I've seen no real answer. Xbox, PS3 and Xbox 360 were sold at a massive loss initially. 3DS was sold at a loss for a while after its price cut and the Wii U was and still made be sold at a loss. PS4/XB1 seem to be as well with, particularly with the PS4, very pricey BOM (Bill Of Materials) estimates that are very close to retail priceby themselves, not including everything else. *R&D however is considered a sunk cost. The Dreamcast must have been when it officially dropped to $50 US after Sega announced they would bow out of the console business, but I mean more in general, like a Genesis in '89 or a Dreamcast in '99, or a Saturn after it dropped to $299. Did unsold inventory, stirage, shipping, a declining arcade market and R&D account for most of Sega's bleeding between 1998 and 2002?
An interesting question: I don't know the answer but I personally don't think they would have sold machines at a loss from launch and that includes all hardware including DC. Massive discounting and 'fire sales' probably eventually led to losses on machines which is obvious but as I said no losses at launch. I think selling games machines at a loss is a relatively new phenomena as you listed yourself staring from the original XBOX, Microsoft's reasons for this are generally regarded to be because A. They needed to launch with a really strong package ie Big Power/graphics and still at a good price (and they even dropped the price pretty soon after launch to make sure they got that part right) B. Statement of intent that they were serious about games C. Microsoft could afford to do it. As markets/companies change so do their fiscal strategies mainly of course market shares etc. 'normal people' like myself find it hard to understand the complexities of making money whilst selling things at less than they cost but this is now an excepted business model with downloads, extra content and advertising offsetting these losses. (get the user-base installed then make money) I don't believe Sega of late 80s through to early 2000 would have gone down that route (the possible exception being the Dreamcast as a last ditch effort but I still don't see it) Just my thoughts but an interesting question
lnitially probably no but Sega is likely to have incurred in losses while trying to match Sony price cuts. IMO Saturn biggest flaw was that its architecture was hard to cost reducing through time compared to PS1, coupled with the fact that Saturn sales in US and Europe were disastrous meant that Sega was in huge disadvantage compared to Sony. When Sega could not match the rival price anymore they started bundling their own software with the system. Didn't work, when Nintendo released the N64 it was all over for Sega in fact in late '97 they announced the successor was in the works. Sega incurred in losses from unsold 16 bit inventory, marketing expenses, warehouse costs, inventory devaluation all bigger than the income brought in by the Saturn business.
Here's an interesting description of the Sega Saturn vs Playstation 1 era and announcements made at E3 1995. http://www.mcvuk.com/news/read/tale-of-two-e3s-xbox-vs-sony-vs-sega/0118482 So basically, the Sega Saturn and Sony Playstation were likely sold initially at a loss as well.
It depends on what Sony & Sega were selling them for. It's not uncommon for 50% of the retail price of something to go to the store and 25% go to the distributor. But for a console that you're going to have people camping outside for they will probably take less. They'll get a lot of people in the store buying games, which will have more of a traditional markup on. It also depends on how they calculated the costs. Sony Computer Entertainment probably weren't making them, but they would have likely been paying one of the other Sony companies to manufacture it. The subsidiary might have been making a profit for manufacturing it, so SCE might make a loss or they might have spread the cost across the companies. I imagine that they'd decide where the profit would go based on the tax implications. Sega on the other hand bought more bits in from other companies, so their costs would be higher.
All interesting stuff but I personally still doubt Sega was selling systems at a loss from launch at the price they internally sent them out at (although the Saturn seems like it could have been a close call) I know in the interviews shown that terms likes 'not making money' are used but in the context of a conversation about sales figures and costs 'not making money' could mean they only made $10 on every machine or some other low ball amount and not the figures they hoped/envisaged at the marketing stage. I think if someone states definitively that "X system was sold at a loss" then that's the only way to be certain. It's interesting that Nintendo rarely seem to get involved in these price war scenarios thus are rarely mentioned (although their later than the competition release dates for machines up until the Wii U may contribute to that fact)
I saw on Wikipedia that the Sega wanted to price the dreamcast at US$249 dollars at launch to make an immediate profit, but Stolar instead decided to put at US$199, not sure if its true.
That is true and by most accounts was the final straw that sent him packing from Sega. Not that they didn't have enough reasons already. I'd have fired him the moment the fallout from his infamous E3 comments began to appear.
I think it would be safe to assume that a lot of hollywood style accounting goes on at game companies. Remember when sega packaged 3 full games with the sega saturn, Whats to stop them from claiming that as a loss of $150.00 in value of those 3 games? For a good comparison consider the Ouya console, at $99 some people think that its over priced and should be around 60, http://www.gamesindustry.biz/articles/2012-07-13-ouya-could-be-a-black-hole-of-losses
Exactly I think what a 'normal' person would describe as making money or losing money is likely very different to how a multinational, multi million dollar company would describe it. I don't think Sega would have made huge amounts of money from the Saturn or Dreamcast. The lack of sales of both hardware and software because of more desirable competition products hurt them the most rather than their pricing strategies.
Good and very long read about Sega history, including each console era: http://www.eidolons-inn.net/tiki-index.php?page=SegaBase It's worth reading all that.
Most consoles were sold at a loss until the redesigns came out to curb costs. Exceptions may have been the early stuff (2600, Colecovision, Intellivision) which were composed on primarily off the shelf parts.
What's also interesting is to consider cross-region subsidising - PAL regions have traditionally paid over and above exchange rate fluctuations on consoles and games, which helps subsidise the US market; I'm not sure how Japan rates in comparison though. For contrast, the Saturn launched in Australia for $799 in 1995, and the DC launched in November 1999 for $499. I remember the biggest pain for the Australian DC launch was the lack of any VMUs until about three weeks after launch I knew someone working close to the distributors when the DC went through a few price drops locally. Apparently they were asking retailers to be making only a few dollars profit for each unit sold (a big ask given the price of entry meant not many units would have shifted), and given the bad blood between Ozisoft/Sega and some retailers, this didn't go down all that well.
Don't Australia and the EU (many other countries as well) include taxes in the price, which are admittedly higher to begin with. $199 wasn't a straight $199 anywhere in North America except the US state of Oregon. This doesn't make up all of the difference at all but just noting that the price of a console is never directly comparable between dollars and GBP or Euros for this reason. A better example that Dreamcast for taxation would be the PS4. $399 in the US and Canada, 349 British pounds, 399 Euros. Tax rate in Canada can be several dollars for post-life recycling on top of up to 15%. Even in the US taxes can be significant. In the EU taxes are always included in price and the sales taxes are quite higher than the US. This does justify some of the cost difference. Brazil in particular taxes game consoles extremely high. Thank you for that! -------------------------------------------------- Also, someone was asking about Japan. Taxes are included in Japanese sales prices as well. PS3 20 GB was about $426, tax included in, in 2006. $499 in the US and $559 in Canada before tax. http://www.moetron.com/2006/09/22/price-drop-for-japanese-ps3-429/ PS4 is slightly over $400 but also includes Knack and an extended warranty.
