Intellivision Amico - Tommy Tallarico introduction + Q&A

1 hour ago, LePionnier said:

Great article !

 

Tommy, can you elaborate on this quote which is one of my concerns regarding Amico right now.

“You take a Last of Us type of project, how many people are there? Towards the end of a project, especially the last sprint, you gotta be in the room together. That is so important. Being in the room is a big part of development for those big games. But for our stuff, we have teams of 5-8 people and so it's a lot easier. From a software standpoint, it hasn't affected us at all, which is great,” he said.

 

In Quebec, only essential services provided. I don't know on your side if it's the same thing. Can your teams continue to improve the games right now despite quarantine ?

 

Thank you.

 

Yes.  Very easily. 

That's what that part of the article was talking about.  We have an advantage because our teams are a lot smaller.  We don't have the same restraints as big teams.  So we are lucky in that regards.  Our projects are a lot less complex.  I'm not saying it's ideal.  But it doesn't affect us the way it would a big team. 


WOO-HOO!!  Just realized this is the first post for page 500!  Wowsers!

🥳🎉🎆🎂🧁

Is there enough horsepower in Amico for us to create "Amicotars" like Xbox & Wii does?

I like what devs do with their avatars added into certain games as playable characters, but others may add the player's avatar as a feature (Like your avatar hanging off the rear view mirror in Codemasters' Dirt game).

4 minutes ago, Steven Pendleton said:

Thanks for the detailed response! I wasn't implying that you guys don't know how to generate a profit, by the way! I meant in terms of any business in general.

 

You guys seem to be doing a great job so far, and I'm looking forward to it.

No, it didn't come across like that at all.  I just wanted to make sure folks know that we have a very detailed (and multiple) plans in place.  And they could be adjusted on the fly if we see a certain momentum and steam picking up in a certain direction.  Projections are just that... educated guesses.      I've surrounded myself with the smartest and coolest people I know to help navigate those waters.  I would be nowhere without the incredible team we've been building.  I can't wait for some of those folks to get spotlighted as well.  Really a fantastic bunch.  And all down to earth smart-asses too! 

1 minute ago, Blarneo said:

Is there enough horsepower in Amico for us to create "Amicotars" like Xbox & Wii does?

 

I like what devs do with their avatars added into certain games as playable characters, but others may add the player's avatar as a feature (Like your avatar hanging off the rear view mirror in Codemasters' Dirt game).

Still working that out.  There are positives and negatives for this and something that could be added down the road. 

One of the big things that sometimes throws huge timeline wrenches into a project is the addition of "feature creep".  Trying to do too much all at once.  Currently we have the avatars under the feature creep category as it is something that isn't needed for success... but something that could be a cool addition.  More often than not, the feature creep type of stuff won't make it in the initial launch of the product... but could easily be implemented down the road.

9 hours ago, Michael Garvey said:

But we don't all go to Reddit and would rather hear it in bite sized portions from you.

 

😃

I agree, please dont stop Pete, I’m afraid that if I go into Reddit, i will get stuck there for years, much like this AA thread about Amico i peaked into a year or two back and have not been able to stop watching😅

1 minute ago, Tommy Tallarico said:

No, it didn't come across like that at all.  I just wanted to make sure folks know that we have a very detailed (and multiple) plans in place.  And they could be adjusted on the fly if we see a certain momentum and steam picking up in a certain direction.  Projections are just that... educated guesses.      I've surrounded myself with the smartest and coolest people I know to help navigate those waters.  I would be nowhere without the incredible team we've been building.  I can't wait for some of those folks to get spotlighted as well.  Really a fantastic bunch.  And all down to earth smart-asses too! 

 

 

Yeah, that's how it goes with projections. Companies pay billions of dollars to consulting companies to help them solve problems, and then what does the consulting company do? Guess at what their client should do and tell them. It's a very well-educated guess, but still a guess.

