Consoles: Supply issues and strategy

For the gamers among us, there is always the question between the Playstation, Xbox, PC and Nintendo Switch. While the different generations of game consoles have changed over the years, how does consumer behavior and the strategies of the companies behind these machines stack up? What about the delay in delivery times and where does this come from? This article tells more about these topics. 

The Playstation 5 and the Xbox Series X and S have been on the market for almost two years, but sales have been disappointing compared to previous generations. Is this due to a lack of interest or too high a price tag? RTL Nieuws reports that sales are disappointing due to the global shortage of computer chips since 2020 [1]. Many releases of games have been postponed because there are still too few owners of a next-generation console. 

So it is a problem to get a brand new console through regular channels and in addition there are differences between the two products. The difference is not just in the manufacturer, but the strategies and product groups that the companies employ and own.

Telegram groups and re-sellers

The inventory issue in particular is an ongoing problem, which, by the way, is not just true for game consoles, computers and other digital products. Nowadays, it is almost impossible to imagine computer chips in consumer goods. These are found in cars and refrigerators. The enlarged digitalization and the trend of “smart” products is making computer chips much more in demand. The pandemic has led to a slowdown in production which certainly has not reduced the problem. In addition, the high innovation in the computer chip industry is creating higher pressure on supply. 

As a result, an electronics store may run out of sufficient stock and have to wait for delivery from the supplier, whose timing is unclear. Often when searching online for items that do sell, you end up with lesser-known companies that offer consoles for hundreds of dollars more than the regular retailers. This group are re-sellers who buy the products in batches and then sell them on at high profit margins. This is a common situation for products that are in short supply, such as festival tickets. 

Another way to get the product is by joining telegram groups. Telegram is a similar chat app to Whatsapp. On Telegram, messages are posted when a retailer has a product in stock again, so eventually the product can be bought. The downside to this is that people often have to have paid within minutes to still qualify before the stock runs out [2]. 

The producers have promised that in six months there will be light at the end of the tunnel, but unfortunately this story has been told many times. Therefore, the future will show if the inventory issue will be resolved or if it will remain a persistent problem for this industry. 

On-demand services and exclusive titles 

The most important thing about a gaming console remains the games available for it on these platforms. So far it has been confirmed by Microsoft that they make a loss on the sales of each console [3]. Sony made a loss on the sale of each console until recently [4].  The answer is simple, they compensate these losses on the other hand with subscription costs (online access, on-demand gaming subscriptions) and the sale of new games, in addition, towards the future the hardware becomes cheaper and profit margins slowly emerge. 

Through these services and associated products, a manufacturer ensures that its product is more attractive to the customer. For example, Sony is known for its hefty catalog of exclusive titles that are only released on its platform. This ensures that people may be tempted to purchase a specific console because of these releases. For example, Horizon Forbidden West is only available exclusively on the Playstation 4 and 5 because the Dutch developer of this game, Guerilla Games, falls under Sony.

“Microsoft has been catching up for the past six months”. 

Both parties have been buying up game developers to add games to their catalogs for years. Microsoft has also made up a lot of ground in the past year. They put down $7 billion for the parent company of Bethesda (Zenimax), which is known for titles like Elder Scrolls and Fallout [5].  Then they made an even bigger investment by putting down almost $70 billion for Activision Blizzard (known for Call of Duty) [6]. This kind of large investment can make people curious about whether future titles will then only come exclusively to the owner’s console. 

So it goes far beyond just the specifications of the gaming console, but also what products can and cannot be used on it. The future will only be able to tell which product is best suited to the consumer’s needs. 

Conclusion

If you want to buy a new console, it is important to weigh the pros and cons. How much do you want to spend? Do you want to keep an eye on chat groups for a chance to buy one at a normal price? What releases are you looking forward to? And on which console will they be released?

Above all, think about what your own wishes are and try to come up with a plan based on this. Sometimes waiting can be a better solution, as there will be a better price available and more information to make an informed choice. 

If this article helped you make a choice or get information about it, then enjoy the (future) purchase!