Case Study: Sony
Game Development and Publishing
Gaming manufacturers made their money not from the sales of consoles - in fact most consoles were priced below cost - but rather from software. It was widely believed that Microsoft's Xbox console, launched in 2001, was sold at a $100 loss per unit and estimates indicated that each Xbox 360, launched in 2005, lost close to $130 per unit. F A number of industry analysts believed Sony's PS3, even at $599 for the premium version, would sell at a loss of $250 per unit. (In 2006, Sony earned about $8 on each PS2 sold.)
Acting as gatekeepers for developing and selling games on their respective systems, gaming manufacturers typically received between $5 and $7 for every unit of software sold for their particular console. On average, video games sold between 200,000 to 300,000 units; a blockbuster was any title that sold over 5 million units.
Over the 30-year history of the video game industry, the role of game developers and publishers had evolved to the point where companies like Microsoft were paying large sums of money to bring the talent in-house.