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Just remember guys, nintendo or any company is going to make as many consoles as they need at launch. Why make more? People will wait to buy it...And you create a demand at the same time. Remember the whole PS2 Fiasco?
But Say it costs Nintendo $110 Dollars per gamecube at launch to make.
As time goes by, they find ways to cut costs.....so they're able to put a cheaper drive in it....cheaper plastic buttons...and whatnot. So it costs them $90 to make each Gamecube.
Then more time goes by and a 8x cd player isnt as expencive as it once was....so that drops in price... $80 bucks a cube now....
Then, because they never stop looking....(Part of the magic of business...) They find 6 different companies that'll make they're product needs cheaper.... Now we're looking at $40 cubes.....
You could go further and take off the pieces that you once were gonna use for expansion and remodel it, like a PSone....and it could cost as low as $15 bucks to make.
But Say it costs Nintendo $110 Dollars per gamecube at launch to make.
As time goes by, they find ways to cut costs.....so they're able to put a cheaper drive in it....cheaper plastic buttons...and whatnot. So it costs them $90 to make each Gamecube.
Then more time goes by and a 8x cd player isnt as expencive as it once was....so that drops in price... $80 bucks a cube now....
Then, because they never stop looking....(Part of the magic of business...) They find 6 different companies that'll make they're product needs cheaper.... Now we're looking at $40 cubes.....
You could go further and take off the pieces that you once were gonna use for expansion and remodel it, like a PSone....and it could cost as low as $15 bucks to make.
[quote name='ZForce915']I think it's funny that anyone here would be able to say they know how much a Gamecube costs to make. Ever get the price quote from Nintendo? No? Then you don't know shit. Your guess is just as good as the next.[/quote]
To the penny, no? But Nintendo is subject to the same laws of physics as everybody else. The innards of the units known in great detail and it's known what the vendors involved sell comparable parts for in more public settings. For instance, what IBM's foundry business gets for an IC of a specific number of elements in a known production process. From the point of view of the semiconductor experts who do this for a living it isn't at all mysterious. Making an educated guess is reasonable
To the penny, no? But Nintendo is subject to the same laws of physics as everybody else. The innards of the units known in great detail and it's known what the vendors involved sell comparable parts for in more public settings. For instance, what IBM's foundry business gets for an IC of a specific number of elements in a known production process. From the point of view of the semiconductor experts who do this for a living it isn't at all mysterious. Making an educated guess is reasonable
[quote name='sgxyay']Nintendo didn't cut much (if any) costs by not making the GC be able to play DVD's. The lense and hardware are pretty much straight DVD equipment. All that's holding the GC back from playing DVD's is the physical size of the place you stick the discs in and a little DVD playing firmware.[/quote]
The licensing cost for selling a legal DVD player is a major factor. When you buy the DVD Kit for the Xbox the primary cost is the DVD playback license.
Sony had reasons unique to their company for bundling DVD playback as a freebie. First of all, they're in the home video business. Growing the DVD player installed base back in the day before they started coming out of cereal boxes was a good way of getting other Sony divisions behind the PS2 push. This was especially true in Japan where DVD players were overpriced compared to the US market and adoption was lagging.
Sony is also one of the founding member of the group that manages the DVD patent pool and receives revenue from the royalties collected. Pioneer holds a much larger number of the DVD patents but still, from Sony's perspective, giving away DVD playback in a Sony game system didn't represent as great a loss as it would for either Microsoft or Nintendo.
The licensing cost for selling a legal DVD player is a major factor. When you buy the DVD Kit for the Xbox the primary cost is the DVD playback license.
Sony had reasons unique to their company for bundling DVD playback as a freebie. First of all, they're in the home video business. Growing the DVD player installed base back in the day before they started coming out of cereal boxes was a good way of getting other Sony divisions behind the PS2 push. This was especially true in Japan where DVD players were overpriced compared to the US market and adoption was lagging.
Sony is also one of the founding member of the group that manages the DVD patent pool and receives revenue from the royalties collected. Pioneer holds a much larger number of the DVD patents but still, from Sony's perspective, giving away DVD playback in a Sony game system didn't represent as great a loss as it would for either Microsoft or Nintendo.
[quote name='scargums']MS will have to be more conservative in order to make money.[/quote]
Yeah, Microsoft doesn't make nearly enough profit in the software business to fund losses in their videogame division.
They returned a 85% profit in the software division. Bottom line profit.
Yeah, Microsoft doesn't make nearly enough profit in the software business to fund losses in their videogame division.
They returned a 85% profit in the software division. Bottom line profit.
