In Console Wars, Savvy Pricing Shots

New product launches always involve (ok, should always involve) careful price planning. The market for video game consoles highlights various aspects of pricing strategy quite nicely. Companies must balance profit (or loss) per unit, with platform profits on games and accessories. A higher market share means more vendors writing games for the platform, making the platform more valuable. Vendors typically sell the consoles at a loss, almost like an insurer underwriting a policy, who may not make money for a year or two.

In this piece, Luke Guttridge notes that Nvidia CEO Jen-Hsun Huang wants to price based on the value to the customer, regardless of costs. This is a healthy approach, and not one necessarily shared across the hardware industry. Guttridge also notes that the drum-beat of premium pricing hints surrounding the next generation Sony Playstation console is aimed as much at Microsoft as the customer. Even Sony lacks the cash to fight a price war of attrition with Microsoft. Messaging value is good for shareholders and messaging that you don’t want a price war is good for everyone except consumers.

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