The High Cost of Gaming

PCs are getting cheap. Extreme Tech have seen ads for sub-$500 PCs at retail, complete with small flat panel displays. Of course, those systems have integrated graphics, and aren't really gaming PCs. But the sub-$1,000 PC market represents the bread and butter of the PC market overall. Those low cost systems necessarily have low margins, which means each system sold generates very little profit for the manufacturer.

Similar issues hold true for the console market. Of the big three console suppliers, Microsoft, Nintendo and Sony, only Nintendo makes any money on the actual console sale. Both Microsoft and Sony lose money every time an Xbox 360 or PS3 get sold. (As an aside, there are still a ton of Playstation 2's being sold, and those probably to make some money for Sony.)

What this means is that PC and console suppliers need to look elsewhere to make money. But the business models, and the way they get their margins, differ between the PC market and console market...

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