As most of you know the PS2 is sold at a lost to Sony. being curious i asked around and have been told that all consoles are sold at a lost. is this true? and does this include R&D or not. just wondering.

They are sold at a loss, based purely on manufacturing costs. R&D and marketing aside, they still lose money each time one was sold.

The practice is fairly common, and indeed is the only way to be competitive. After all, the PS2 is of comparitive power of a $299 PC video card, but includes DVD playback and processor and stuff.

They make the money back in game sales and game licensing, or at least that's the idea. Sega's decision to simply make software and forget this hardware stuff makes a lot more sense in light of this widespread market reality.

yeah, its sort of the same philosophy as drug dealers. You know, they give you some stuff cheap and then once your hooked they jack up the price

i hope you are not talking from experience!

If this is true, than how do they wver drop the price?

It seems that such a loss would be too much to take

Well, once enough games have come out to establish a console as a definite "safe buy," increased game revenue allows them to take the brunt of a larger hit per console sold. In addition, as new technologies are discovered and manufacturing processes become more efficient, the cost to produce each unit drops signifigantly. Things get even cheaper still as they pay off the substantial costs of "revving up" the system: the costs to purchase the machines and the land on which they're produced no longer need be figured in, and the marketing blitz at launch can be stepped back some. Finally, there is the fact that they don't need as many factories going at once later in a console's lifespan, as demand is lower than at launch.

Those are a few off the top of my head from my Econ class; I'm sure there are others. It's one of the more complicated markets out there, which explains why so many game companies tap out.

Really, I don't know how Indrema ever intended to make it in an environment so conducive to companies with huge amounts of cash.

Yeah, what everyone else said.. but towards the end of the system's lifespan, things can change. Sony was/is making a profit on each Playstation console (original) sold these days.

Economies of scale.