The best-selling traditional video game console of each generation in the last 30 years has been priced between $375 and $500 at launch*
* Adjusted for inflation as of 2018 and rounded off to nearest multiple of $5. Where stripped-down and full-featured versions were launched in parallel the full-featured version is used.
The launch of a major new game console can be a multi-billion dollar risk for their large corporate parents. Many systems are sold for less money than it costs to manufacture them, a sacrifice made to speed market penetration and build public confidence.
Video game manufacturers often launch new systems in the same year as their rivals to avoid falling behind in technology and sales. They use sophisticated analysis to set the right launch price to gain market share with acceptable short-term losses.
Yet pricing mistakes on most hardware generations -- both too high and too low -- have repeatedly cost the console makers billions of dollars in revenue.
I first analyzed these historical patterns in the 1990's as part of a series of "Console Wars" presentations I did each year at GDC, sessions that launched the term Console Wars into the industry vocabulary.
I had always been amazed that the maker of every leading console in game history up to that time had lost its leadership crown in the following generation:
- The Atari 2600 was (after a hiatus for consoles) replaced by the Nintendo NES
- The SNES did better worldwide, but in North America the NES was supplanted by the Sega Genesis
- The Genesis, in turn, was supplanted as #1 by the original Sony PlayStation, now called PS1
As a game developer in each of these generations I can confirm that we could see that the leading platform owner in each case was overconfident and making what seemed like obvious mistakes. We talked about it over lunches and at events, and history proved that the observations of rank-and-file game developers were right.
How could major companies like Atari, Nintendo and Sega keep repeating the mistakes of their competitors? As you might expect, multiple factors were involved.
In almost every case, however, the launch prices of new consoles were central to their success... or failure.
Why was the PS4 less expensive at launch than the PS3, despite its radical new technology, higher manufacturing cost and seven years of inflation?
Because it had to be less expensive to succeed.
Ever since my old GDC Console Wars presentations I have regularly updated the chart of launch prices, adjusted for inflation. You're looking at the version from the summer of 2018.
Over all these years and all the intervening hardware generations, once the numbers are adjusted for inflation they remain about the same.
Late is Better than Never
The chart below shows the data that backs up this "law" over the last three decades.
Some of the machines that were not initially priced in the "Goldilocks Zone" and were not the best-sellers of their generation still racked up impressive levels of sales. If you go back and look at the data, however, those systems only became best-sellers after price adjustments brought them into the Goldilocks Zone of $375 to $500 ($374 to $503 in 2018 dollars prior to round-off).
For example, in September of 2008 there were two major price cuts: Microsoft lowered the price of the premium 120GB Xbox 360 to $399. Sony lowered the price of the 80GB PS3 to the same price of $399, which equals about $475 in 2018 dollars. This was the first time that either the Xbox 360 or the PS3 had entered the Goldilocks Zone with their front-line systems.
It took three more years, however, for the PS3 and Xbox 360 to surpass the Wii's annual sales in 2011.
There are multiple reasons why the uniquely-designed Wii established such a big lead and sold the most units in that 2006-2013 hardware cycle. The price drops that started in 2008 aren't the only reason that Sony and Microsoft won the annual sales races in the last two years of competition before the PS4 and Xbox One were introduced.
Looking back at how these console launches took place, however, it's clear that PS3 and Xbox 360 shipping at a price that was above the Goldilocks Zone -- especially when they faced a far less expensive competitor with simpler games aimed at a mass audience -- was a big part of the story.
Launch prices matter, even when you cut hardware prices later, because "you only get one chance to make a first impression."
What About Core Versions?
A "core version" of a new console has become a trade term for "a stripped down model sold for a lower price." The most common downgraded features are memory and hard disk size.
I found no evidence that a core version priced inside the Goldilocks Zone materially changed the fate of a platform whose primary configurations were priced above the appropriate window.
My theory about why: Gamers buy new systems in order to experience great new graphical and audio features, and to play the most stunning games. Core systems do add initial sales volume for manufacturers. But the trade-offs they offer limit the game experience on top titles, which makes these models a bad match for the passionate game fans who drive the console industry.
As the market matures core systems become obsolete very quickly, and users have learned that a little patience will give them the chance to buy a full-featured machine at the same price.
Why the Label of "Traditional" Console?
Twice in the last 12 years -- with the Wii in 2006 and the Switch in 2017 -- Nintendo has turned the games world on its head by shipping a successful video game console that "broke the rules" of video game consoles:
- The Wii had a processor like that of the old PS2 and Xbox rather than its modern competitors, featured a motion-control interface rather than regular controllers, and featured games that "core gamers" found boring but that appealed to a broad market of families and older players
- The Switch is part console, part hand-held game system that uses a less powerful CPU than PS4 and Xbox One, with a built-in high-res display
Both of these systems shipped at prices that were about 20% below the bottom of the Goldilocks Zone, because Nintendo isn't trying to create traditional consoles like Sony and Microsoft. They're selling a different kind of video game experience aimed at a wider audience that has its own, separate pricing Goldilocks Zone.
Looking at this pattern, I saw two related competitions, not one. Traditional video game consoles need to be in that $375 to $500 zone. Nintendo has launched its non-traditional systems in the $310-$320 range in 2018 dollars, defining its own very narrow price window for success.
The Recipe for the Research
I started with the list of the 20 most prominent console launches of the last 30 years. Estimated worldwide sales data for all but one of them have been collected on Wikipedia, and I used this data to divide them into "Console War Leaders" and "Console War Non-Leaders." (I'd love to get a complete set of North America specific data if anyone has any leads on a credible source.)
In the case of the Genesis and the SNES, I continue to find contradictory data published online, including obvious partisan re-writings of history.
In the early 1990's the consensus opinion of North American publishers and developers was that the Genesis won handily in North America but the SNES won in worldwide sales. To avoid any question of who should be included I declared it a tie and have listed both on the "Winners" chart.
I then took the launch price for the full-featured version of each machine for its North American launch, rounded all $199 prices into $200 etc., and used the U.S. Bureau of Labor Statistics website to convert those launch prices into 2018 dollars. This adjusts all the numbers for inflation, which has been low in recent years but has been much higher at times during the video game era.
I then ranked both tables by launch price, and voila! The winners were clustered together, and most of the non-winners did not meet those same criteria. I placed a "Yes" in the far right "Zone?" column for systems that met these "Goldilocks Zone" price criteria.
I have also done a much deeper analysis of other economic factors that I will write about in a later article, but none of them have materially changed the overall rankings below.
Here are the two tables:
Table 1: Console War Leaders 1985-2018
Table 2: Console War Non-Leaders 1985-2018
|Xbox One||2013||38||$500||$ 547|
|Xbox 360||2005||86||$400||$ 529|
|TurboGrafix 16||1989||10||$200||$ 416||Yes|
|Wii U||2012||14||$300||$ 334|
|Nintendo 64||1996||33||$200||$ 326|