How do manufacturers like Sony/Nintendo/Microsoft lose money?

#1ZombieAkanePosted 10/10/2012 9:37:45 AM
Especially so many years after releasing their consoles?

I'm a complete noob when it comes to system wars, but I just read that Sony was bleeding a few months back.

What I don't understand is, they already made launch? They already paid for the hardware development, they're just selling consoles now at a markup price.

Am I missing something?

I don't see how either of the big 3 can be a failure or lose money if they sell more than 2 million units. That should be a lot of profit right there yeah?
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#2mario_gamerPosted 10/10/2012 9:38:37 AM
They sell consoles at a loss...
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#3FoppePosted 10/10/2012 9:39:31 AM
Nintendo is the only company that earn money for each sold unit.
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#4ZombieAkane(Topic Creator)Posted 10/10/2012 9:42:05 AM
Foppe posted...
Nintendo is the only company that earn money for each sold unit.


Huh? How the **** does that work?
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#5rudgerlightPosted 10/10/2012 9:42:44 AM
Microsoft and Sony sold their consoles at a loss. This meant that every time a piece of hardware was bought, they actually lost money. This was true for both of them until earlier this year (I believe). Nintendo on the other hand only sold the Wii at profit - though they were forced by their own bad decisions to sell the 3DS at a loss (which hasn't been true since August).

In each case, production costs went down over time and they came up with better hardware solutions to make the consoles function better and cheaper. Sony took out backwards compatibility for the PS2 from the PS3. Then they changed the system's form, took out several of the random inputs, etc. Microsoft.....well they kept revising the innards and then used cheaper plastic for the shell.
#6MonadAlvisPosted 10/10/2012 9:48:43 AM
Microsoft and Sony really make their money off of games sold, not consoles. The 3ds's failure at the beginning and its following price cut is what caused Nintendo to lose money recently.
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#7FoppePosted 10/10/2012 9:50:16 AM
ZombieAkane posted...
Foppe posted...
Nintendo is the only company that earn money for each sold unit.


Huh? How the **** does that work?


Because getting a bigger userbase by selling at a loss means a higher chance of selling more games in the future, a bigger chance of getting exclusive titles and a higher chance of earning more money.
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#81shadetail1Posted 10/10/2012 9:52:24 AM(edited)
ZombieAkane posted...
Foppe posted...
Nintendo is the only company that earn money for each sold unit.


Huh? How the **** does that work?

The way Sony and Microsoft have been doing this is:

Make a very fancy and powerful console, and then sell it for *less* than it cost them to develop/manufacture/package/ship the unit. In theory, the low price entices customers to buy the system, and having the system entices them to buy full-priced software for the system. In theory, profit from software sales will fill the deficit from hardware sales.

For instance, at launch, each PS3 cost Sony *more than* $800, but they had a $600 price tag. Sony expected people to buy the PS3, and then buy PS3 games to make up the difference. But the $600 was still too high for the customer base, so it didn't sell well enough that enough gamers were buying the PS3 games. That is why Sony is in such bad shape. They tried this "sell at a loss" strategy, and it backfired badly.
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#9rudgerlightPosted 10/10/2012 9:50:48 AM
ZombieAkane posted...
Foppe posted...
Nintendo is the only company that earn money for each sold unit.


Huh? How the **** does that work?


Why do you think the PS3 is only now starting to get games really taking advantage of the system? They released an over powered machine, so it's still relevant today despite having come out a week before the Wii. The Wii wasn't even HD! Obviously it was cheaper. Plus it had significantly fewer inputs.

It's also why Nintendo is releasing first this generation. They intentionally released a technologically weak machine because their emphasis was on the motion control. The motion control was expensive to R & D, but to actually produce it was relatively cheap so the money came back quick.
#10TottentanzPosted 10/10/2012 9:51:56 AM
ZombieAkane posted...
Especially so many years after releasing their consoles?

I'm a complete noob when it comes to system wars, but I just read that Sony was bleeding a few months back.

What I don't understand is, they already made launch? They already paid for the hardware development, they're just selling consoles now at a markup price.

Am I missing something?

I don't see how either of the big 3 can be a failure or lose money if they sell more than 2 million units. That should be a lot of profit right there yeah?


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