What happened to the old Nintendo "razor/razorblades" economics?
Just for those who slept through macroeconomics, the razor and razorblade principle is selling the "razor" at a loss and selling the "razorblades" for a huge profit. The assumption is, if everyone runs out to buy the razor at a reduced price, they'll have to pay somewhat inflated prices for the blades.
Nintendo did that with the NES, SNES and 64... they sold the systems at a considerable loss, but made up the difference by selling games and licensing to game manufacturers.
Now, Microsoft and Sony know how to make a buck... they launch their systems just before the holiday season in limited supply... now we're on the supply side of economics. Generally, people wouldn't pay $400-$500 for a video game system, but when they're in short supply and the holidays are coming up, there's enough of an "early adopter" public out there who rushes out and drops the cash. As long as they perform limited restocking, they can continue that trend for as long as a year or more.
When the early adopters stop shelling out cash, boom, the price drops and everyone else starts jumping aboard.
Wait for it.......
Ok, now the early adopters and everyone else who actually "wants" the game systems have bought one, either at full or reduced price. Now what? Well, last time, Nintendo came along with their Game Cube and started selling it for $150 while XBox and PS2 were still priced over $200... what do we have now? Some friendly price competition, that's what. Sony and Microsoft drop the price of their game systems to $150 as well... maybe even less.
The market is saturated with game systems at this point. You can get a PS2 for less than $100 on ebay. Demand drops, and the next gen consoles are announced.
Lather, rinse, repeat.
If you're a battery, you're either working or you're dead....