I'll be back later, since I think there was something else I wanted to talk/ask about but I forgot again and I have some distractions to get rid of: some awesome curry here sitting on my desk, Star Trek in the PS4, and I have to spend some time with the SuperGrafx now that I have a PSU that works with it. This thing is pretty damn awesome and I'm quite glad that I bought it. 1941 Counter Attack~

8 hours ago, Steven Pendleton said:

I remember the PS3 was sold at a huge loss (to be made up for in software sales) and I'm not sure about most other consoles, but if you look at things like razors and printers, those are usually sold at a loss and then they make it up with sales of razor blades, which is why those things are so damn expensive, and printer ink. I'd love to see the Amico profit margins, especially for the third party developers! Each game costs a different amount of money to make and will sell differently, of course, but it would still be interesting to see. I know, that stuff is secret since I'm pretty sure you're a private company, but still!

I would only add beyond Tommy's excellent response is don't forget Intellivision has flipped the script on their eStore. Typically Sony & Microsoft absorb 0% of the cost of the game but only take 30% of the store. Intellivision however usually funds the game but, by my guestimation is taking 70% to 90% of the store (the rest is for overhead, licensing and developer bonus for sales). At normal astronomical game dev costs you might think this is a bad move but Intellivision game might cost only, say, $100,000 to develop. That is (back of the napkin) 12,500ish sales to break even and then they get say $8 for every sale afterwards on a $10 game. Combined with super low game prices & the focused weekly(ish) spot light on new games (plus occasional flashback sales to highlight, say, baseball at the start of spring training each year) it isn't hard to imagine getting a big percent of Amico owners to buy into each game. It is pretty easy to put together a scenario where Intellivision is pulling 2x profit per dollar sold in their store over Microsoft & Sony. That means consumer attachment is worth twice as much for the Amico, AND they make a profit on consoles sold instead of a loss over the big boys.

10 minutes ago, GrudgeQ said:

I would only add beyond Tommy's excellent response is don't forget Intellivision has flipped the script on their eStore. Typically Sony & Microsoft absorb 0% of the cost of the game but only take 30% of the store. Intellivision however usually funds the game but, by my guestimation is taking 70% to 90% of the store (the rest is for overhead, licensing and developer bonus for sales). At normal astronomical game dev costs you might think this is a bad move but Intellivision game might cost only, say, $100,000 to develop. That is (back of the napkin) 12,500ish sales to break even and then they get say $8 for every sale afterwards on a $10 game. Combined with super low game prices & the focused weekly(ish) spot light on new games (plus occasional flashback sales to highlight, say, baseball at the start of spring training each year) it isn't hard to imagine getting a big percent of Amico owners to buy into each game. It is pretty easy to put together a scenario where Intellivision is pulling 2x profit per dollar sold in their store over Microsoft & Sony. That means consumer attachment is worth twice as much for the Amico, AND they make a profit on consoles sold instead of a loss over the big boys.

Also  now I have no idea from the launch of the switch

  But generally Nintendo also profits off hardware. The whole take a losd on the hardware approach started with Sony...

At least Tommy knowledge. 

22 minutes ago, GrudgeQ said:

I would only add beyond Tommy's excellent response is don't forget Intellivision has flipped the script on their eStore. Typically Sony & Microsoft absorb 0% of the cost of the game but only take 30% of the store. Intellivision however usually funds the game but, by my guestimation is taking 70% to 90% of the store (the rest is for overhead, licensing and developer bonus for sales). At normal astronomical game dev costs you might think this is a bad move but Intellivision game might cost only, say, $100,000 to develop. That is (back of the napkin) 12,500ish sales to break even and then they get say $8 for every sale afterwards on a $10 game. Combined with super low game prices & the focused weekly(ish) spot light on new games (plus occasional flashback sales to highlight, say, baseball at the start of spring training each year) it isn't hard to imagine getting a big percent of Amico owners to buy into each game. It is pretty easy to put together a scenario where Intellivision is pulling 2x profit per dollar sold in their store over Microsoft & Sony. That means consumer attachment is worth twice as much for the Amico, AND they make a profit on consoles sold instead of a loss over the big boys.

