Why don't gaming consoles EVER go on sale?

[xboxist]

I'm not talking about retail price drops. I'm talking like just your average weekly sale at some place like Best Buy or something. They always cost exactly what their current retail price is. There's never anything like, "PS2 is only $134.99 this week!" (when the current retail price is $149.99)

You could probably single out 95% of the items at Best Buy, and they all at some point go on sale for a week and then return to their normal price.

So what gives? I'm obviously lacking knowledge about the business model involved with consoles. Games go on sale every day. Why not the hardware?

 

[imported_michealo]

cause the profit margin is about nil for retail stores for hardware, and the manufacturer generally takes a loss on the sale

 

[PingSpike]

The hardware is already sold at a signifigant loss. I suspect they don't want to increase the loss by putting them on sale and creating price wars for them. Plus, consoles compete with eachother...but they also try to avoid competing with eachother. Each side tries to get exclusive titles, to make you buy their console. PC video cards are a little different, if ATI won't lower their price then you can buy and nvidia card and play the same games. If microsoft won't lower their console price, well I guess you're not playing halo3 or whatever then.

 

[xboxist]

Oh, well then that would explain it. I didn't know that hardware is sold at a loss to begin with. Putting them on sale would offer absolutely no benefit to the store then.

Why are things like that? How did it get to the point where they sell them for a loss? Shouldn't the price be higher across the three systems then?

I suck at business. 😉

 

[sundev]

I'm not positive but I think that consoles when the first come out cost the manufacturer a couple of hundred dollars more than they are selling them for. e.g. Xbox when it first came out cost Microsoft something like $500 to build, and they sold it for a lot less ($300?).

I guess they don't "have" to sell them at a loss, but I'm sure they've done the research and found what the sweet spot is for highest # of sales without losing tons of money. Imagine if the Xbox or PS2 cost $500 or $600 when they first came out? I doubt their sales would be as high as they are.

 

[PingSpike]

Yeah, pretty much what sundevb said. They're going to tons of little bites instead of one big bite. The real money is made because each game sold, regardless of whether it was the manufactorer of the console's affiliated company that made it, makes them some money from licensing fees. This is one of the reasons console games tend to be a bit more expensive and don't seem to drop in price as much as PC games, or at least thats how it seems to be to me. The game makers have to recoup the licensing costs. I don't know how many games the average console user buys over the games life cycle, but I'm sure they've checked their numbers and determined that they buy X amount and price the console accordingly so they come out ahead.

Think about it like this, parents or kids are going to buy a ton of games for $50 or $60 dollars. You can sell your console at a razor thin margin without losing on it for $500 and maybe sell the games for $40...or you can sell it for $300 and charge them $60 I guess. But if parents or consumers scoff at the price of the console, and buy the other one...they're not going to buy any of those games either. Once you get the console in their house, you'll probably keep making money off it. But if they buy the other guys console, you don't get a dime.

Of course, there are suppose to be laws saying you can't sell something for less than you paid for it to avoid larger companies just destroying competitors with brute force...but I guess there's some kind of loop hole for consoles/games because this has always been their business model.