[quote name='scargums']ok, so for htis generation, sony and microsoft designed their systems expecting to lose money initially, ms much more so than sony based on sales, but the idea was to build a huge fanbase and continue to attract more people away from nintendo into their own camp so that next generation they would not have to lose money again on hardware, as the installed fanbase is clearly there now.
my quiestion is, has anyone considered the fact that maybe nintendo didnt do this (design the system to lose money to make it more attractive to buyers) because they have been planning to do this in the next generation instead of this one? by doing this, they could agressively try to sell the cube while making a profit on every one, and all the while save up this money (add it to the enormous pile they already have) in order to develop a killer system they can lose money on to bring buyers back to them in the next gen when at least MS will have to be more conservative in order to make money. Sony will likely lose money on ps3s but those arrogant shaq-fus know they will make it back so they likely dont even care and will continue to be aggressive. i see next gen being nintendo versus sony, with the xbox not being in the picture once the latter two are released.[/quote]
Do you realize how insane this is? Imagine a director telling a studio, "I'd like to make a movie that will never do better than #3 at the box office because somehow this will make the movie I do after that an incredible money maker?" In case you've forgotten, Nintendo already lost the previous generation with the N64. Not enough to leave the company in disarray but certainly to the extent they had to rethink some of their policies, such as their dislike for the easily pirated optical media. People may have trouble remembering but in 1995 the Sony Playstation was also sold at a loss. Sony did everything it could think of to win a position in the industry and succeeded very well. The way they did it set certain precedents that no competitor can ignore.
Nintendo did not go into the GameCube with the idea of losing a generation to win the next. That would be suicidal and stunningly arrogant as well. Nintendo bet on certain things working to their advantage. This was compatible with their corporate culture and changing that is one of the most difficult challages a company can face. After the N64 lost to the Playstation and Sega got blown completely out of the water to the extent that there was a long period between the death of the Saturn and the launch of Dreamcast where Sega had no platform at all.
Nintendo is still coming to terms with the realties of where the console business has gone without asking them for permission. Unlike Sega, they have a strong portable business that allows them the chance to indulge their resistance to change without putting the company in a dire negative cashflow situation. Nintendo may get it together or they may never do better than #2 or #3 again. The market has grown to the extent a third player can be profitable, albeit at a smaller scale than the lead company. It will quite a long time for it to be shown either way.
my quiestion is, has anyone considered the fact that maybe nintendo didnt do this (design the system to lose money to make it more attractive to buyers) because they have been planning to do this in the next generation instead of this one? by doing this, they could agressively try to sell the cube while making a profit on every one, and all the while save up this money (add it to the enormous pile they already have) in order to develop a killer system they can lose money on to bring buyers back to them in the next gen when at least MS will have to be more conservative in order to make money. Sony will likely lose money on ps3s but those arrogant shaq-fus know they will make it back so they likely dont even care and will continue to be aggressive. i see next gen being nintendo versus sony, with the xbox not being in the picture once the latter two are released.[/quote]
Do you realize how insane this is? Imagine a director telling a studio, "I'd like to make a movie that will never do better than #3 at the box office because somehow this will make the movie I do after that an incredible money maker?" In case you've forgotten, Nintendo already lost the previous generation with the N64. Not enough to leave the company in disarray but certainly to the extent they had to rethink some of their policies, such as their dislike for the easily pirated optical media. People may have trouble remembering but in 1995 the Sony Playstation was also sold at a loss. Sony did everything it could think of to win a position in the industry and succeeded very well. The way they did it set certain precedents that no competitor can ignore.
Nintendo did not go into the GameCube with the idea of losing a generation to win the next. That would be suicidal and stunningly arrogant as well. Nintendo bet on certain things working to their advantage. This was compatible with their corporate culture and changing that is one of the most difficult challages a company can face. After the N64 lost to the Playstation and Sega got blown completely out of the water to the extent that there was a long period between the death of the Saturn and the launch of Dreamcast where Sega had no platform at all.
Nintendo is still coming to terms with the realties of where the console business has gone without asking them for permission. Unlike Sega, they have a strong portable business that allows them the chance to indulge their resistance to change without putting the company in a dire negative cashflow situation. Nintendo may get it together or they may never do better than #2 or #3 again. The market has grown to the extent a third player can be profitable, albeit at a smaller scale than the lead company. It will quite a long time for it to be shown either way.
As I've had experience in ordering retail merchandise from wholesalers, distributors, and manufacturers, the $28 price tag is probably pretty accurate. But you have to look at the exchanges and "price" vs. "cost" of a product.
Using a 1.5 factor 'rule of thumb', $28 cost of production equals roughly $100 retail value of an item you would see in a retail store. pricing factors are usually taken to a few more decimal places, but I'll use the '1.5' rule as an example:
$28 = cost of production to fabricate 1 Nintendo Cube
28 X 1.5 = $42 - price of Cube sold to wholesale distributor.
42 X 1.5 = $63 - price of Cube sold to retail distributor (best buy, meijer, whatever)
63 X 1.5 = $95 - price consumer sees on the shelf.
So, $71 profit for nintendo from subtracting 28 from 99 is an under-analysis. There are many points of purchase and markup before products hit retail store shelves. Just becuase it may COST Nintendo $28 to make a cube, doesn't mean it sells it for $28. And the profit for them is only about $15 per unit if the 28 figure is accurate. It's the same in every industry, for every products, only the multiplying factors are different than this '1.5 rule' average. You can also divide a retail "price" by 1.5 to get an estimate of what a retail store has paid for an item.
Using a 1.5 factor 'rule of thumb', $28 cost of production equals roughly $100 retail value of an item you would see in a retail store. pricing factors are usually taken to a few more decimal places, but I'll use the '1.5' rule as an example:
$28 = cost of production to fabricate 1 Nintendo Cube
28 X 1.5 = $42 - price of Cube sold to wholesale distributor.
42 X 1.5 = $63 - price of Cube sold to retail distributor (best buy, meijer, whatever)
63 X 1.5 = $95 - price consumer sees on the shelf.
So, $71 profit for nintendo from subtracting 28 from 99 is an under-analysis. There are many points of purchase and markup before products hit retail store shelves. Just becuase it may COST Nintendo $28 to make a cube, doesn't mean it sells it for $28. And the profit for them is only about $15 per unit if the 28 figure is accurate. It's the same in every industry, for every products, only the multiplying factors are different than this '1.5 rule' average. You can also divide a retail "price" by 1.5 to get an estimate of what a retail store has paid for an item.
