With Console Makers Betting On Streaming, Console Prices Will Rise

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#1 Posted by GoldenElementXL (3248 posts) -

I don't really have a source here, but lets talk folks.

When consoles launch, the maker usually takes a loss on the hardware. Or in some rare cases the margin has been razor thin in the positive. That is usually more than a year after launch, or Nintendo releasing what some of you call "weak" hardware.

PS3 - $599 console costs $840.35 to build, leaving Sony with a $241.35 loss on each console.
Xbox 360 -Microsoft is again losing around $125 per hard-drive-equipped unit of its brand-spanking-new console, the Xbox 360
PS4 - According to Eurogamer's "well-placed sources" Sony will take a loss of $60 per hardware unit sold of the PlayStation 4.
Xbox One X - Regarding selling the X at a loss despite the $500 price tag. "I don't want to get into all the numbers, but in aggregate you should think about the hardware part of the console business is not the money-making part of the business. The money-making part is in selling games."

Why do they do this? The biggest reason is the console makers need the hardware out in the public so they can sell games. And games make Sony, Microsoft and Nintendo far more money than the hardware does as you can see in the Xbox One X example above. So what happens when streaming becomes mainstream and the console makers start the generation with 100's of millions of devices already capable of playing the upcoming titles?

It makes no sense for Sony or Microsoft to take a loss on their hardware anymore. The bean counters in these board meetings will try to maximize their money making potential. We've already seen a shift on the software side where devs and pubs are minimizing risk and maximizing sales potential. What do I mean by that?

Gen 7 - Uncharted, Uncharted 2, Uncharted 3
Gen 8 - Uncharted 4
Gen 7 - Gears of War, Gears of War 2, Gears of War 3, Gears of War Judgement
Gen 8 - Gears of War 4, Gears of War 5(currently unreleased)
Gen 7 - Rockstar Games released = 15
Gen 8 - Rockstar Games released = 2 (and 1 of them is cross-gen)
Gen 7 - Halo 3, Halo 3 ODST, Halo Reach, Halo Wars, Halo 4
Gen 8 - Halo 5, Halo Wars 2, Halo Infinite (currently unreleased)

And we are closing year 6, so it's not like the time frames are drastically different. There are already rumblings that the upcoming titles will also launch on the next gen consoles as well. We've seen fewer games from the blockbuster studios and FAR FEWER 3rd party titles. If you look at your games library now and compare it to your 360/PS3 library in 2011-2012 (6 years after launch) you would realize how dry software launches have been this gen.

With hardware companies betting on the sure thing like the software publishers have before them, we should expect hardware prices to be profitable for the console makers. So what number am I hinting at? Don't be shocked if the higher end Xbox and PS4 consoles break the $600 mark. The enthusiast will pay that, and the casual user will just buy the game and stream it on other hardware. In the end that's the more profitable route for the console makers anyway. So it should be obvious why that's were everyone is pushing the next generation.

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#2 Posted by adsparky (1411 posts) -

By that logic they will get cheaper, because they won't get their revenue from the product itself but from the services that would be sold through that product; Like when you get a certain cell phone plan and you get a discount on the phone itself.

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#3 Edited by GoldenElementXL (3248 posts) -

@adsparky: But they didn’t get the revenue from the product before, either... What?

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#4 Edited by Ant_17 (12553 posts) -

@goldenelementxl said:

@adsparky: But they didn’t get the revenue from the product before, either... What?

Don't they get a % for having 3rd party games on their consoles?

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#5 Edited by Howmakewood (5930 posts) -
@Ant_17 said:
@goldenelementxl said:

@adsparky: But they didn’t get the revenue from the product before, either... What?

Don't they get a % for having 3rd party games on their consoles?

royalties(dont remember how much, less than digital) for physical copies and flat 30% for digital

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#6 Posted by Ant_17 (12553 posts) -

@howmakewood said:
@Ant_17 said:
@goldenelementxl said:

@adsparky: But they didn’t get the revenue from the product before, either... What?

Don't they get a % for having 3rd party games on their consoles?

royalties(dont remember how much, less than digital) for physical copies and flat 30% for digital

So it seems they never lost anything from the consoles when other people were making games for them.

