Next Generation Consoles: Their Economic Impact
Austin Baylor
We’ve entered the eighth round of counsels in video gaming with the introduction of the Play Station 4, Xbox 1, and Wii U; developed by Sony, Microsoft, and Nintendo respectively. We may not all own of play on them, but we’ve heard of them, but have we heard the economics behind the competitive market video gaming it?
The PS4, Play Station 4, and Xbox 1 have a combined total sale of over 10 million systems and they have only been in the market for 4 months. The PS4 currently pushes ahead over the Xbox 1 due to the price difference. The PS4 opened at 399$ while the Xbox was 499$. To those who don’t have favorites, it’s clear what your first choice would be. Both systems also rocket over 1 million sales within the first 24 hours of their release dates in about the exact same time, so price was initially not an issue in the choice of the consumers.
Bill of materials cost comparison of TechInsights.
Cost and Profit Comparison Chart.
Now to the actual amounts these companies make. With the chart above, it shows that Microsoft makes almost 3x as much money from a sale of an Xbox 1 compared to a sale of a PS4 on Sony’s part. If we round the sale figures to the nearest million, Sony sold 6 million and Microsoft sold 4 million systems. With sony making an estimated 40$ per system, they’ve profited 240 million dollars in profit so far from the system sales alone. On the other hand, Microsoft has sold 4 million at around 110$ of profit a piece. That accounts for 440 million dollars of profit from systems alone for Microsoft. This is almost twice the profit Sony has made.
New systems are not released often and the last generation of systems came out almost a decade ago. It’s up to these companies to produce the best they can to make the most they can. It’s also a huge war to try to get others to be part of their brand and not the other.
Most people own an Xbox or PS4. Not many own both, and as systems get more expensive, the number of people owning both shrinks, so it is important to the companies to get people to buy their product and not the other. As of now the Play Station Systems are more popular, but mostly because of cost and not loyalty. Xbox owners tend to be more loyal to the Xbox knowing the extra costs needed to own one.
These companies push millions of dollars into the market each year with video games alone. Usually these come from the annual release of games that sprinkle money into their pockets, but every decade or so they unveil a brand new system. One reason is to stay ahead of the crowd and the other is to give a boost to their companies. It’s only been 4 months since the release of these systems, the companies and the economy are still seeing a lot of money circulating because of 2013’s huge gaming system release.
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