Correct!  Because every game is somewhat like a 1st party game (actually considered 2nd party) we are in essence acting like the publisher AND the hardware manufacturer.  So big difference there (and a big advantage to having a closed and curated system).  The bad part about having a closed system is that you're not going to get a huge number of folks with the ability to upload whatever they want to your store.  But that is what we are trying to avoid anyway and I see as a big problem (especially for Indie developers) to overcome.  As I mentioned in the article... since when did quantity become more important than quality??  So I see our closed system as being a HUGE plus.  Not only for the product... but more importantly for the customer in adding to that "trust" and "value" factor that is so important to us.

56 minutes ago, Tommy Tallarico said:

Damn you Canadians and your Curling!!

😂

Tommy maybe a multi game like 2 or 3 game pack called Canadian games.  actually I like curling  I'm im.on the far south side of canada ......new orleans lol. 

14 minutes ago, Nolagamer said:

Also  now I have no idea from the launch of the switch

  But generally Nintendo also profits off hardware. The whole take a losd on the hardware approach started with Sony...

At least Tommy knowledge. 

I'm not sure where it started.  But yeah... if I had to guess... I'm assuming it was with Sony and Microsoft as they had zero experience in the game industry but all the money in the world (because of other products/companies they own etc.) to buy into it.  Very different from companies like Sega & Nintendo.

We're seeing the same thing happening with Google & the Stadia right now.  Google has spent HUNDREDS OF MILLIONS of dollars to create the infrastructure to what they believe is the future of gaming.  Eventually I fear... everything will move to digital.  The only thing we all may be buying in 7 years from now is a controller to hook up to the internet.  Will be interesting to see if Google's gamble will pay off.  I'm guessing that they will not do well this round.  Whether or not they keep taking the loss until it's ready for folks to abandoned what they know.. is anyone's guess.  They certainly have the wallets to do it.  But will they have the patience?  I think they'll keep trying for at least the next year or two.  After that... things like shareholders, ROI (Return on Investment) and account spreadsheets start to matter.

Will definitely be an interesting next couple of years in gaming and hardware... that's for sure!

7 minutes ago, Nolagamer said:

Tommy maybe a multi game like 2 or 3 game pack called Canadian games.  actually I like curling  I'm im.on the far south side of canada ......new orleans lol. 

That actually isn't a bad idea!  Cooking Poutine Mama, Maple Syrup Tapper, Moose Trap, Beaver Bomber... the ideas are endless!

2 hours ago, Tommy Tallarico said:

Hi!

 

Yep!  Imagic games have been confirmed!  Expect to see Microsurgeon, Beauty & the Beast and Demon Attack in the first wave.  Gotta do the silver boxes!! 

 

As to your first idea... we have talked about something like this as well... haven't figured out the solution just yet, but the opportunities and ideas are endless.  Once the brand and machine are established and in homes, I can see a lot of developers approaching us with fantastic ideas like this.

 

 

Thank you soooo much for responding I really appreciate it. And to know Imagic is coming lol I believe now my whole focus is on Amico lol my son and I are not even talking about the other systems. Ha ha. 

2 hours ago, Tommy Tallarico said:

Damn you Canadians and your Curling!!

😂

Sorry, eh!

1 hour ago, Tommy Tallarico said:

Keep in mind though... these hardware loses that everyone always talks about are typically only in year one or year two.  NOT during the lifetime of the product.  Only in the beginning. And if you look at the curve of when consoles REALLY start to take off and hit mainstream sales... it's typically by year 3.  So the clock starts ticking to get pricing lower and lower by manufacturing more units AND component and memory prices get cheaper along the way.

