Video Games is one market Microsoft has been trying hard to conquer with its Xbos console. But it hasn’t succeed – yet. Sony’s PlayStation has a commanding lead. The reason: a 2:1 advantage in games. The New York Times elaborates:
The market for consoles and video games is worth more than $9 billion a year. Even while losing on selling consoles, Microsoft could still make a lot of money from game makers. They pay the console makers about $10 for each copy of the games they manufacture and they made well in excess of 50 million games in the United States last year. Games typically sell at retail for $50.
For now, though, there are only losses for Microsoft. It declines to say how much it loses on each console, but industry analysts estimate the figure at close to $100. Sony, by contrast, does not sell PlayStation 2’s below cost.
Part of Microsoft’s problem is the ambitious design of Xbox: its chipsets and other electronic components are more expensive than those of the PlayStation. Microsoft has also been unable to realize certain economies of scale because sales have not been as robust as expected.