Sony, Microsoft Seek Relevance in Next-Gen Consoles

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Nov. 15 (Bloomberg) -- Rafi Mohammed, founder of Culture of Profit, discusses the newest video game console offerings from Sony and Microsoft and how the nature of home video games has changed since their last product upgrades. He speaks on Bloomberg Television’s “Bloomberg Surveillance.”

Seems to be in its sunset years?

Mobile devices have taken over and it has been a long time since playstation or microsoft came out with a new device.

I don't know if i would call it the sunset years.

There is a lot of a revamp with both of these consuls.

One of the key problems is microsoft has priced a premium of $100 over what the playstation 4 is at.

The sony have pricing power?

Or is it facing pricing picture yak -- pricing pressure?

The goal is to get as many consuls into the homes as possible.

First it is the razor razor blade model.

You get consul in, make money off your games, and then these five dollar per month subscriptions become big.

People buy what their friends by.

I think sony did the right thing by setting a low price.

Does that mean unit prices are more important than profit margins?

The unit prices get you in the door.

Where the real money is are in the subscriptions.

Next year it is estimated that xbox live gold will bring in 1.2 billion dollars of revenue, and that can go as high as $2.5 billion in the future.

The goal is off the ancillary products.

If the price is what gets us in the door, could lay station -- could playstation start cutting prices into the holiday season?

They could and sony has come out and said they are losing money on every consul they are are selling.

Microsoft is saying they are pricing at a $100 premium, they may make a small profit off of that.

I think sony has the advantage right now and microsoft is going to have to react by either lowering their price or unbundling the product and selling the console alone at a lower price.

The console competes on price but when you look at the ipad, that sells for $800. what gives apple a pricing power versus these gaming consoles?

Apple is a highly differentiated product whereas playstation versus xbox, they are relative commodities.

They are the entryway to games.

That is the key difference.

The difference for me over the decades of looking at these toys is the idea that the world has changed.

Our sony and microsoft marketing and developing these products acutely aware of google and apple and netflix?

Or are they in their own the universe -- their own little universe?

That is a great question.

What they are trying to do is be a gateway not only to games but to net looks and -- but to netflix in various television programs.

They're very cognitive sent -- very cognizant of it.

You want to make that consul the centerpiece of your entertainment.

Thank you so much.

He has a wonderful book on something which we take for

This text has been automatically generated. It may not be 100% accurate.

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