That's a big misconception in the industry I see pop up a lot - that "you take a loss on the hardware, make your money on the software".  If that was the whole model, you'd see Sony and Microsoft, Nintendo increasing their number of studios and first-party content ten-fold.  To make more up on the software, instead of parsing out profits to every other third-party player.  And they'd be slightly less motivated to release a new system every 5 years and make another round of massive losses with a new, low-install base for a year or two.

Sony's execs were rarely revelatory in comments about how much money they were losing for every PS3 made.  But, that was in the first 18 months.  When the unit launched (at $599 for its 60GB top model, $499 for its base 20GB model), they were taking a loss at that launch price.  Everything was new, the processors were proprietary and the tech pretty elaborate (Cerny was incredibly talented with that build, but I suspect had to be more elegant with the PS4).  An independent cost breakdown of the components by iSupply, investigating supplier prices, estimated the retail value of the components in the PS3 was $840 for the 60GB ($599 retail) model, I think about $780 for the 20GB model.  That's a big loss.  Note that was the estimated retail value of the components.  Sony's in the rather luxurious position to negotiate down those wholesale price in most cases, talk to the suppliers directly and come to a deal that will work better for both of them.  Sony pays a little less, that components supplier sees the 150 million PS2s they just sold and 100 million original PlayStations, 80 million PSPs, figures the lowest  absolute operating costs, what a slim profit per cost looks like, and multiplies that number times a hundred million.  The suppliers nor Sony are revealing their actual numbers on their contracts - some can be inferred, but Sony isn't having its contract details out in the open.  Point is Sony doesn't pay list cost.

They still took a loss, but it was probably in the $150-200 range per unit if I had to throw a number at the wall, not the estimated $250-$280 range reported.    

Either way, Sony stopped the bleeding, fast.  Within the first year, as new suppliers are coming on board, new versions of the components make the older ones obsolete (cheaper), costs begin to trend down.  Sony itself did a rebuild of its system, removing the costly DVD drive and components needed for PS2 backwards compatibility.  That saved a ton.  And by that point, it's a small percentage of their market they're alienating in doing so.  They slimmed down from their 16 ton beast to a lighter model - fewer components, the lighter weight and smaller size of the PS3 Slim gets a few dozen more units per pallet, and a lot less weight figured into the cost of shipping containers leaving China.  More savings.  And they could pack in more GB hard drives as memory costs become cheaper every couple months.  Within two years they were just about breaking even on the cost, and at some point in year 3, they were making money.  Note that of the PS3's lifetime sales, only about 30% of all sales happened in Year 1 or Year 2.  Even for the notoriously expensive, "Sony's taking it up the wazoo gifting this beautiful console to us for a paltry $599", they could play a long-game and made a healthy profit on the system.

It's doubtful a system like the Switch ever took a loss to begin with.  Rather than taking a loss in year 1 and 2, they probably priced the system at an absolute minimum profit per unit.. say, $12 on every sale.  Knowing they'd claw more back from diminishing manufacturing costs as mobile phone and tablet market components are turning over at a rapid rate.  Within 2 and a half years they could issue the Switch Lite at $100 less, and really, they didn't cut out that much - component output, a relatively inexpensive plastic dock with $8 of hardware built in, the physical size of the Switch Mini meant a few dollars less per smaller screen, no HD rumble or duplicative components per controller.. a modified layout that didn't have to be as cramped in the original switch space (since you have room to occupy the joycons).. you might be looking at $60 or $75 of realized savings in comparative components, but they could drop it $100 because the whole of all components was probably even much cheaper than that.  They're reaping the rewards of diminishing hardware components cost.   

