Xbox 360 and PS3 have cost Microsoft and Sony a combined total of $8 billion, according to a new article penned by industry veteran Ben Cousins.
According to Cousins’ report on Kotaku, Microsoft has spent some $2.996bn on Xbox 360 since it launched in 2005, while Sony has fared worse, spending $4.951 billion on PS3. Both figures are a loss, and you can see an overview of both company’s losses in Cousins’s financial table here.
Cousins, who has worked at a string of high-profile studios over the years – including Sony EA and Lionhead – has shed serious doubt on the future of the home console as we know it, citing SOny and Microsoft’s plan to sell each console at a loss as a reason for such poor fortune. It’s a poor strategy he says, as even with a combined total of 70+ million consoles sold, both companies are still losing money.
“Consoles like Xboxes, PlayStations & the Wii U are sold at a loss”, said Cousins. “It costs more to manufacture and distribute the device than it is sold for. Console manufacturers do this because they hope to make back the money from the license fee they charge for every game sold on the system.
“In order to offset the huge cost of hardware production, distribution, R&D and marketing, a hardware platform holder must sell vast quantities of hardware, and even bigger quantities of software. So much needs to be sold, in fact, that the data points to PS3 and Xbox 360 having made huge losses, despite having sold 70+ million units of hardware each.
“Of those 70 million Xbox 360s sold, a large proportion (approx. 40%) were bought after the most recent price cut of August 2009. Of the 70 million PS3s sold, a large proportion (approx. 42%) were bought since the introduction of the PS3 Slim.”
With such a large proportion of consoles being sold post-price cut, it seems as if the loss-leading strategy is failing to bear fruit for both companies. The issue isn’t being helped by some 50% of home console owners also owning a smartphone, tablet or both, devices which are seeing a rapidly advancing capacity for supporting triple-a game content.
Today’s reveal of the Tegra-4 powered Project Shielf from Nvidia shows that mobile gaming is rapidly gaining ground, and could pose a real threat to the home console market as we know it in 2013. As a final bullet point in his report, Cousin addressed this very issue, “Mobile developers and publishers are starting to target these ‘mainstream console gamers’ aggressively. I work for a mobile publisher just slightly smaller than EA, and we are targeting them aggressively.”
Predicting what he sees on the horizon for the industry, Cousins continued, “In the future, I see gaming as having two main markets:
“Mobile devices like smartphones and tablets will serve the biggest market—covering kids, casual gamers and the mainstream console people.
“The core and ultra-core gamers would be served by PC gaming, which will be smaller than mobile, but that will continue to grow. Many of the old-school PC gamers I know that moved to playing games on Xbox over the last 10 years are coming back to PC because of free-to-play and indie games, controller and TV support, as well as incredible digital distribution on platforms like Steam.”
So now it’s over to you readers. Which of the two brackets above would you say you’ll fall in to, should Cousin’s predictions come to pass? Are home console manufacturers really in trouble, or is this a knee-jerk reaction? Let us know below.