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#7 Posted by GoldenElementXL (3248 posts) -

@Ant_17: 3rd parties pay licensing fees, but it’s hardly what keeps the lights on in the offices. I’m sure those aren’t going away however, streaming or not. One thing 3rd parties do to make the money back (and then some) are exclusive marketing deals. Big 3rd parties save millions there. That’s probably a gimmick that will die off someday soon though. Those deals haven’t moved the needle for Microsoft at all

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#8 Posted by Ant_17 (12553 posts) -

@goldenelementxl: It didn't work for MS cause they marketed bad games. BF5 had the feminist and "**** you" attitude, Fallout 76 and Anthem being shit, PUBG being slow on updates etc.

But they realy might not do deals cause they buy out studios so why bother?

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#9 Posted by DaVillain- (36927 posts) -

I'm just gonna come and say, Fucks Game Streaming and I say it with a passion!

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#10 Posted by Calvincfb (0 posts) -

I hope not.

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#11 Posted by Steppy_76 (2710 posts) -

@goldenelementxl said:

I don't really have a source here, but lets talk folks.

When consoles launch, the maker usually takes a loss on the hardware. Or in some rare cases the margin has been razor thin in the positive. That is usually more than a year after launch, or Nintendo releasing what some of you call "weak" hardware.

PS3 - Xbox 360 -Microsoft is again losing around $125 per hard-drive-equipped unit of its brand-spanking-new console, the Xbox 360

$599 console costs $840.35 to build, leaving Sony with a $241.35 loss on each console.

PS4 - According to Eurogamer's "well-placed sources" Sony will take a loss of $60 per hardware unit sold of the PlayStation 4.

Xbox One X - Regarding selling the X at a loss despite the $500 price tag. "I don't want to get into all the numbers, but in aggregate you should think about the hardware part of the console business is not the money-making part of the business. The money-making part is in selling games."

Why do they do this? The biggest reason is the console makers need the hardware out in the public so they can sell games. And games make Sony, Microsoft and Nintendo far more money than the hardware does as you can see in the Xbox One X example above. So what happens when streaming becomes mainstream and the console makers start the generation with 100's of millions of devices already capable of playing the upcoming titles?

It makes no sense for Sony or Microsoft to take a loss on their hardware anymore. The bean counters in these board meetings will try to maximize their money making potential. We've already seen a shift on the software side where devs and pubs are minimizing risk and maximizing sales potential. What do I mean by that?

Gen 7 - Uncharted, Uncharted 2, Uncharted 3

Gen 8 - Uncharted 4

Gen 7 - Gears of War, Gears of War 2, Gears of War 3, Gears of War Judgement

Gen 8 - Gears of War 4, Gears of War 5(currently unreleased)

Gen 7 - Rockstar Games released = 15

Gen 8 - Rockstar Games released = 2 (and 1 of them is cross-gen)

Gen 7 - Halo 3, Halo 3 ODST, Halo Reach, Halo Wars, Halo 4

Gen 8 - Halo 5, Halo Wars 2, Halo Infinite (currently unreleased)

And we are closing year 6, so it's not like the time frames are drastically different. There are already rumblings that the upcoming titles will also launch on the next gen consoles as well. We've seen fewer games from the blockbuster studios and FAR FEWER 3rd party titles. If you look at your games library now and compare it to your 360/PS3 library in 2011-2012 (6 years after launch) you would realize how dry software launches have been this gen.

With hardware companies betting on the sure thing like the software publishers have before them, we should expect hardware prices to be profitable for the console makers. So what number am I hinting at? Don't be shocked if the higher end Xbox and PS4 consoles break the $600 mark. The enthusiast will pay that, and the casual user will just buy the game and stream it on other hardware. In the end that's the more profitable route for the console makers anyway. So it should be obvious why that's were everyone is pushing the next generation.

If you're selling less units the loss per unit actually matter less to their overall bottom line. Having a larger userbase to sell games to from jump also makes those losses on hardware easier to swallow as well.

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#12 Posted by michaelmikado (364 posts) -

This will probably be the last generation of consoles to sell at a loss. There’s no incentive to have physical console market share.

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#13 Posted by GoldenElementXL (3248 posts) -

@Steppy_76: But how many fewer consoles would they sell launch year at $100-$200 price increase and what would that do for the financials? The early adopters and enthusiasts will be there regardless. We are talking a swing of tens of millions of dollars in a single year here.