I'd fully expect Intellivision to reap the rewards of declining costs too, but, I don't think they'll have quite the same drastic cost savings to get the system down to $50 or $100 like certain talking heads would tell you; you know the price point when they'd see this thing as maybe worth anybody's time.  (anybody at Intellivision jump in and correct me if I'm speaking out of line on cost - I obviously don't have the actual numbers).  Most components won't be as cutting edge, generally.  Could be some really nifty magic bits in your Amico, but it is a bit more zero sum - if they're going to go really cool on something the controller can do, they probably need to forgo something else that'd be really cool but less core to the central mission.  Take the extra processing and memory needed to make the controllers their own take-with-you game machines.  The tech is there, we have mobile games after all.  But that little treat would add immense cost.  Still, it sounds like the tech in the controllers will allow for some mini-games and Easter eggs, some cool external away-from-machine possibilities, beyond RFID reads to confirm your game library and taking your Amico library to your friends house.  And if most tech they're using isn't cutting edge, the tech will have less of a drastic drop in cost.  Tech has a generally steep cost curve, from really, really expensive when it's shiny bright new, then it drops precipitously as alternate tech emerges and costs for the new thing comes down.. then it's a gradual, gentle slope for a while as that tech is more utilized in its second and third lives in other consumer electronics.  I suspect this is the sweet spot that Intellivision is shopping for.. good, recent chip sets and fans, supplemental chips that are fantastic, just not released 2 hours ago.  Those have a more stable cost - falling a bit, but terribly much.. but as other consumer electronics move on to a different chip, a different component, prices again drop as they become less relevant, as manufacturing ceases and it turns to selling surplus stock.  Eventually, almost no one wants the tech and the price falls off the second cliff.  But Intellivision I do not think is anywhere near that tech being so close to that second cliff.  

Hey Tommy -

I kind of created an answer but I'm not entirely sure. I just guessed based on the answers you've given in the past.

Let me know if I need to correct anything. I'm the first response.

Maple syrup taper lol. I love the fane tapper .

54 minutes ago, RetroAdvisoryBoard said:

 

That's a big misconception in the industry I see pop up a lot - that "you take a loss on the hardware, make your money on the software".  If that was the whole model, you'd see Sony and Microsoft, Nintendo increasing their number of studios and first-party content ten-fold.  To make more up on the software, instead of parsing out profits to every other third-party player.  And they'd be slightly less motivated to release a new system every 5 years and make another round of massive losses with a new, low-install base for a year or two.

 

Sony's execs were rarely revelatory in comments about how much money they were losing for every PS3 made.  But, that was in the first 18 months.  When the unit launched (at $599 for its 60GB top model, $499 for its base 20GB model), they were taking a loss at that launch price.  Everything was new, the processors were proprietary and the tech pretty elaborate (Cerny was incredibly talented with that build, but I suspect had to be more elegant with the PS4).  An independent cost breakdown of the components by iSupply, investigating supplier prices, estimated the retail value of the components in the PS3 was $840 for the 60GB ($599 retail) model, I think about $780 for the 20GB model.  That's a big loss.  Note that was the estimated retail value of the components.  Sony's in the rather luxurious position to negotiate down those wholesale price in most cases, talk to the suppliers directly and come to a deal that will work better for both of them.  Sony pays a little less, that components supplier sees the 150 million PS2s they just sold and 100 million original PlayStations, 80 million PSPs, figures the lowest  absolute operating costs, what a slim profit per cost looks like, and multiplies that number times a hundred million.  The suppliers nor Sony are revealing their actual numbers on their contracts - some can be inferred, but Sony isn't having its contract details out in the open.  Point is Sony doesn't pay list cost.

They still took a loss, but it was probably in the $150-200 range per unit if I had to throw a number at the wall, not the estimated $250-$280 range reported.    

Either way, Sony stopped the bleeding, fast.  Within the first year, as new suppliers are coming on board, new versions of the components make the older ones obsolete (cheaper), costs begin to trend down.  Sony itself did a rebuild of its system, removing the costly DVD drive and components needed for PS2 backwards compatibility.  That saved a ton.  And by that point, it's a small percentage of their market they're alienating in doing so.  They slimmed down from their 16 ton beast to a lighter model - fewer components, the lighter weight and smaller size of the PS3 Slim gets a few dozen more units per pallet, and a lot less weight figured into the cost of shipping containers leaving China.  More savings.  And they could pack in more GB hard drives as memory costs become cheaper every couple months.  Within two years they were just about breaking even on the cost, and at some point in year 3, they were making money.  Note that of the PS3's lifetime sales, only about 30% of all sales happened in Year 1 or Year 2.  Even for the notoriously expensive, "Sony's taking it up the wazoo gifting this beautiful console to us for a paltry $599", they could play a long-game and made a healthy profit on the system.

