Can you build something like that for the same price as a higher end console? These consoles are designed to be loss leaders so it’s hard to beat if you just focus on the hardware price.
Yes you can. You can build a PC with a RX7600 CPU for about $600. That’s about in the same performance ballpark as a PS5. If you mass produce those and trim down some features, you’ll be able to hit $500. And you won’t have to pay the Microsoft tax. Sadly, this is also why it’s not happening. I’m 100% sure MS are furiously working behind the scenes to prevent anyone from coming out with a system like this.
Though, caveat, the PS5 has been out for a few years. At the time it was introduced, I imagine it would have been more competitive.
Also, I don’t think that the term @[email protected] is looking for is “loss leader”. I believe that he’s referring to the fact that the console is sold at a loss, while the console vendor – who has monopoly control over the platform – forces game prices up and extracts some of the money that game developers make. That’s a different pricing strategy from use of a “loss leader” albeit with certain similarities; in the “loss leader” strategy, purchase of the sold-below-cost item isn’t normally tied directly to sale of other products. I’d call this the razor-and-blades pricing strategy:
googles
Yeah. Wikipedia even uses console video game pricing as an explicit example in the first paragraph, including mentioning the distinction from a loss-leader strategy.
The razor and blades business model[1] is a business model in which one item is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as consumable supplies. It is different from loss leader marketing and free sample marketing, which do not depend on complementary products or services. Common examples of the razor and blades model include inkjet printers whose ink cartridges are significantly marked up in price, coffee machines that use single-use coffee pods, electric toothbrushes, and video game consoles which require additional purchases to obtain accessories and software not included in the original package.[1]
Can you build something like that for the same price as a higher end console? These consoles are designed to be loss leaders so it’s hard to beat if you just focus on the hardware price.
Yes you can. You can build a PC with a RX7600 CPU for about $600. That’s about in the same performance ballpark as a PS5. If you mass produce those and trim down some features, you’ll be able to hit $500. And you won’t have to pay the Microsoft tax. Sadly, this is also why it’s not happening. I’m 100% sure MS are furiously working behind the scenes to prevent anyone from coming out with a system like this.
Though, caveat, the PS5 has been out for a few years. At the time it was introduced, I imagine it would have been more competitive.
Also, I don’t think that the term @[email protected] is looking for is “loss leader”. I believe that he’s referring to the fact that the console is sold at a loss, while the console vendor – who has monopoly control over the platform – forces game prices up and extracts some of the money that game developers make. That’s a different pricing strategy from use of a “loss leader” albeit with certain similarities; in the “loss leader” strategy, purchase of the sold-below-cost item isn’t normally tied directly to sale of other products. I’d call this the razor-and-blades pricing strategy:
googles
Yeah. Wikipedia even uses console video game pricing as an explicit example in the first paragraph, including mentioning the distinction from a loss-leader strategy.
https://en.wikipedia.org/wiki/Razor_and_blades_model