[quote name='Heyricochet']That guys thoughts are horribly flawed. Everyone knows that the Xbox was loosing money at $300, and now at $180 MS is bleeding cash. The thing is that they have the cash reserves to take it, so next generation when they've gotten their act together hardware wise, and now that they are gaining more and more key software developers, thats when MS will make money back. GC costing 20 bucks? Even 30-40? Thats a joke. Silicon may be pretty cheap, but it ain't that cheap.[/quote]
Have you perhaps noticed that the price of a PC has gone down dramatically in the same time period since the Xbox launched? All of the parts in the Xbox occupy a much lower price tier than they did four years ago. .18 micron manufacturing was then state of the art, now it's an aging process available to companies who couldn't afford anything better than .35 back then. This cuts the cost of the chipset considerably.
If you look at the Xbox and GameCube you'll see that their prices have maintained the same ratio. Both are now sold at 50% of their launch price. The Xbox hardware is subsidized but at the same percentage it's always been while the actual dollar amount has decreased. If it were viable to drop the Xbox price to $99 without driving that subsidy unacceptably high, they would. Just as Nintendo would leap at the chance to offer a $50 GameCube and sub-$100 bundles. If the cost fell low enough a console company would give away the hardware to anyone buying enough games at the same time to assure them of coming out ahead on the hardware cost.
Have you perhaps noticed that the price of a PC has gone down dramatically in the same time period since the Xbox launched? All of the parts in the Xbox occupy a much lower price tier than they did four years ago. .18 micron manufacturing was then state of the art, now it's an aging process available to companies who couldn't afford anything better than .35 back then. This cuts the cost of the chipset considerably.
If you look at the Xbox and GameCube you'll see that their prices have maintained the same ratio. Both are now sold at 50% of their launch price. The Xbox hardware is subsidized but at the same percentage it's always been while the actual dollar amount has decreased. If it were viable to drop the Xbox price to $99 without driving that subsidy unacceptably high, they would. Just as Nintendo would leap at the chance to offer a $50 GameCube and sub-$100 bundles. If the cost fell low enough a console company would give away the hardware to anyone buying enough games at the same time to assure them of coming out ahead on the hardware cost.
[quote name='epobirs'][quote name='scargums']ok, so for htis generation, sony and microsoft designed their systems expecting to lose money initially, ms much more so than sony based on sales, but the idea was to build a huge fanbase and continue to attract more people away from nintendo into their own camp so that next generation they would not have to lose money again on hardware, as the installed fanbase is clearly there now.
my quiestion is, has anyone considered the fact that maybe nintendo didnt do this (design the system to lose money to make it more attractive to buyers) because they have been planning to do this in the next generation instead of this one? by doing this, they could agressively try to sell the cube while making a profit on every one, and all the while save up this money (add it to the enormous pile they already have) in order to develop a killer system they can lose money on to bring buyers back to them in the next gen when at least MS will have to be more conservative in order to make money. Sony will likely lose money on ps3s but those arrogant shaq-fus know they will make it back so they likely dont even care and will continue to be aggressive. i see next gen being nintendo versus sony, with the xbox not being in the picture once the latter two are released.[/quote]
Do you realize how insane this is? Imagine a director telling a studio, "I'd like to make a movie that will never do better than #3 at the box office because somehow this will make the movie I do after that an incredible money maker?" In case you've forgotten, Nintendo already lost the previous generation with the N64. Not enough to leave the company in disarray but certainly to the extent they had to rethink some of their policies, such as their dislike for the easily pirated optical media. People may have trouble remembering but in 1995 the Sony Playstation was also sold at a loss. Sony did everything it could think of to win a position in the industry and succeeded very well. The way they did it set certain precedents that no competitor can ignore.
Nintendo did not go into the GameCube with the idea of losing a generation to win the next. That would be suicidal and stunningly arrogant as well. Nintendo bet on certain things working to their advantage. This was compatible with their corporate culture and changing that is one of the most difficult challages a company can face. After the N64 lost to the Playstation and Sega got blown completely out of the water to the extent that there was a long period between the death of the Saturn and the launch of Dreamcast where Sega had no platform at all.
Nintendo is still coming to terms with the realties of where the console business has gone without asking them for permission. Unlike Sega, they have a strong portable business that allows them the chance to indulge their resistance to change without putting the company in a dire negative cashflow situation. Nintendo may get it together or they may never do better than #2 or #3 again. The market has grown to the extent a third player can be profitable, albeit at a smaller scale than the lead company. It will quite a long time for it to be shown either way.[/quote]
Agree'd
It's very rare that someone would get into a business and say "My ambition is to be the third best selling product!"
I'm sure that Nintendo intended to win this generation, and learned some lessons. That said, they did maintain a profitability in their products almost entirely throughout this generation, and they have quite a war chest built up. They also, I dare say, have the most talented developers of any videogame company, software or hardware. They could be a "Sleeping Giant" who lumbers awake and crushes competition.
