Discussion So have console price drops gone the way of the dinosaurs

[Vanillalite]

Looking at the hardware & pricing of the Xbox hardware shown yesterday coupled with what Sony did restructuring the PS5 pricing as well as Nintendo’s pricing of the Switch/Lite/OLED have console price drops become a thing of the past?

Are gone the days of slowly dropping the price over the system life cycle to generate more buy in or is this a unique generation?

 

[Hero of Hyrule]

I feel like the Switch will see a price drop after the successor is out, to be positioned as a cheaper entry point into the ecosystem for younger players (ala 3DS after the Switch launched, or GBA after the DS launched, or Wii Mini after the Wii U launched).

 

[ILikeFeet]

nintendo is the result of their stuff doing very well still. they introduced price drops in the form of the Switch Lite

microsoft and sony is the result of throwing everything, including the kitchen sink, into a loss leader product. this tactic only really works if people spend more on the stuff that subsidizes these products. it's working for sony, but ms is in the hole

 

[Josh5890]

The days of getting a PlayStation or Xbox for $199 or less every day are likely gone forever. Technology is getting more complex and expensive. There is no race to the bottom anymore when it comes to hardware prices. The chips in these systems are going to keep console prices high. That plus these companies seem less interested in losing money on consoles sales in order to get people into the ecosystem.

Nintendo is a different story. There has most likely been room for a permanent price cut on the Switch for at least a couple of years, but with the system still selling so well after 7 years on the market, why fix what isn't broke? I'm still expecting some sort of a price reduction before the holidays, but only $50 for each model.

 

[oldpuck]

Price drops are a thing of the past.

Price drops are only possible because the hardware gets cheaper to make over the course of the generation. But the big technological leaps that made that possible aren't coming anymore, and when they do come, they're much slower. Sony and Microsoft and Nintendo aren't caught off guard here, they knew that the price cuts weren't coming.

Microsoft knew that they wouldn't be able to offer a cheaper mid-gen version of the console without cutting performance. And they knew they couldn't cut performance mid-gen without breaking some games. So they made the Series S on day one. They've talked about this strategy publically.

Sony made the PS5 less powerful than the Xbox Series X, but offered it at the same price, and offered an all digital model. They were stingy with the specs, in order to keep costs down, and betting on a bunch of exclusive launch games to carry the day.

Nintendo knew that they can't make the handheld cheaper at the same size, but they knew that they could make it smaller. The Lite is basically the Switch equivalent of a PlayStation Slim, physically smaller, so cheaper to make and ship. But instead of using technical advances to miniaturize parts, Nintendo simply cut parts out (like the Joy-Con rail) to make space.

As @ILikeFeet points out, these devices are loss leaders. They lose money. That only works if they net a profit overall. Sony and MS used to bet that tech advances would come, make the hardware profitable all by magic by year 3, without them having to lift a finger. In the meantime, they make money on the games. Then, when the hardware is starting to show its age, you can afford to cut the price, and make up the loss by selling a bunch more games, most of which you've already made and are just sitting on shelves, waiting for the price cut.

Games are getting more expensive to make, but the number of gamers isn't increasing. The games aren't making as much money as they used to. The hardware isn't getting cheaper to make over the course of the generation, so they're making less money on the hardware too. The price cut can't come, so they're starting to cut into late generation sales too.

Sony and MS could get themselves out of this mess if they stopped launching their consoles at a loss. But they're both afraid that if one of them does that, the other one won't and they'll get killed during the launch year because they have the worse device.