Entertainment/Gaming Consoles

[elSicomoro]

I don't remember if they carried them as Funco Land, but I believe they do now. They definitely offer them through their site.

[vsp]

Okay, here's the deal on Xboxes and selling at a loss:

All consoles sell at a reduced profit margin than games do, and generally at a loss until well into a console's lifespan (i.e. unless it's a breakout hit like the NES/PSX/PS2).

Some reasons:

To a company that produces consoles, the single most important factor is WHETHER THE CONSUMER BUYS THE CONSOLE. If a customer owns Console X, it doesn't matter that much which game the customer buys for it; the company will make some money. (Third-party games bring licensing and console-rights fees. First-party games have higher profit margins, obviously, but the company must also pay for game development, R&D, marketing, etc. for homegrown titles.) If a customer doesn't own Console X, he won't buy ANY games for it, obviously, so getting the customer to buy Console X is the first big hurdle.

The console company is thus not in a position where it can sell these at a high profit margin; it needs to sell them as cheaply as they can to get the maximum number of consoles into homes. More consoles in homes == more incentive for third-party developers to develop for that console == more choices for the customer == more game sales == more sales of overpriced peripherals (memory cards, controllers, etc.) == more money.

The next hurdle to consider is that consoles are generally big-bucks items in their youth, and if a console doesn't succeed then, it probably never will. An Xbox at $299, a PS2 at $299, etc. is not an impulse buy for the typical family; it's a luxury. The lower that initial price is set, the more people will buy it early, instead of waiting for a price drop (during which time other systems and games will be released and compete with it). Nothing new about those prices, btw: the original Intellivision, for instance, cost $249.99. in ~1980 dollars.

The console does not exist in a vacuum. Other consoles will be following the same laws of supply and demand, and pricing their systems accordingly. A console price drop has certain implications. For a market leader, it could mean that the R&D has been paid off by profits, and that the console is becoming cheaper to manufacture due to hardware redesigns, decreased part costs as technology advances, or both. (Hence the revamped, compact versions of many consoles -- Intellivision II, Genesis 2/3, small NES, GameBoy Pocket, PSOne.) It could mean that they're lowering prices to force the hand of other companies to lower theirs, who may not be as capable of absorbing the economic hit. It could mean that they're aggressively trying to add to that customer base, to remain number one even as new systems compete with the existing standard. Or, often, it's a combination of these.

When a non-leading console drops prices, it's generally the third reason above -- trying desperately to get the console into homes, by any means necessary, and taking an up-front cash hit to gain an opportunity to make it up in software sales.

What happened recently went something like this: The Xbox needed a price drop to try to make a dent -- ANY dent -- in the PS2 sales machine. It has been doing so-so in the States, and miserably elsewhere in the world. Word of the imminent price drop leaked, and Sony decided to be aggressive and act (cutting theirs immediately) instead of react (cutting theirs in response). By doing so, they probably gained some sales from people who jumped at PS2-at-$199 without knowing of the imminent Xbox drop.

Microsoft then pulled the trigger on their drop, knowing that their thunder had been stolen somewhat but needing to at least keep pace with their major competitor.

Nintendo then dropped THEIR console by $50, because (for now) their cheaper price is their sole major marketing advantage over Sony and Microsoft. The flagship titles that early adopters want (Mario, Zelda, Pokemon, Metroid, Starfox) still aren't here, so they had little choice. This is far too early in the Xbox/Cube's lifespans for drops of that magnitude, IMHO, and it'll be interesting to see which of them (or either, or both) gets flushed out in the process.

As for FuncoGameStopLand, it's never really impressed me all that much. If you need something that's moderately old and moderately common, you can probably get it at a reasonable price; right now, that's the likes of a used NES or Genesis. Older systems tend to be dropped like a rock, however, often without warning. (The NES, for example, is rapidly vanishing from those stores.) They keep price listings for just about every game for each system, but they rarely have anything in stock that's the least bit rare or unusual. Likewise, recent releases aren't likely to be discounted significantly (sometimes at all) compared to pricing in the major outlets.