"Grrrrrr Nintendo MAD Nintendo SMASH!"
We will have to wait and see.
my quiestion is, has anyone considered the fact that maybe nintendo didnt do this (design the system to lose money to make it more attractive to buyers) because they have been planning to do this in the next generation instead of this one? by doing this, they could agressively try to sell the cube while making a profit on every one, and all the while save up this money (add it to the enormous pile they already have) in order to develop a killer system they can lose money on to bring buyers back to them in the next gen when at least MS will have to be more conservative in order to make money. Sony will likely lose money on ps3s but those arrogant shaq-fus know they will make it back so they likely dont even care and will continue to be aggressive. i see next gen being nintendo versus sony, with the xbox not being in the picture once the latter two are released.[/quote]
Do you realize how insane this is? Imagine a director telling a studio, "I'd like to make a movie that will never do better than #3 at the box office because somehow this will make the movie I do after that an incredible money maker?" In case you've forgotten, Nintendo already lost the previous generation with the N64. Not enough to leave the company in disarray but certainly to the extent they had to rethink some of their policies, such as their dislike for the easily pirated optical media. People may have trouble remembering but in 1995 the Sony Playstation was also sold at a loss. Sony did everything it could think of to win a position in the industry and succeeded very well. The way they did it set certain precedents that no competitor can ignore.
Nintendo did not go into the GameCube with the idea of losing a generation to win the next. That would be suicidal and stunningly arrogant as well. Nintendo bet on certain things working to their advantage. This was compatible with their corporate culture and changing that is one of the most difficult challages a company can face. After the N64 lost to the Playstation and Sega got blown completely out of the water to the extent that there was a long period between the death of the Saturn and the launch of Dreamcast where Sega had no platform at all.
Nintendo is still coming to terms with the realties of where the console business has gone without asking them for permission. Unlike Sega, they have a strong portable business that allows them the chance to indulge their resistance to change without putting the company in a dire negative cashflow situation. Nintendo may get it together or they may never do better than #2 or #3 again. The market has grown to the extent a third player can be profitable, albeit at a smaller scale than the lead company. It will quite a long time for it to be shown either way.[/quote]
Agree'd
It's very rare that someone would get into a business and say "My ambition is to be the third best selling product!"
I'm sure that Nintendo intended to win this generation, and learned some lessons. That said, they did maintain a profitability in their products almost entirely throughout this generation, and they have quite a war chest built up. They also, I dare say, have the most talented developers of any videogame company, software or hardware. They could be a "Sleeping Giant" who lumbers awake and crushes competition.
"Grrrrrr Nintendo MAD Nintendo SMASH!"
We will have to wait and see.
Bottom line is that assuming nintendo is even still producing systems (which my local store susgests they arnt because he cant get any in stock right now) they arnt loosing any money anymore, of course they certainly arnt making more per sold system than their rivals (M$ is probably still taking a small loss at this point but it's nothing their game sales arnt covering).
Also I think it's foolish for MS to think they'll make more money in the secon gen as opposed to their first especially if they make their system with the same design theory. Tha XB is jacked full of expsenive tech which they're barely making a hardware profit on, to do that with the nextbox gaurantees a loss in the first year of the system (this part is a given as every system looses in the begining) but it's worse for them as being out first means they will be subject to the whims of their oppoents price points.
Fer'instance: XB2 releases for 300(naturally) Nintendo releases the revolution at 250 or so and PS3 at 300. Sony first place from the last two generations decides early on they can under cut MS who's hungry to make money this gen, drops to 250 or tosses in a free game or 2. After all they can afford it with two gens of success in their wallet. M$ blows a huge wad for a new exclusive title or 4. Nintendo releases a newMario game and a GB and makes 5 million sales the first week, drops their systems price to 200 with a free game. etc..
Anyway, the point I'm making is MS is more likely to spend cash thinking it will help themin the long run where as Ninty and Sony simply have to release more of what they have and ride the wave. By the 3rd year Sony and Ninty are making money off thei systems and MS is still paying royalties on their latest "exclusive title".
Also I think it's foolish for MS to think they'll make more money in the secon gen as opposed to their first especially if they make their system with the same design theory. Tha XB is jacked full of expsenive tech which they're barely making a hardware profit on, to do that with the nextbox gaurantees a loss in the first year of the system (this part is a given as every system looses in the begining) but it's worse for them as being out first means they will be subject to the whims of their oppoents price points.
Fer'instance: XB2 releases for 300(naturally) Nintendo releases the revolution at 250 or so and PS3 at 300. Sony first place from the last two generations decides early on they can under cut MS who's hungry to make money this gen, drops to 250 or tosses in a free game or 2. After all they can afford it with two gens of success in their wallet. M$ blows a huge wad for a new exclusive title or 4. Nintendo releases a newMario game and a GB and makes 5 million sales the first week, drops their systems price to 200 with a free game. etc..
Anyway, the point I'm making is MS is more likely to spend cash thinking it will help themin the long run where as Ninty and Sony simply have to release more of what they have and ride the wave. By the 3rd year Sony and Ninty are making money off thei systems and MS is still paying royalties on their latest "exclusive title".