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#14 Posted by adsparky (1411 posts) -

@goldenelementxl said:

@adsparky: But they didn’t get the revenue from the product before, either... What?

At the beginning of each generation either they have losses or just barely made a profit with each console, but as time passes the components and processes became cheaper so they start earning more to compensate for their initial losses, It's all a gamble, they have marketing teams and things like that to lower the risk of failure but in the end you have to spend money to make money.

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#15 Posted by GoldenElementXL (3248 posts) -

@adsparky said:
@goldenelementxl said:

@adsparky: But they didn’t get the revenue from the product before, either... What?

At the beginning of each generation either they have losses or just barely made a profit with each console, but as time passes the components and processes became cheaper so they start earning more to compensate for their initial losses, It's all a gamble, they have marketing teams and things like that to lower the risk of failure but in the end you have to spend money to make money.

I figured I was misunderstanding your point. That all makes sense and you don't have an argument from me on any of it.

My larger point is that these companies take losses for years until the components get cheaper and easier to manufacturer. Now they have a way to make money from the jump, and increase the revenue every year after. And all of that on top of having HUGE install bases for software sales.

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#16 Posted by nepu7supastar7 (5108 posts) -

@goldenelementxl:

Now if Nintendo joins the streaming bit, I'd be on board! Goddamm I'm tired of dealing with Nintendo's piece of shit controllers!

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#17 Posted by lundy86_4 (53374 posts) -

@nepu7supastar7: For Switch? Grab a Pro. I do hate the digital triggers, but the controller is great other than that.

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#18 Posted by R4gn4r0k (31207 posts) -

I will definitely not be streaming my games any time soon.

But in 10-20 years, yeah who knows?

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#19 Edited by ellos (2040 posts) -

I suppose the potential is there for them to push pricing a bit more on the hardware. I don't imagining this is happening this generation though. Streaming is future and all but current still an option. They would want to be careful on how they roll it out. Its a huge investment in hope to gain more long term. Initially its probably more then what you have established with the tradition of getting your hardware at people's home.

On third party front. There is going to be even more competition especially if your sony. Jeezus has sony even contributed anything when it comes to active psn users. How did that shit get so high if its not because the console is the number one destination for all 3rd party multiplayer service games. Now with cross play and many places to play. Yeah TC that console hardware has to be premium priced now that I think about it. They won big they have to prepare for the reality of loosing a lot of share its inevitable. 3rd party have a lot of places to go now if specific hardware with good numbers is not showing up on peoples homes. If they can reach users on many already owned devices. The 30% from third party is gonna go down at some point. These marketing deals have helped them from not making noises about wanting that to be lower. They probably do love what Tim Sweeny is doing. They will also be looking to not only put there games every where but the major 3rd party will want there services everywhere as well. Could be very messy for consumers.

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#20 Posted by Steppy_76 (2710 posts) -

@goldenelementxl said:

@Steppy_76: But how many fewer consoles would they sell launch year at $100-$200 price increase and what would that do for the financials? The early adopters and enthusiasts will be there regardless. We are talking a swing of tens of millions of dollars in a single year here.

The ones who are buying the real hardware vs streaming are likely going to be your more hardcore enthusiests than even a normal launch, meaning the segment of the market that purchases the highest amount of games, make each unit they sell more likely to sell enough software to overcome that initial loss. It's not just games anymore either, but all the other stuff available as well from their store.

You're talking about tens of millions in a industry that brings it billions every year. I think of it of them having the best of both worlds. You have the large userbase initially due to the streamers, you have a larger proportion of early adopters more than offsetting the losses on the individual units, and many of those streamers may end up getting a real hardware unit for better performance down the road when the console is being sold for a profit. The little bit of losses is made up for by getting those in YOUR ecosystem. I'd say the digital age has made it more vital to get them locked in if you can.

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#21 Posted by adsparky (1411 posts) -

@goldenelementxl: Precisely for that they should be cheaper, because they have an income "secured"; both Sony and Microsoft know what happens when they charge more than their competition, And more at this times when there are a lot of powerful companies trying to get their slice of the cake and can take a hit in their wallets to secure a marketshare.