So, if you're looking for a game there, you have a certain window of time and popularity if you want a reasonable shot of finding it in stock. Before that point, you can probably find it cheaper elsewhere; after that point, they probably won't have it at all. Unless the game is very popular, the window isn't generally that long, and finding games past a certain age there is extremely hit-or-miss.

The things I do go there occasionally looking for are peripherals; memory cards, controllers, etc. Once in a while, someone'll trade in a system with some funky controllers, and they'll label them as "Misc Joypad" or "Misc Controller" and sell them pretty cheaply.

(I'm spoiled. We have several Stop 'n' Save Software outlets around here, recently renamed as EB Gameworld to more accurately represent that they've been Electronics Boutique's clearance outlet all along. I live near the very first one they opened in Edgmont, PA, which had some VERY funky stuff for quite some time after it opened. Duo Taps for $.10, TurboDuo games for $5, NeoGeo memory cards, NeoGeo Pocket Colors for $20, a TurboExpress for $50 new-in-the-box, all sorts of clearance-priced systems and merchandise... they're still my best source for used games for all systems.)

[elSicomoro]

Realistically in the end, I would think that the makers really don't have to worry TOO much about making money off the consoles, with the exception of maybe Nintendo. Sony has its 90 quintillion other products, Microsoft runs the computer industry, and Nintendo has the Seattle Mariners.

[vsp]

It's not so much a matter of "worry," as a matter of smart corporate decision-making. Even an ubercorp like Microsoft has to look at a product that's funnelling money into a hole in the ground and pull the plug sooner or later, if there are no signs of improvement.

Obviously, Sony and Microsoft have a multitude of other products, and Nintendo has one product line that trumps the GameCube -- the Game Boy franchise. In its various incarnations, the Game Boy has simply destroyed all competitors for over a decade, most of whom were technologically superior to their Nintendo counterparts at the time. (Game Gear, TurboExpress, Nomad, NeoGeo Pocket Color... right now, only the WonderSwan remains, and that only in Japan for the most part.)

But in a three-horse race, the third horse tends to falter quickly. Just ask Sega. The Saturn was quite comparable to the PSX, superior in many ways, but it fell behind (particularly in America) and never recovered. Nintendo skewed younger, Sony skewed older, Sega went after that older audience and ended up canning the Saturn entirely, pushing Dreamcast development in hopes of THAT taking the technological lead. And even that didn't work -- despite the DC having a clear advantage in its modem capabilities and much better specs than the PSX, Sony held its ground, and when the PS2 took over the market, Sega gave up console systems altogether.

The thought of, say, Virtua Fighter 4 on a Sony system, or Crazy Taxi on a Nintendo one would have been ludicrous two years ago. Not anymore.

At the moment, the Xbox is the one on the hot seat, IMHO; they're chasing the Sony audience, and failing, just as Sega did. The wild card is that many speculate that Microsoft is much more willing to take a loss than Sega was, strictly for the purpose of getting a Microsoft gaming-and-entertainment box into American living rooms. Rumors of what the Xbox2 will be like (most of which depict it as more of a minicomputer than a gaming system) are rampant. A lot of that, however, will depend on how the first Xbox fares, and not many of the signs are good right now.

One has to realize that Microsoft has publicly stated that they <b>expect to lose two billion dollars</b> on Xbox. That is some serious, serious, serious cash.

Think about this for a second: Microsoft has some $40 billion dollars in the bank. There are 30 million PlayStation 2's out there. Microsoft could buy every PlayStation 2 owner an Xbox, ship it to them and still have some $33.4 billion in the bank. That's cash.

Then they could buy each of those people ten games to go with their Xboxes (at RETAIL, we're talking) and still have some $18 billion in the bank. And that's including shipping of both boxes to the customer.

Or... a controlling interest in Sony is only $26 billion...

At current rate, Microsoft's bank account grows by around $1 billion each month.

Microsoft is in this for the long haul. They don't care about losing money. They care about getting a good Microsoft product into the living rooms.

[Nic Name]

Originally posted by dhamsaic

They don't care about losing money. They care about getting a good Microsoft product into the living rooms.

