I’m slightly amazed that even with the announcement of the possible Xenon specs, people still seem inexorable over the possibility that it will launch in the $300 price window that most recent consoles have occupied at launch. It almost seems like any other price for a console launch is completely unthinkable and would be commercial suicide for Microsoft and, I’d assume, Sony.
Would it, though? People seem to be willing to spend £1,500 or more on a gaming PC, £2,000 or more on a nice HDTV, a couple of grand on a sound system, a couple of hundred on a decent DVD player, and I’m sure that the initial HD DVD/Blu-ray players will sell well at their $300-500 (US) price points. Why is a console costing more than £300 one of gaming’s last taboos, then? People are only too happy to (sometimes validly) complain about the cost of a new game but it’s the huge losses on hardware that force these prices. Personally I spend a lot more over the lifespan of a console on games than the actual machine, so I’d prefer to pay £500 for the console and then have games available at DVD prices. That would benefit the manufacturer as well, since piracy isn’t going to cause such huge losses for them.
To me the fact that the PSP is launching in the US for $250, only $50 shy of the usual price for a new home console, should be the first indication that we’re not going to see the new machines launching in the same old price bracket. When people are willing to pay £2,000 for a gaming PC don’t you think that a console would sell for £500? If what Microsoft and Sony are saying isn’t all marketing rhetoric both of their consoles will be more powerful than any PC on the market, so that sounds like a pretty good deal to me. It’s not uncommon for a sought-after console to reach $800 on eBay at launch, so people are willing to pay when they have to.
It’s true that consoles are almost always sold at a loss initially and that the money is made back on the games, but no matter how big the company is they simply cannot afford to sell (ballpark figure) £1,500 worth of electronics for £350. If they take a cut of £10 from every game sold every person would have to buy 115 games for it to be profitable, and that’s never going to happen. They’d be very lucky to persuade people to buy twenty at £40 per game, and even if the costs were £1,000 per unit, each person would need to buy 65 game to make it profitable. I know people who pirate every single one of their games and most of them don’t even have that many when they’re free.
So what if parents won’t buy a $500 machine for their kids? They buy relatively very few games, maybe one for birthdays and one for Christmas plus a couple more, but the bigger 20-30 market with a high disposable income can afford it and tend to buy a lot more games. Games, not hardware, are where the money is made, after all. It all depends on whether market share (what Sony and Microsoft fight over) or profitability (what Nintendo has) is more important. Just remember that a company can’t exist on market share alone.