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#22 Posted by nepu7supastar7 (5108 posts) -

@lundy86_4:

The Pro Controller should be Nintendo's standard.

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#23 Posted by lundy86_4 (53374 posts) -

@nepu7supastar7 said:

@lundy86_4:

The Pro Controller should be Nintendo's standard.

Yep. The Joycon is way too small for me. I also avoid using them individually if at all possible.

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#24 Posted by rzxv04 (686 posts) -

Sounds possible.

It'd be interesting to see if they can divert towards designing properly licensed and full featured, macro, button edits for all major OS though.. and maybe increasing the prices a bit.

DS4 $ 18 sells for $ 40-60.

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#25 Edited by watercrack445 (1664 posts) -

There is an increasing market for gaming laptops so I might buy a laptop instead. With streaming becoming mainstream I would be able to play any exclusive first-party games. At least I get to play any games I want and buy less than more with a laptop.

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#26 Posted by BoxRekt (1783 posts) -

PS5 isn't going to be over $499 and Sony will take a $100 loss sorry.

Your whole argument revolves around streaming being the main thing console manufacturers are trying to push. The failure in your logic is that Sony profited with traditional consoles and abandoning that for something unproven would be foolish at best.

MS is the one who failed at traditional consoles so that's why they're ALL IN on the whole streaming nonsense.

Sony will take a loss on PS5 because it's PROVEN to be successful to them!

This scenario only works for MS since traditional console business FAILED for them, that's why streaming is their main objective but it's just a safety net for Sony. The next xbox could easily be $600+ but that's where your arguments starts and ends.

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#27 Edited by lundy86_4 (53374 posts) -

@boxrekt said:

PS5 isn't going to be over $499 and Sony will take a $100 loss sorry.

Your whole argument revolves around streaming being the main thing console manufacturers are trying to push. The failure in your logic is that Sony profited with traditional consoles and abandoning that for something unproven would be foolish at best.

MS is the one who failed at traditional consoles so that's why they're ALL IN on the whole streaming nonsense.

Sony will take a loss on PS5 because it's PROVEN to be successful to them!

This scenario only works for MS since traditional console business FAILED for them, that's why streaming is their main objective but it's just a safety net for Sony. The next xbox could easily be $600+ but that's where your arguments starts and ends.

Seems like a whole lot of speculation from ya, bud. Especially considering you criticize the TC.

Companies tend to hedge their bets on unproven technology, hence streaming, VR, and mid-gen refreshes. It's almost like companies do this research far in advance of us end-users.

At the end of the day, nobody is "ALL IN" on streaming, like you've said. MS least of all, as their Play Anywhere denotes playing locally across multiple hardware spectrums. They don't seem to be moving strictly toward streaming. It's an avenue for further revenue.

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#28 Edited by Kadin_Kai (505 posts) -

@goldenelementxl: I do not follow your logic.

I agree console makers usually make a loss on hardware initially.

I also agree sales of software is where the money is made.

So streaming will lead to greater sales of software because non-dedicated gamers (those who want to play but do not want to invest in hardware), can play assuming they have decent internet speed.

So, if more money is expected from this group then MS, Sony & Nintendo will expect higher profits. Therefore why will they substantially raise the cost of their hardware?

However, I do expect consoles to cost more, it’s naturally due to inflation, the China-US trade war, Iran-US sanctions.

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#29 Edited by BoxRekt (1783 posts) -
@lundy86_4 said:
@boxrekt said:

PS5 isn't going to be over $499 and Sony will take a $100 loss sorry.

Your whole argument revolves around streaming being the main thing console manufacturers are trying to push. The failure in your logic is that Sony profited with traditional consoles and abandoning that for something unproven would be foolish at best.

MS is the one who failed at traditional consoles so that's why they're ALL IN on the whole streaming nonsense.

Sony will take a loss on PS5 because it's PROVEN to be successful to them!

This scenario only works for MS since traditional console business FAILED for them, that's why streaming is their main objective but it's just a safety net for Sony. The next xbox could easily be $600+ but that's where your arguments starts and ends.

Seems like a whole lot of speculation from ya, bud. Especially considering you criticize the TC.

Companies tend to hedge their bets on unproven technology, hence streaming, VR, and mid-gen refreshes. It's almost like companies do this research far in advance of us end-users.

