- 1. Research and Development Costs Are High
- 2. Licensing Fees Are Expensive
- 3. The Console’s Components Are Expensive
- 4. Retailers Add a Markup
- 5. There’s a Microchip Shortage
- 6. Market Manipulation Increases Prices
- 7. Some of the Consoles Are Upgradable
- 8. Consoles Are Portable, Unlike Gaming PCs
- 9. The Buyer Gets Access to Exclusive Games and Features
- 10. Consoles Come With Online Subscriptions
Whether you have a kid or are a big gamer yourself, there’s likely someone in your house who wants the newest video game console when it comes out. However, wanting something doesn’t mean you’ll get it, especially considering the price of new gaming consoles when they’re first released. These exorbitant prices are enough to discourage many would-be buyers, but there are actually legitimate reasons why gaming consoles are so expensive.
Here are 10 of the most standout reasons why gaming consoles cost so much:
- Research and development costs are.
- Licensing fees are expensive.
- The console’s components are expensive.
- Retailers add a markup.
- There’s a microchip shortage.
- Market manipulation increases prices.
- Some of the consoles are upgradable.
- Consoles are portable, unlike gaming PCs.
- The buyer gets access to exclusive games and features.
- Consoles come with online subscriptions.
Read on to learn more about the seemingly outrageous costs of video game consoles.
1. Research and Development Costs Are High
Before release, console makers spend a lot of time and money on research and development for their consoles. This is far more than just the manufacturing cost, which is probably chump change in comparison.
They have to consider what kind of audience they are marketing to, how that audience will use the console, if it has too many bells and whistles or not enough, and durability, amongst other things. They also need to keep up with the competition, so they invest in marketing campaigns.
All of this research takes money!
2. Licensing Fees Are Expensive
Console makers have to pay hefty licensing fees to game developers to include their games on the console. They also need to pay licensing fees for the console’s operating system and other built-in software like web browsers. This can add hundreds of dollars to the cost of the console. That’s why the Xbox X retails for one price, but there’s an additional fee for each game license.
3. The Console’s Components Are Expensive
The components that go into a gaming console are expensive, especially if you’re looking at the latest rig! The cost of these parts would be much higher than the manufacturing cost if they were sold separately.
However, console makers can get bulk discounts because they order components in large quantities and gamers usually buy more than one console.
4. Retailers Add a Markup
Manufacturers try to keep prices low for you and me, but retailers add their markup to the already expensive production cost. This is why we see double- or even triple-priced consoles pop up in marketplaces after the manufacturer has sold out.
Some sellers even have shopping bots that buy the consoles faster than everyone else when shopping online. This creates an artificial shortage which allows the sellers to raise the price even higher. These sellers then list the consoles on marketplaces like Amazon, eBay, and Rakuten at two to three times the retail price.
5. There’s a Microchip Shortage
A microchip shortage is another reason why gaming consoles are expensive. Since more people around the world are buying new electronics than ever before, there’s a worldwide shortage of materials that go into these chips. This makes it difficult for console makers to get their hands on the materials needed for production.
In case you haven’t noticed, chips are in everything we use these days, including cars, phones, computers, and of course, gaming consoles. And there aren’t enough to go round. The result is higher prices and huge waiting lists.
6. Market Manipulation Increases Prices
Console makers sometimes use market manipulation to make their console seem more popular than it is. For example, they can increase the amount of advertising and marketing for a console. And one way of doing this is paying celebrities to talk about how amazing the console is on social media platforms like TikTok, Instagram, and Facebook.
This creates a false demand for their product, which they can fulfill by creating more consoles. Once this false demand has died down, they decrease production so that the price of the console will go up due to low availability.
They may even offer incentives like free games and accessories to encourage you to buy now at an inflated cost instead of waiting for prices to go down.
7. Some of the Consoles Are Upgradable
When it comes to gaming consoles, you get what you pay for. And sometimes, that means getting an upgradable console. You can upgrade specific parts of these consoles like internal storage or RAM. This way, you don’t have to replace the entire console to enjoy the next upgrade.
This upgradability means fewer profits for console manufacturers. But since it’s a popular option for gamers, console makers end up adding upgradability at a higher price than usual. They also make sure the parts aren’t compatible with any other console out there, so you can only buy parts from them.
8. Consoles Are Portable, Unlike Gaming PCs
Portability is another reason why gaming consoles are expensive. Unlike gaming PCs, consoles can be taken with you wherever you go. This makes them more convenient for gamers, which means console manufacturers can charge a higher price for them.
This portability means you can enjoy a game on the couch using a TV or even on an airplane using the built-in screen. You can even play video games in your car by linking your phone to a compatible console, such as the Nintendo Switch and Xbox X.
9. The Buyer Gets Access to Exclusive Games and Features
Many console manufacturers have exclusive games and features that are only available to their consoles. This exclusivity makes gamers prefer one console over another, which means more profits for the console manufacturer. It also ensures they can continue to create new consoles with upgraded hardware since people are willing to pay top dollar for access to the best titles.
So while you’re not getting the best prices on consoles, you can still enjoy exclusive games and features that give your console the competitive edge.
10. Consoles Come With Online Subscriptions
Online subscriptions cost a pretty penny as well! To play multiplayer games with other people online or access streaming services like Netflix or Hulu, you’ll need to buy an online subscription.
This is yet another way console manufacturers make more money from gamers, but it’s also how they’re able to keep their consoles up-to-date. Many of the latest features would never have been possible without these online subscriptions.