Ps3 pricing

[suprasteve]

they may get around it by saying they make more money on games, but the fact remains that if any company sells something below what it cost them to produce it, number one: stupid unless trying to run competitors out of the market, number two: illegal in the US. That I'm sure of. If consoles fall under this category, well I've already posted before

 

[P11]

they may get around it by saying they make more money on games, but the fact remains that if any company sells something below what it cost them to produce it, number one: stupid unless trying to run competitors out of the market, number two: illegal in the US. That I'm sure of. If consoles fall under this category, well I've already posted before

The keyword you have in your response is COMPANY. Microsoft does not depend only on Xbox360 sales to survive...I'm sure if you calculate Microsoft's income vs. their loss in Xbox 360 sales it would be like 1,000,000,000 : 1

 

[apj101]

they may get around it by saying they make more money on games, but the fact remains that if any company sells something below what it cost them to produce it, number one: stupid unless trying to run competitors out of the market, number two: illegal in the US. That I'm sure of. If consoles fall under this category, well I've already posted before

I mean this in the nicest possible way, but please listen to what i'm saying.

They are not just selling the console, they are selling the future cash flows of the games discounted back to todays net present value. This has to be considered as part of the sale. You don't just measure the "loss" the PS are making on the one item; as the sale includes this service, for example lets plug in some numbers (made approximations up of course)

Cost of console to PS $900 (excluding all development cost as these are sunk)
Sale price $500

Console loss $400

NPV of cost of producing new games $1 (each, excluding development cost as these are not bore by MS)
NPV of sale price of games $40 (i have made up discount rate but they are about right, and i have stripped out an amount for the developers)

NVP profit on games $39

So provided they can say to the judge that they intend to sell 10 games on average per console then the package including future sales is profitable for MS.

The simple fact is that you cant judge the issue on SP less cost. Thats how all business work. Its like the common loss leader idea, do your supermarkets get sued when they offer 2 for 1 deal...no its very common business practice.

Sorry to be so strong but i deal with stuff like this day in day out, under US and UK GAAP / Regs

 

[Zedicus]

I've seriously started a decline in my liking of consoles. Consoles are just well normally a "cheap pc". Now that I'm older and have access to money I don’t see why anyone would want a console because PC's are capable of playing much better games, and all the other functions of a PC that a console does not have. Also with a Console you have to wait every 6+ years to get new hardware. With a PC I can upgrade each individual part whenever I want or get a entire new machine. The Pro's in a PC weigh out the Pro's of Consoles in a very significant manner. I do not understand why anyone is buying them other then they are typically more affordable. If the PS3 is around $600 I see Sony’s gaming market for this generation to crash and burn.

 

[suprasteve]

I get exactly what you are saying apj, and as I said earlier, IF they are permitted to consider consoles and games together, then that is a way around it, and it would be legal in the eyes of the government. Barring that, it would be illegal. I'm sure they are either not selling at a loss OR they are doing what you say with games included in the overall cost analysis, or there wouldn't be any out on the shelves. I'm not saying Microsoft is for sure not selling the console itself at a loss, I'm saying that they are obviously doing something serious to keep it from happening. And P11, it only matters as far as price vs. cost of an item, whether that be console+games or merely console, not based upon the company's total revenue, because often companies take a loss on a quarter or even over a longer time period
EDIT: here, I looked up one instance of this law in Minnesota's state laws, but rest assured every state and/or the federal government has similar laws regarding selling below cost http://www.revisor.leg.state.mn.us/stats/325D/04.html

 

[apj101]

I get exactly what you are saying apj, and as I said earlier, IF they are permitted to consider consoles and games together, then that is a way around it, and it would be legal in the eyes of the government. Barring that, it would be illegal. I'm sure they are either not selling at a loss OR they are doing what you say with games included in the overall cost analysis, or there wouldn't be any out on the shelves. I'm not saying Microsoft is for sure not selling the console itself at a loss, I'm saying that they are obviously doing something serious to keep it from happening. And P11, it only matters as far as price vs. cost of an item, whether that be console+games or merely console, not based upon the company's total revenue, because often companies take a loss on a quarter or even over a longer time period
EDIT: here, I looked up one instance of this law in Minnesota's state laws, but rest assured every state and/or the federal government has similar laws regarding selling below cost http://www.revisor.leg.state.mn.us/stats/325D/04.html

The basics of the anti competition law only really work on simple cases, like selling a car, or a PC; since neither can be shown (this far in case law) to be generating futher cash inflows from the sales. But there are some cases that are less clear cut (i dont include the ps3 in this as this example is pretty clear), such a parker biro pen, if they sell at a low margin, can they justify the sale to include the future cash inflows of selling ink, when there are other companies that provide ink, or people can just throw the pen away? so far noone has brought this to court, but you see how the issue can be un-clear.