 

 

It's doubtful a system like the Switch ever took a loss to begin with.  Rather than taking a loss in year 1 and 2, they probably priced the system at an absolute minimum profit per unit.. say, $12 on every sale.  Knowing they'd claw more back from diminishing manufacturing costs as mobile phone and tablet market components are turning over at a rapid rate.  Within 2 and a half years they could issue the Switch Lite at $100 less, and really, they didn't cut out that much - component output, a relatively inexpensive plastic dock with $8 of hardware built in, the physical size of the Switch Mini meant a few dollars less per smaller screen, no HD rumble or duplicative components per controller.. a modified layout that didn't have to be as cramped in the original switch space (since you have room to occupy the joycons).. you might be looking at $60 or $75 of realized savings in comparative components, but they could drop it $100 because the whole of all components was probably even much cheaper than that.  They're reaping the rewards of diminishing hardware components cost.   

 

 

 

I'd fully expect Intellivision to reap the rewards of declining costs too, but, I don't think they'll have quite the same drastic cost savings to get the system down to $50 or $100 like certain talking heads would tell you; you know the price point when they'd see this thing as maybe worth anybody's time.  (anybody at Intellivision jump in and correct me if I'm speaking out of line on cost - I obviously don't have the actual numbers).  Most components won't be as cutting edge, generally.  Could be some really nifty magic bits in your Amico, but it is a bit more zero sum - if they're going to go really cool on something the controller can do, they probably need to forgo something else that'd be really cool but less core to the central mission.  Take the extra processing and memory needed to make the controllers their own take-with-you game machines.  The tech is there, we have mobile games after all.  But that little treat would add immense cost.  Still, it sounds like the tech in the controllers will allow for some mini-games and Easter eggs, some cool external away-from-machine possibilities, beyond RFID reads to confirm your game library and taking your Amico library to your friends house.  And if most tech they're using isn't cutting edge, the tech will have less of a drastic drop in cost.  Tech has a generally steep cost curve, from really, really expensive when it's shiny bright new, then it drops precipitously as alternate tech emerges and costs for the new thing comes down.. then it's a gradual, gentle slope for a while as that tech is more utilized in its second and third lives in other consumer electronics.  I suspect this is the sweet spot that Intellivision is shopping for.. good, recent chip sets and fans, supplemental chips that are fantastic, just not released 2 hours ago.  Those have a more stable cost - falling a bit, but terribly much.. but as other consumer electronics move on to a different chip, a different component, prices again drop as they become less relevant, as manufacturing ceases and it turns to selling surplus stock.  Eventually, almost no one wants the tech and the price falls off the second cliff.  But Intellivision I do not think is anywhere near that tech being so close to that second cliff.  

Great RetroAdvisoryBoard.

If I may add this :

Intellivision Entertainment will probably not need to lower its cost sale too much as long as there is more demand than available consoles even if the costs of the components decrease.

If the machine costs $ 30 less to produce, with sustained demand I would decrease the cost by only $ 15 or nothing at all, and when the inventory starts to increase, make a bigger price drop.

What do you think ?

1 hour ago, 1001lives said:

Hey Tommy -

 

I kind of created an answer but I'm not entirely sure. I just guessed based on the answers you've given in the past.

 

 

Let me know if I need to correct anything. I'm the first response.

I would suspect there is a way to "backup" our Amicos to the USB or SD Card device in case something should happen with said hardware... then maybe upload to new Amico that comes.  That is my guess.