[quote name='bmulligan']As I've had experience in ordering retail merchandise from wholesalers, distributors, and manufacturers, the $28 price tag is probably pretty accurate. But you have to look at the exchanges and "price" vs. "cost" of a product.
Using a 1.5 factor 'rule of thumb', $28 cost of production equals roughly $100 retail value of an item you would see in a retail store. pricing factors are usually taken to a few more decimal places, but I'll use the '1.5' rule as an example:
$28 = cost of production to fabricate 1 Nintendo Cube
28 X 1.5 = $42 - price of Cube sold to wholesale distributor.
42 X 1.5 = $63 - price of Cube sold to retail distributor (best buy, meijer, whatever)
63 X 1.5 = $95 - price consumer sees on the shelf.
So, $71 profit for nintendo from subtracting 28 from 99 is an under-analysis. There are many points of purchase and markup before products hit retail store shelves. Just becuase it may COST Nintendo $28 to make a cube, doesn't mean it sells it for $28. And the profit for them is only about $15 per unit if the 28 figure is accurate. It's the same in every industry, for every products, only the multiplying factors are different than this '1.5 rule' average. You can also divide a retail "price" by 1.5 to get an estimate of what a retail store has paid for an item.[/quote]
I would be extremely surprised if major outlets like Best Buy or Target were dealing with a wholesale distributor for console hardware. One of the primary advantages of large retail companies is their ability to deal directly with major vendors. The supply chain for putting consoles and games in your local BB is rather simpler than you describe, I believe. It does show why many small independent retailers aren't too concerned with selling hardware though. Get them talking and plenty of them will bitch about it costing them money to sell a console at SRP because their supply chain is longer than the big retailers who account for the vast majority of consoles sold.
Using a 1.5 factor 'rule of thumb', $28 cost of production equals roughly $100 retail value of an item you would see in a retail store. pricing factors are usually taken to a few more decimal places, but I'll use the '1.5' rule as an example:
$28 = cost of production to fabricate 1 Nintendo Cube
28 X 1.5 = $42 - price of Cube sold to wholesale distributor.
42 X 1.5 = $63 - price of Cube sold to retail distributor (best buy, meijer, whatever)
63 X 1.5 = $95 - price consumer sees on the shelf.
So, $71 profit for nintendo from subtracting 28 from 99 is an under-analysis. There are many points of purchase and markup before products hit retail store shelves. Just becuase it may COST Nintendo $28 to make a cube, doesn't mean it sells it for $28. And the profit for them is only about $15 per unit if the 28 figure is accurate. It's the same in every industry, for every products, only the multiplying factors are different than this '1.5 rule' average. You can also divide a retail "price" by 1.5 to get an estimate of what a retail store has paid for an item.[/quote]
I would be extremely surprised if major outlets like Best Buy or Target were dealing with a wholesale distributor for console hardware. One of the primary advantages of large retail companies is their ability to deal directly with major vendors. The supply chain for putting consoles and games in your local BB is rather simpler than you describe, I believe. It does show why many small independent retailers aren't too concerned with selling hardware though. Get them talking and plenty of them will bitch about it costing them money to sell a console at SRP because their supply chain is longer than the big retailers who account for the vast majority of consoles sold.
[quote name='epobirs']
I would be extremely surprised if major outlets like Best Buy or Target were dealing with a wholesale distributor for console hardware. One of the primary advantages of large retail companies is their ability to deal directly with major vendors. The supply chain for putting consoles and games in your local BB is rather simpler than you describe, I believe. It does show why many small independent retailers aren't too concerned with selling hardware though. Get them talking and plenty of them will bitch about it costing them money to sell a console at SRP because their supply chain is longer than the big retailers who account for the vast majority of consoles sold.[/quote]
Actually, I think mine is the simpler description. You're right, many big box stores deal directly with the manufacturer (but not many) but pay freight on the product by a third party shipper which adds to the bottom line retail price in the absence of a wholesaler. When your products are made in China or Korea, however, there may not be a 'wholesaler', per se, but there are many chains of purchase, wharehousing, and delivery that products go through before being sold at retail. Very few products come directly from a manufacturer.
What I was really trying to get at was that there's a difference in the "cost" to produce an item and what it's sold to a middle man for, and then sold to the consumer. And that nintendo making $70 neglects to account for all the hands it passes through before it hits the retail shelf.
I would be extremely surprised if major outlets like Best Buy or Target were dealing with a wholesale distributor for console hardware. One of the primary advantages of large retail companies is their ability to deal directly with major vendors. The supply chain for putting consoles and games in your local BB is rather simpler than you describe, I believe. It does show why many small independent retailers aren't too concerned with selling hardware though. Get them talking and plenty of them will bitch about it costing them money to sell a console at SRP because their supply chain is longer than the big retailers who account for the vast majority of consoles sold.[/quote]
Actually, I think mine is the simpler description. You're right, many big box stores deal directly with the manufacturer (but not many) but pay freight on the product by a third party shipper which adds to the bottom line retail price in the absence of a wholesaler. When your products are made in China or Korea, however, there may not be a 'wholesaler', per se, but there are many chains of purchase, wharehousing, and delivery that products go through before being sold at retail. Very few products come directly from a manufacturer.
What I was really trying to get at was that there's a difference in the "cost" to produce an item and what it's sold to a middle man for, and then sold to the consumer. And that nintendo making $70 neglects to account for all the hands it passes through before it hits the retail shelf.
