Sony has a lead, but is letting Microsoft back into the game

Posted: 2014/12/09 in Indie Games

While consoles have traditionally been hugely subsidized, typically sold at a loss early in their lives, and at a profit late in life, neither the Xbox One or the PS4 is being sold at a loss.  Rather, they’re being sold approximately at cost.  Heck, with a year of cost reductions under its belt, by now the PS4 may even be sold at a profit.  Microsoft committed to selling the Xbox One at cost even prior to launch, and you see that manifesting with game bundles and targeted sales as the cost to make the Xbox One gradually decreases.  In the U.S. (often used as the global benchmark), the Xbox One has been sold as low as $329.99 without Kinect, and as low as $449.99 with Kinect and three games.

BTW, don’t take my word for the fact that these consoles were sold approximately at cost when they launched, here’s a link:  http://www.shacknews.com/article/82167/report-xbox-one-costs-471-to-build

Meanwhile, the cost of the PS4 has actually gone *up* $50 in Canada as the Canadian dollar weakened by 10%.  The Xbox One did not follow suit, and is actually the cheaper console in Canada now.  So it seems clear to me that Sony is determined to not sell the PS4 at a loss, or even at cost if it doesn’t have to, and that Microsoft is determined to sell the Xbox One at cost at the highest.

I don’t begrudge either company their decision, each makes sense given their position in the competitive landscape.  But if the entirety of Sony is looking to SCE to deliver profits (as Engadget and others have reported: http://www.engadget.com/2014/12/09/sony-leaning-on-playstation/) that means Sony’s going to give Microsoft the ability to catch up to the PS4’s early lead.  Just as Microsoft had the PS3 on the ropes in that generation, but focused on profitability for the Xbox 360 rather than crushing the competition, so too is Sony seemingly focused on profitability with the PS4 rather than crushing the Xbox One.  I expect the end result to be the same (a tie).

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