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Wii the Death Knell of the Bleeding Edge Console?
>> From next-gen.biz:
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Nintendo has shown that it doesn't need to sell consoles at a loss to be a mainstream success. Could this be the last generation of the high-cost, "bleeding edge" console?
This generation, videogame console manufacturers somewhat literally went for broke when they entered the new interactive entertainment technology arms race. Built-in Blu-ray drives, standard connectivity features, hard drives and high-horsepower multi-core processors drove losses for both Sony and Microsoft who sell their machines at a loss.
Nintendo, on the other hand, has never been one to sell its consoles at a loss. Puttering past competitors with what detractors called "GameCube 1.5" technology is the Nintendo Wii, which distinguishes itself not by sheer power, but by unique gameplay mechanics. It's clear that Sony and Microsoft's razor strategy is lost on Nintendo execs. In June 2006, prior to the Wii's launch, Nintendo president Satoru Iwata said, "It is a strange notion that a game console always leads to mounting losses in the beginning. We can't promise we won't even have a one yen loss, but we are not expecting an enormous loss."
The end of costly consoles?
For the uninitiated, console makers rely on the razorblades-and-razors business model, which follows the model of razor companies who sell razors at a loss, and offset those losses with high-margin razorblades. In the games business, consoles are the razors and software are the blades. Nintendo's current razor, the $250 Wii, isn't a money-losing piece of hardware.
"I think the results of this cycle will have a strong influence on the next cycle, in that cheaper consoles will be expected," says analyst Billy Pidgeon, program manager for IDC's Consumer Markets: Gaming program. "Microsoft and Sony will attain successful business on this generation, but catering to the early adopter hardcore gamers with a technology leader strategy will be difficult in 2011."
Maybe a lower-cost PS3.5 or an Xbox 540, both with intuitive control options and incredible online services (and with relatively low manufacturing costs), will more than suffice next time around.
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Full Story: next-gen.biz (3 pages)
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