[quote name='Alpha2']Bottom line is that assuming nintendo is even still producing systems (which my local store susgests they arnt because he cant get any in stock right now) they arnt loosing any money anymore, of course they certainly arnt making more per sold system than their rivals (M$ is probably still taking a small loss at this point but it's nothing their game sales arnt covering).
Also I think it's foolish for MS to think they'll make more money in the secon gen as opposed to their first especially if they make their system with the same design theory. Tha XB is jacked full of expsenive tech which they're barely making a hardware profit on, to do that with the nextbox gaurantees a loss in the first year of the system (this part is a given as every system looses in the begining) but it's worse for them as being out first means they will be subject to the whims of their oppoents price points.
Fer'instance: XB2 releases for 300(naturally) Nintendo releases the revolution at 250 or so and PS3 at 300. Sony first place from the last two generations decides early on they can under cut MS who's hungry to make money this gen, drops to 250 or tosses in a free game or 2. After all they can afford it with two gens of success in their wallet. M$ blows a huge wad for a new exclusive title or 4. Nintendo releases a newMario game and a GB and makes 5 million sales the first week, drops their systems price to 200 with a free game. etc.
Anyway, the point I'm making is MS is more likely to spend cash thinking it will help themin the long run where as Ninty and Sony simply have to release more of what they have and ride the wave. By the 3rd year Sony and Ninty are making money off thei systems and MS is still paying royalties on their latest "exclusive title".[/quote]
It's already failed to work out that way for this generation. Microsoft has had a profitable quarter for the Xbox division. Since virtually all of the non-Xbox related stuff in this division is flat out money losers thus far it indicates the Xbox business, taken entirely by itself, had a very good quarter. Many didn't expect this to happen at all for the current machine and that its existence was solely to establish the brand.
Microsoft is most assuredly making quite a lot of effort toward a more cost effective product in the second generation. This is the primary reason the inclusion or lack of a hard drive is such a heavily discussed issue. For console purposes, where the capacity need is much less than in a PC, flash memory may prove a more effective means of providing local storage. Hard drives find a minimum price for their form factor and never drop much in price from there but instead increase capacity to improve value. This doesn't help a console maker who doesn't need more capacity but wants a lower part cost.
Another big issue is IP in the chipset. Part of the rush to market with the Xbox meant buying parts from Nvidia based on what they were already doing in the PC sector. This left MS without control of their chipset. If they want a die shrink to lower costs and produce a smaller, lower priced Xbox, they have to deal with Nvidia or their completely out of luck. There is good reasons for the choice of partners Microsoft has for the next generation. Intel isn't motivated to make what MS needs, AMD lacks the capacity for reliable deliveries, so this pretty much leaves IBM as the sole players with their own CPU line and massive production capacity. They're much more invested in the embedded field and more accomodating to the needs of CE companies. ATI went after the Xbox2 business by dangling a few critical items in their offer. One of those was contractual obligation to provide a die shrink at a future point.
It is also foolish to believe there is no first mover advantage. Sega failed because the company was a shambles. They weren't able to withstand any negative events. It isn't the same story for any of the remaining console companies. (After the dust settled Sony was effectively first mover for this generation as the Dreamcast failed to ever reach beyond the hardcore gamer market. Longterm, it's effects were negligable.) for the vast majority of the market the PS2 was the first system of this generation that mattered. Despite a fairly lacluster first year of software the installed base achieved in that time made it impossible for either new system to knock Sony out of the competition. The best they could hope for was to push it down to #2 and even that was beyond them. (Inside Microsoft I don't believe they ever considered beating Sony in this generation. It was enough to become a credible console brand.) The PS2 had to respond to the pricing of new consoles in the same way you describe for Xbox2. With a platform designed to scale down for cost effectiveness there is no reason Microsoft cannot be as agile as Sony.
You seem to have the bizarre idea that Microsoft has no internal production capacity and that Sony or Nintendo have no reliance on outside developers. Sony has always published a large number of games from second parties and a substantial portion of GameCube titles using Nintendo franchise have been farmed out to outside companies. (Although, of the four StarFox games to date, only the N64 titles was internally developed by Nintendo.) Sony built their development capacity by buying it, just as Microsoft has. Do you think the folks at Naughty Dog joined Sony out of love and admiration rather than money? Did you think Nintendo got Capcom's top franchise as a semi-exclusive for free? Nintendo footed the bill for all of the REmakes as well as paying the bulk of costs for RE0 and RE4. Capcom was smart enough not to give Nintendo contractual exclusivity for this generation and gets to seek greener pastures as it suits them.
Also I think it's foolish for MS to think they'll make more money in the secon gen as opposed to their first especially if they make their system with the same design theory. Tha XB is jacked full of expsenive tech which they're barely making a hardware profit on, to do that with the nextbox gaurantees a loss in the first year of the system (this part is a given as every system looses in the begining) but it's worse for them as being out first means they will be subject to the whims of their oppoents price points.
Fer'instance: XB2 releases for 300(naturally) Nintendo releases the revolution at 250 or so and PS3 at 300. Sony first place from the last two generations decides early on they can under cut MS who's hungry to make money this gen, drops to 250 or tosses in a free game or 2. After all they can afford it with two gens of success in their wallet. M$ blows a huge wad for a new exclusive title or 4. Nintendo releases a newMario game and a GB and makes 5 million sales the first week, drops their systems price to 200 with a free game. etc.