TJ

2 hours ago, RetroAdvisoryBoard said:

 

That's a big misconception in the industry I see pop up a lot - that "you take a loss on the hardware, make your money on the software"

not really a misconception as "Loss leaders" is a very real thing throughout the business world. Example Microsoft xbox didnt make a penny until I think the 3rd generation. Thats on hardware and software.  Hardware is not a money maker for anyone. For retailers and wholesalers the margins are razor thin, that has been the case all the way back to the genesis.  I was a buyer way back in the day for an small east coast retailer, I think we made a whopping 10 bucks on a sale of Genesis and even less on a SNES.  You tied up a lot of money on systems for inventory where you didnt make really any money even on the retail side of things. Software is where the money is at. Always has been. (Reoccurring revenue is the real golden goose and the only reason Im on the business side of software these days)

Even this generation Xbox does not expect to make any money on the hardware side of things

https://www.thurrott.com/games/xbox/xbox-one/118357/microsoft-wont-make-profit-selling-xbox-one-x

with this corona virus and the variables and components rising, I really dont think Intellivision will be making much on the hardware side of things either since Tommy and his team are worried about price point ( as they should be) . Right now cost look to be pushing right past their sweet 199 spot, so for the time being they will likely be making razor thin margins on any 2020 retail hardware. You have to leave room for the retailer to make margin as well. Its why hardware just is not a money maker for anyone. Likely the last time hardware was a huge cash cow was the first gen with Atari 2600 and Intellivision.  IIRC they made a lot of money on the hardware back then. 

1 hour ago, LePionnier said:

 If that was the whole model, you'd see Sony and Microsoft, Nintendo increasing their number of studios and first-party content ten-fold.  To make more up on the software, instead of parsing out profits to every other third-party player.  And they'd be slightly less motivated to release a new system every 5 years and make another round of massive losses with a new, low-install base for a year or two.

First party software itself is a gamble as well, there is risk involved. You know what the only thing that isnt a gamble. Third party games. You make your royalities and you dont care who is the winners and losers as long as there is some winners.  As far as the longevity, you think sony and Micro and Nintendo want to make new consoles every 5 years?  of course they dont. Its why they are stretching the cycles out to 7 or more years now.  The Market dictates that they update the hardware since tech waits for no man. If they were to sit around an not update their system, it would leave them vulnerable for a new player to step into the market and grab market share.  Its a tough business.

52 minutes ago, bigdaddygamestudio said:

not really a misconception. Microsoft xbox didnt make a penny until I think the 3rd generation. Thats on hardware and software.  Hardware is not a money maker for anyone. For retailers and wholesalers the margins are razor thin, that has been the case all the way back to the genesis.  I was a buyer way back in the day for an small east coast retailer, I think we made a whopping 10 bucks on a sale of Genesis and even less on a SNES.  You tied up a lot of money on systems for inventory where you didnt make really any money even on the retail side of things. Software is where the money is at. Always has been. Reoccurring revenue is the golden goose.

 

Even this genration Xbox does not expect to make any money on the hardware side of things

https://www.thurrott.com/games/xbox/xbox-one/118357/microsoft-wont-make-profit-selling-xbox-one-x

Oh I know distributors and retailers make no bright profit points on the systems - Tommy's talked up about how retailers do a double-take "wait, we make how much on each sale???" - that's not typical.  But the manufacturers do make more money on units than lose money, and they're factoring the lifetime sales of the console to make those profits.  Not always, and my point was it was a misconception that the standard approach, that 80% of the time it's 'Put Out a Loss-Leader', to take a massive loss on the console, and recoup that loss and great profit through sales.  There's truth to the loss-taking, for some consoles, and some of the time for those consoles.  But it's a fuller story.  Articles linked.