I was with you until that last statement.

They care about making money.

It's not a friggin' religion.

If they cared about getting the best systems into the homes ... they'd have bought Apple years ago, and we'd all have Macs.

Let me rephrase:

Microsoft wants to own the house, and this is their way in.

They want a product in the living room that doesn't crash, works well, etc - kinda like Xbox.

[vsp]

But they're still the minority player in the field. Microsoft doesn't take over and rule every place that they stick their corporate nose into, and they're not the 900-pound gorilla in this arena. It's not to say that a new player can't quickly become dominant, obviously -- else Sony wouldn't have struck it gold with the PlayStation -- but they have one hell of a hill to climb with the Xbox, because Sony already owns that house big-time.

Microsoft has ONE route to dominance, and it's an obvious one -- spending major bucks to gain exclusivity rights to major game companies and properties. When Xbox is the only place for EA Sports, for killer apps like GTA3, for Tony Hawk, for the biggest games coming out, people will start flocking to it in droves. If you're a ten-to-one underdog, how do you convince developers to abandon the market leader and not produce cross-platform products? Money, baby, and big truckloads of it. Even Microsoft may not want to churn out THAT kind of dough, though it is something they do have in abundance...

You bring up a good point, and it's one I've been wondering about a bit lately. That is, why hasn't Microsoft shelled out for exclusivity rights for GTA? Probably because Sony is paying them big bucks, but still... plans for an Xbox version were scrapped (sadly - I would love to see Liberty City rendered on the Xbox) so it's all PS2 & PC now. Another big one would be Tony Hawk, because it's retardedly popular.

All in all, it doesn't matter much to me which consoles survive. There's room for two of them and possibly three, but if not, we'll end up with a cheap console and cheap games for it. Can't say that I'll complain too much about that.

--dave, lover of cheap games.

[vsp]

Originally posted by dhamsaic
You bring up a good point, and it's one I've been wondering about a bit lately. That is, why hasn't Microsoft shelled out for exclusivity rights for GTA?

According to the last figures I saw, GTA3 for the PS2 has sold over six million copies worldwide. For reference, that's a very solid 20% of the ~30 million PS2s out there (not bad for a mature niche title), and about fifteen times higher than the announced sales criteria for the "PS2 Greatest Hits" line. (It should reach the other criteria (time of release) in mid-summer; picture the additional sales boost when it goes down to $24.99 then.)

Microsoft HOPES to ship five-to-six million Xboxes worldwide by the end of 2002. How much would Microsoft have to pay Rockstar/Take Two for exclusivity rights to offset that kind of sales loss, and to switch to a console with one-sixth the customer base?

A Windows:Linux and/or Mac::PS2:Xbox analogy would be flawed, but still nicely ironic.

The alternative, of course, would be for Microsoft to attempt to buy Rockstar/Take Two outright and adjust their priorities accordingly. I'm far from savvy enough about the corporate-takeover world to speculate as to how that might be accomplished.

11 million copies. :P

400,000 being the "Greatest Hits" level... I imagine they will double their sales

[vsp]

Actually, the press release I saw said six million for GTA3, and eleven million for the entire GTA franchise (including GTA, GTA London and GTA2 for various platforms).

Either way, that's one hell of a lot of games. That's Final Fantasy VII levels, and GTA3 hasn't even enjoyed a price-cut sales boost yet or added in PC-version sales...

[vsp]

Current DC addiction: RECORD OF LODOSS WAR.

I have never seen any of the related anime series, so this isn't a biased plug for the game. Regardless, I'm finding it addictive as hell. It's sort of a single-player Diablo, with better graphics and a nifty equipment-upgrade system.

Joe Bob sez check it out. (Head Hunter's next. And sometime before the end of the year, I'm going to start on Freedom Force.)

[jeni]

paul and i bought a pirate game last night, which looks fun so far. when we get our little place and can play it all night, it will be tremendous fun. until then, we have to use the television sparingly.

[Bil Braski]

I'm heading over to EB this weekend to pick up a new game. Anyone have any info on any of these?:

Medal of Honor: Frontline
Stuntman
The Getaway