Anyway, the point I'm making is MS is more likely to spend cash thinking it will help themin the long run where as Ninty and Sony simply have to release more of what they have and ride the wave. By the 3rd year Sony and Ninty are making money off thei systems and MS is still paying royalties on their latest "exclusive title".[/quote]
It's already failed to work out that way for this generation. Microsoft has had a profitable quarter for the Xbox division. Since virtually all of the non-Xbox related stuff in this division is flat out money losers thus far it indicates the Xbox business, taken entirely by itself, had a very good quarter. Many didn't expect this to happen at all for the current machine and that its existence was solely to establish the brand.
Microsoft is most assuredly making quite a lot of effort toward a more cost effective product in the second generation. This is the primary reason the inclusion or lack of a hard drive is such a heavily discussed issue. For console purposes, where the capacity need is much less than in a PC, flash memory may prove a more effective means of providing local storage. Hard drives find a minimum price for their form factor and never drop much in price from there but instead increase capacity to improve value. This doesn't help a console maker who doesn't need more capacity but wants a lower part cost.
Another big issue is IP in the chipset. Part of the rush to market with the Xbox meant buying parts from Nvidia based on what they were already doing in the PC sector. This left MS without control of their chipset. If they want a die shrink to lower costs and produce a smaller, lower priced Xbox, they have to deal with Nvidia or their completely out of luck. There is good reasons for the choice of partners Microsoft has for the next generation. Intel isn't motivated to make what MS needs, AMD lacks the capacity for reliable deliveries, so this pretty much leaves IBM as the sole players with their own CPU line and massive production capacity. They're much more invested in the embedded field and more accomodating to the needs of CE companies. ATI went after the Xbox2 business by dangling a few critical items in their offer. One of those was contractual obligation to provide a die shrink at a future point.
It is also foolish to believe there is no first mover advantage. Sega failed because the company was a shambles. They weren't able to withstand any negative events. It isn't the same story for any of the remaining console companies. (After the dust settled Sony was effectively first mover for this generation as the Dreamcast failed to ever reach beyond the hardcore gamer market. Longterm, it's effects were negligable.) for the vast majority of the market the PS2 was the first system of this generation that mattered. Despite a fairly lacluster first year of software the installed base achieved in that time made it impossible for either new system to knock Sony out of the competition. The best they could hope for was to push it down to #2 and even that was beyond them. (Inside Microsoft I don't believe they ever considered beating Sony in this generation. It was enough to become a credible console brand.) The PS2 had to respond to the pricing of new consoles in the same way you describe for Xbox2. With a platform designed to scale down for cost effectiveness there is no reason Microsoft cannot be as agile as Sony.
You seem to have the bizarre idea that Microsoft has no internal production capacity and that Sony or Nintendo have no reliance on outside developers. Sony has always published a large number of games from second parties and a substantial portion of GameCube titles using Nintendo franchise have been farmed out to outside companies. (Although, of the four StarFox games to date, only the N64 titles was internally developed by Nintendo.) Sony built their development capacity by buying it, just as Microsoft has. Do you think the folks at Naughty Dog joined Sony out of love and admiration rather than money? Did you think Nintendo got Capcom's top franchise as a semi-exclusive for free? Nintendo footed the bill for all of the REmakes as well as paying the bulk of costs for RE0 and RE4. Capcom was smart enough not to give Nintendo contractual exclusivity for this generation and gets to seek greener pastures as it suits them.
pumbaa
CAGiversary!
I think it would be safe to say that Nintendo gets the larget margin from their system. I would think that their mantra of "gaming only" systems and the fact that they won't go into online gaming until it is "profitable" and low cost to the user show that the company is DRIVEN by making as much money as possible on their systems.
Sony and Microsoft can afford to lose money on a system, simply because gaming isn't their sole means of income. I think this is the reason Nintendo might be branching out into animation, simply to diversify and make more money. Whereas it makes sense for a company like Microsoft or Sony to branch out into gaming, it doesn't make sense for Nintendo to go into consumer electronics or make their own operating systems. Animation, manga, and gaming are closely related in Japan... so Animation make sense from a Japanese perspective at the very least.
Sony and Microsoft can afford to lose money on a system, simply because gaming isn't their sole means of income. I think this is the reason Nintendo might be branching out into animation, simply to diversify and make more money. Whereas it makes sense for a company like Microsoft or Sony to branch out into gaming, it doesn't make sense for Nintendo to go into consumer electronics or make their own operating systems. Animation, manga, and gaming are closely related in Japan... so Animation make sense from a Japanese perspective at the very least.
elprincipe
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[quote name='epobirs']It is also foolish to believe there is no first mover advantage. [/quote]
Not to rain on the parade of your detailed and well thought-through post, but I would just note that, in terms of sales:
SNES > Genesis (not to mention TG-16)
PSX > Saturn (not to mention 3D0, CD-i, Jaguar)
PS2 > Dreamcast
I suppose you'll point to the fact that those three are Sega machines and the others weren't the big names, and fair enough. However, I don't think that you can look back and say for certain that you get a huge advantage for being first. Being first with system-seller games maybe.