There's Nintendo on the Switch: and also this breakdown estimate.  Nintendo has always insisted to its investors in financial documents since the early 90s that it makes a profit on every unit sold.  Sega was much the same, though there are questions about whether they made more profit on each sale of the Saturn and Dreamcast or a slight loss considering the tech cost at the time.  They were desperate to regain a foothold and operating a bit differently.

There's Sony on the PS3:  . This still years before ceasing production and costs dropping to further profitability.  Here iSuppli already notes the difference in component costs in 2008, with estimates of getting to break-even or better by 2009 (Year 3).. which evidently took a little longer, according to a report from late 2009, right at the start of the 4th year, they were still taking a loss per console, but pretty close.  

Sony corrected that on the PS4, the system cost less than retail.  Did Sony see any of that profit after retail took its pittance?  Very little.  But very little times 20 million of those units at that cost-point is still $20-$80 million.  And they sure made a lot more as the costs came down with further revisions.  

Even Microsoft was focused on reducing its costs to profitability ASAP with the 360, the premiere version it took a big loss on, but its standard $299 version sold for close to cost at launch.  Microsoft paid a ton for taking back so many defective units over the first few years, which completely ate its hardware gaming division's cashflow, but the units were profitable early in their lifespan if we're not factoring buybacks and repair.  Still, it was focused on getting those prices down and never intended for the console to be a loss-leader.  Its initial Xbox was a bit of an exception, just like Sony's PlayStation and PS2 - they had all the money in the world to throw into making a splash with a premiere gaming platform, a money rush for the market, and did so.  Even then, they were eager to get those costs down within months or a year of launch.  This article from 2002 already notes that a $249 price point on the two-year old PS2 already has a healthy profit margin.  And then they made even further revisions and cuts to get to profitability sky high on the console.  

But I think we're looking at exceptions and treating them like the rule.  Some of these companies have been more willing to put out a system at their own expense to reap the rewards in software, in subscription services and install base.  Now Google will put a billion into a platform service it may never reap a quarter of its investment from.  But that's Google.  They could launch $10billion into the sun and shrug.  It's not standard operating procedure.  The standard is to sell as near to cost as possible - you make a little, the distributors and retailers make almost nothing (but they make a ton on the games) - you make a ton on the games, but you don't lose a ton on your system and have to hold your breath that it sells 100 million.  It's always been much like you described.  $10 on your Genesis or SNES sale.  Sega, Nintendo made a small amount similar to that - maybe more, maybe less.  The real money's in the games.  But you don't put out a loss leader if you don't have to.  

If I was Sony and launching DVDs as a successor format to VHS and stood to make $500billion from the DVD business, I wouldn't bat an eyelash at selling the PS2 with its DVD player for a nickel.  But my investors might.  And my investors would question why do something so self-harming when people have clearly shown an interest in buying a video game console at a $200 price point for the last twenty years.  And my investors and majority shareholders would be calling for me to step down and install someone not so daft to sell the thing at $299 because it's state-of-the-art and everyone will get one.  And they'd be right.

Tommy,

That was a good interview you did yesterday with Voice of Geeks Network on YouTube.  I like that you finally turned on the fan.  It's an optical illusion, because it looks like the fan is going to hit the wall behind it with how the wall is shaped.  I know Michael Garvey is very happy now about the fan.  😃

25 minutes ago, RetroAdvisoryBoard said:

 But you don't put out a loss leader if you don't have to.  

of course thats the case, but dealing with tech, one which will have to remain relevant for a good part of a decade, you will likely have to take a loss early on, and then try to make back the losses in the last few years of the hardware run.  All said its a zero sum game ie..a waste of time if not for the software.

Lets remember the GREATEST business blunder in the HISTORY of the world was thinking the money is in the hardware and not the software. Xerox , my god they gave away a multi TRILLION dollar idea, their GUI (gooey) software and design which still to this day is relevant in every computer. Gates still has to be laughing every morning when he wakes up.

Tommy,

Is it this week that the new merchandise will be in the IE shop?  If so, which day can we expect to see the new stuff?