At the end of the day, nobody is "ALL IN" on streaming, like you've said. MS least of all, as their Play Anywhere denotes playing locally across multiple hardware spectrums. They don't seem to be moving strictly toward streaming. It's an avenue for further revenue.

LMFAO You CAN'T be serious? *facepalm*

@goldenelementxl said:

I don't really have a source here, but lets talk folks.

This entire thread SPECULATION to begin with genius.

Haha you sound like a metal case saying what I wrote was speculation while in the same breath trying to validate the TC's opinion which from the start was 100% "speculation". Are you okay?

Come back from fanboy fantasy land dude, nothing the TC wrote is fact.

And yes I can criticize the TC's opinion because what he said is something he THINKS and I think otherwise!

If your objective was to lash out at me because I logically disagreed with what the TC (your fellow lemming) was saying then I'll counter your angry post by exposing the flaw in your post with your own words:

"Seems like a whole lot of speculation from ya, bud. Especially considering you criticize BoxRekt."

Pot meet kettle

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#30 Edited by lundy86_4 (53374 posts) -

@boxrekt said:

LMFAO You CAN'T be serious? *facepalm*

This entire thread SPECULATION to begin with genius.

Haha you sound like a metal case saying what I wrote was speculation while in the same breath trying to validate the TC's opinion which from the start was 100% "speculation". Are you okay?

Come back from fanboy fantasy land dude, nothing the TC wrote is fact.

And yes I can criticize the TC's opinion because what he said is something he THINKS and I think otherwise!

If your objective was to lash out at me because I logically disagreed with what the TC (your fellow lemming) was saying then I'll counter your angry post by exposing the flaw in your post with your own words:

"Seems like a whole lot of speculation from ya, bud. Especially considering you criticize BoxRekt."

Pot meet kettle

Read that first part again. I said:

@lundy86_4 said:

Seems like a whole lot of speculation from ya, bud. Especially considering you criticize the TC.

That second part is lost on you, eh? You go on a rampage against TC's speculation... With... Speculation. Congrats?

You seriously need to relax lol.

Avatar image for boxrekt
#31 Edited by BoxRekt (1783 posts) -
@lundy86_4 said:
@boxrekt said:

LMFAO You CAN'T be serious? *facepalm*

This entire thread SPECULATION to begin with genius.

Haha you sound like a metal case saying what I wrote was speculation while in the same breath trying to validate the TC's opinion which from the start was 100% "speculation". Are you okay?

Come back from fanboy fantasy land dude, nothing the TC wrote is fact.

And yes I can criticize the TC's opinion because what he said is something he THINKS and I think otherwise!

If your objective was to lash out at me because I logically disagreed with what the TC (your fellow lemming) was saying then I'll counter your angry post by exposing the flaw in your post with your own words:

"Seems like a whole lot of speculation from ya, bud. Especially considering you criticize BoxRekt."

Pot meet kettle

Read that first part again. I said:

@lundy86_4 said:

Seems like a whole lot of speculation from ya, bud. Especially considering you criticize the TC.

That second part is lost on you, eh?

You seriously need to relax lol.

lol you're the one who went off the deep end with a mind numbingly stupid counter argument talking about MY "speculation",

@goldenelementxl said:

I don't really have a source here, but lets talk folks.

When THIS was the opening sentence in the thread!

You need to calm down and stop being so triggered by my posts and rushing to make arguments against them before your brain figures out what you're saying is actually DUMB!

Don't blame me for responding to your nonsense ramblings if you're bold enough to make them quoted at me.

There's really nothing you can say. You made a stupid argument that paints you as a triggered argument happy fanboy and a hypocrite to boot.

Good job of criticizing my speculation, of the TC's speculation with your own speculation! You sure showed me!

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#32 Posted by lundy86_4 (53374 posts) -

@boxrekt: I "went off the deep end." Haha, righto... Thumbs up.

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#33 Posted by MclarenMaster18 (1558 posts) -

For me I still rather have physical consoles over streaming consoles.

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#34 Posted by I_P_Daily (12031 posts) -

I will say this...

**** streaming & **** any company that does it.

They can charge me extra for a console I don't care, but if they do away with consoles I will do away with them.