Console Economics
Scoble explains how the console business works:
First year, you’ll lose $200 per machine (Sony is supposedly losing $300 on PlayStation 3).
Second year, you’ll lose $150.
Third year, you’ll lose $100 (although price will probably drop too).
Fourth year, you’ll lose $25 to $50, or if market conditions are good, you might even break even.
Then later asks what we think. I think Nintendo is laughing all the way to the bank. They may have the smallest (about 15%) share of the console market, but they apparently make money on the consoles themselves from the start. Seems like a more rational approach to me.
Comments
[d.w.] November 19, 2006 15:18:35.874
I don't know if anyone has pointed this out already at Scoble's, but his numbers are probably more true for Microsoft than Sony -- Sony manufactures at least some of their own components (e.g. optical drives) and is far more aggressive in cutting down component counts (recall how quickly they shrank both Playstation 1 and 2). Not to say they don't lose money on their consoles initially, but no way are they still losing money 3 years in.