Fair pricing means a reasonable profit on the base cost.
Under many circumstances, this is true. However, console makers have historically sold consoles either at or slightly below cost, expecting to make their real profits on game sales, online store sales, etc… In the business world, it’s called a loss leader. Meaning it’s something popular that the company takes a loss on, while expecting it to encourage more sales elsewhere.
The classic grocery store example is a rotisserie chicken. You can go get a whole rotisserie chicken from the grocery store deli for like $3. It’s so cheap because the store is selling it at a loss. It’s a loss leader. Very few people will simply buy the chicken by itself. Instead, they’ll buy a tub of potato salad, some roasted corn, a can of green beans, and a gallon jug of sweet tea to go along with it. By selling that chicken at a slight loss, they were able to get the customer to buy all of those other things at a profit.
That being said, Valve has already stated that they’re not planning on having the Machine be a loss leader. Which is why people expect it to cost as much as a prebuilt with similar specs.
SCmSTR@lemmy.blahaj.zone 2 weeks ago
In most cases, yes. But you have to remember, this is Valve and not some ordinary company. They have extremely deep wallets and a lot of responsibility and expectations on their shoulders. If they charged what it cost for hardware and what it cost them to do r&d, it would likely not be in consumers favor.
SparroHawc@lemmy.zip 2 weeks ago
They’re buying the parts directly from the manufacturers though, so cutting out the retailer middle-man could offset the R&D costs.
Uebercomplicated@lemmy.ml 2 weeks ago
Research and development is probably very high when you consider Proton, SteamOS, and the semi-custom CPU and GPU. Something between $50 to $100 million would be typical. Silicone is famously expensive in R&D, Proton has continuous costs (and has for quite a while now) that rack up, and SteamOS is literally an operating system. That’s a lot of salaries to pay.
I reckon they’re taking advantage of being private and playing the long game. Very, very long game. They’re not really in danger as long as Steam is successful, but I can’t blame them for wanting a decent gross margin so they can at least cover hardware costs. Especially with memory prices right now, I wouldn’t be surprised at 1000€ here in Germany, though I wouldn’t be happy about it. I would happily buy at 900€ (≈$1040), and be ecstatic at 800€ (≈$920).
SparroHawc@lemmy.zip 2 weeks ago
Personally, I wouldn’t include Proton in the costs of the Steam Machine. The Deck already is benefiting from it immensely, and I would consider it to be a cost of expanding into Linux gaming in general - especially with the Lenovo handheld and other devices starting to jump on the bandwagon as Microsoft continues to take repeated dumps on their userbase. Its R&D costs are being won back by the market % Steam takes on any games bought and played in Linux, which means that it can benefit from that continued revenue stream rather than the one-off hardware sale.
The hardware has to break even. The software already has.