Re: Discussion: Should Apple enter the console video game business? Why or why not?

The alMIGHTY N wrote:

However, unlike traditional oligopolies, the console market has few, if
any, barriers to entry (3rd party developers may be construed as one --
but this may be overcome be offering low licenses/royalties fees)

How do you mean? (re: the console market having few barriers to entry)

Factors which prevent a new product entering the market;

The biggest one is inelastic demand (eg petroleum and other necessitties) which enables companies already established in the market to engage in "predatory pricing" which is designed to drive new entrants with high start-up/development costs out of the market.

The demand curve for consoles is quite the opposite which means a small decrease in price > proportionate gain in revenue. . However, MS and Sony can't do this because they are already operating at or below their marginal cost curves (and I doubt they can adjust their production in any case)

The demand curve for the total console market is in fact, "kinked" (like a watch-face at 4:50) -- the "kink" is at the exact price point for the Wii, while Sony and MS are pricing along the steep section. This leads me to believe the Wii was developed by a team of economists (and I'm not kidding, either.)

Bottom line -- if Apple brings out a console that is priced between the 360 and the Wii, it is likely take away many sales from Sony and MS, but this is easier said, than done especially since Jobs will refuse to settle for a steaming pile of crap, like the Wii)

For other factors that are "barriers to entry" see ;
http://en.wikipedia.org/wiki/Barriers_to_entry#Barriers_to_entry_for_firms_into_a_market

Note: Although it lists "product loyalty" as a barrier to entry, and despite the proliferation of fanbois in the console market (Hi Jonah), the empirical research I've seen suggests in the console market, it's not as important as some may think (because people usually become fanbois after they make their initial purchase from fear of "buyer's remorse") and price is far more significant factor.

Development time is an important barrier to entry, but a theoretical Apple console won't be released until next-gen, so it's kinda moot.




--
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But I'm like hot butter on a breakfast toast.
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