Not to rain on the parade of your detailed and well thought-through post, but I would just note that, in terms of sales:
SNES > Genesis (not to mention TG-16)
PSX > Saturn (not to mention 3D0, CD-i, Jaguar)
PS2 > Dreamcast
I suppose you'll point to the fact that those three are Sega machines and the others weren't the big names, and fair enough. However, I don't think that you can look back and say for certain that you get a huge advantage for being first. Being first with system-seller games maybe.
Frankly there are lots of elements that can change the flow in the course of things. My view as I said was based on if M$ makes the same decisions they made THIS generation.
You did make one very good observations though that by getting their system out first they have a better chance of getting in on cheaper components that could lead to a reduced size version of their system (a la PSOne and PSTwo) later on in the systems life, I'm sure a lot of people would pee themselves for a small Xbox2 (but once again this is assuming that they make similar design choices and the thing turns out huge again). The problem with the PS2's response to later systems isnt really the same because for the msot part Sony made money despite dropping prices which they did largly on their own time table and a couple of times before M$ dropped XB prices (which inturn forced them to do it in order to keep pace which is why they had so much trouble getting the XB to be profitable.)
I beg to differ on part of Sega's failed Dreamcast though, Sega has made plenty of stupid decisions but few of them effected the DC which was simply steamrolled by the anticipation for the PS2. It was technically a great system but sony somehow made people WANT a PS2, and I would assume that they;ll try very much the same method with the PS3 vs Xbox2 if it's at all possible.
As for production capability why do you thing peopl use the $ when they say MS? because they always give off an aire that they buy what ever they need and often do it at the expense of other people. I've said it many times but while watching the first PS come up in the media the impresion I always got from the developers was that they liked the system because they felt Sony was smart and simply had a better system and plan. Watching the XB come up the impression you got is that if Gates wated something for his baby he just went out and bought it. which I think is something that turned the Japanese off beyond just the average xenophobia. Yeah Naughty dog Joined Sony for the money but it was less because they were bought than it was that they saw they were just going to make more money with them. As for Nintendo deal it was meant to be a solid exclusivity but this was with the assumption that theese games were going to sell butt loads of systems which the didnt. which also lead to Shinji Mikami's much publisized radio show blow up at the anger that his remake wasnt as well received as FF10-2, Capcom expected big things to happen and they didnt, so understandably they sought a better deal but you can be pretty sure if it actually went the way they wanted it to we probably wouldn't have seen VJ or VJ2 or even the possibility of RE4 on PS2, atleast not this year if it worked out.
Not that this would have hurt Sony any.
Anyway we still have no idea what ANY of these companies are really going to be doing hardware wise untill they actually show their cards so for allwe know Nintendo could blow all our socks off and Sony could be third place... what? it could happen!
You did make one very good observations though that by getting their system out first they have a better chance of getting in on cheaper components that could lead to a reduced size version of their system (a la PSOne and PSTwo) later on in the systems life, I'm sure a lot of people would pee themselves for a small Xbox2 (but once again this is assuming that they make similar design choices and the thing turns out huge again). The problem with the PS2's response to later systems isnt really the same because for the msot part Sony made money despite dropping prices which they did largly on their own time table and a couple of times before M$ dropped XB prices (which inturn forced them to do it in order to keep pace which is why they had so much trouble getting the XB to be profitable.)
I beg to differ on part of Sega's failed Dreamcast though, Sega has made plenty of stupid decisions but few of them effected the DC which was simply steamrolled by the anticipation for the PS2. It was technically a great system but sony somehow made people WANT a PS2, and I would assume that they;ll try very much the same method with the PS3 vs Xbox2 if it's at all possible.
As for production capability why do you thing peopl use the $ when they say MS? because they always give off an aire that they buy what ever they need and often do it at the expense of other people. I've said it many times but while watching the first PS come up in the media the impresion I always got from the developers was that they liked the system because they felt Sony was smart and simply had a better system and plan. Watching the XB come up the impression you got is that if Gates wated something for his baby he just went out and bought it. which I think is something that turned the Japanese off beyond just the average xenophobia. Yeah Naughty dog Joined Sony for the money but it was less because they were bought than it was that they saw they were just going to make more money with them. As for Nintendo deal it was meant to be a solid exclusivity but this was with the assumption that theese games were going to sell butt loads of systems which the didnt. which also lead to Shinji Mikami's much publisized radio show blow up at the anger that his remake wasnt as well received as FF10-2, Capcom expected big things to happen and they didnt, so understandably they sought a better deal but you can be pretty sure if it actually went the way they wanted it to we probably wouldn't have seen VJ or VJ2 or even the possibility of RE4 on PS2, atleast not this year if it worked out.
Not that this would have hurt Sony any.
Anyway we still have no idea what ANY of these companies are really going to be doing hardware wise untill they actually show their cards so for allwe know Nintendo could blow all our socks off and Sony could be third place... what? it could happen!
thagoat
CAGiversary!
nintendo left out the dvd features because of expensive licensing fees. that is the main reason. and the cost of production is about 30 bucks for a gamecube. when you buy equipment and parts in bulk(by the millions) it gets nice and cheap for them. thats just how nintendo likes it. they will cut the price again, but not until sony and microsoft cut there's again. they will remain the cheapest console to buy AND make.
bread's done