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Did you know console makers sell their consoles at a loss?

Did y’all know that companies don’t brand any money off console sales? In fact, companies almost always lose coin from making and selling consoles. This might sound strange, but it is true and panel manufacturers have confirmed this is true.

Why is this? How do companies make upwards for the loss in profit? This article will explicate…

Why Companies Sell Consoles at a Loss

Microsoft recently revealed that it sells all of its Xbox consoles at a loss. This turned a few heads, only did not surprise any manufacture experts. Almost all game consoles are sold at a loss; it has been this way for several generations. PlayStation is in the aforementioned boat as Microsoft, and Nintendo is not too far behind.

Making and marketing game consoles is expensive. Companies invest a lot of time and money into these products; only sell them at prices that don’t quite make up for all the costs. Why practice companies do this? Why not price the consoles higher?

I reason is that if consoles are too expensive, people won’t buy them. Companies sell consoles in a competitive market place. If a panel is too expensive, people will probably purchase a cheaper alternative or just not buy altogether.

Some other, perhaps more important reason, is that if nobody buys a console, nobody will purchase the games that were made to be played on that console. So, in order to facilitate game sales, it is actually in a company’s interest to toll its consoles low.

How Game Companies Make Profits

The truth is, consoles are not money makers for game companies. Games, subscriptions, and accessories are what make companies money. Consoles are simply the gateway to future sales, with manufacturers hoping to heave the coffers after selling yous a console.

Xbox Controller Beside a Stack of Xbox Games

This is why companies are OK with pricing consoles so low; they have other money makers in store. These other money makers are how companies survive selling consoles at a loss; they do not rely on console sales alone.

Consoles are how companies become people onto their platform or service. If a visitor can get you lot to buy an Xbox, for case, you will buy Xbox products for years to come. Companies profit off the subsequent sales that follow a panel auction.

It Is All Office of the Game Company’due south Plan

Upon closer inspection, it becomes clear that companies do this intentionally. They intentionally lose profits on console sales in guild to facilitate other, more profitable sales. Nosotros sometimes call this pricing strategy a “loss leader”. Companies pb with a turn a profit-losing auction, because they know more profitable sales volition follow.

Profit Chart with Positive Trend

Present, game consoles take tons of products and services attached to them. In addition to just games (some of which are panel exclusives), game consoles offer online service subscriptions, game laissez passer subscriptions, pro controllers, collectables, and other accessories.

These products and services are the truthful cash cows of game companies. The sales offerings attached to game consoles have evolved to include things like services and subscriptions, which are lucratively profitable. Read about what GaaS (Games equally a Service) is and how it is affecting gaming. Originally, the only sales offerings attached to game consoles were things like games and controllers.

Gaming Brands Know What They’re Doing (And Now You Do Also)

switch, playstation, and xbox logos

In curt, game companies know what they are doing when they sell game consoles at a loss. But now, you do too. It is all office of their plan.

This noesis may help you lot avert unnecessary purchases. Now that you know what companies are trying to sell you, y’all can be more mindful of what yous make up one’s mind to buy.

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