Console wars and how to avoid getting injured...
To launch a successful console you need to satisfy three different groups of people: users, retailers and games developers.
The first, and arguably most important, are the users. They want affordable and reliable hardware and games. They want support if anything goes wrong.
The second are retailers. They want a decent profit margin on what they sell. And some marketing funds would be nice.
The third are games developers. They want to sell lots of games, which depends on you selling lots of consoles.
Juggling the demands of all three is harder than playing Doom with your eyes shut.
But for those involved in Console War III it gets harder.
Revenue is also split three ways.
Profit from hardware sales makes up the first chunk. But if the war continues there is less and less to be made here. Peripherals like extra memory and joysticks help a bit but it is not a big money-maker. For many fighting the Console War selling hardware is more a case of not losing too much per sale as it is making an actual profit on selling consoles.
Now your punter has their console you can start selling them games.
Assuming you can produce the games cheaply - on a CD not a cartridge - there's room for a bit of profit to be split between the game's writers, the retailer and the console maker. If you get a really great game it could even start to drive people to buy your hardware.
The third part of the equation is other services - which at the moment means online gaming.
In the olden days you relieved your customer of a big pile of cash for a console, followed by smaller, irregular amounts for each game sold.
But if you get them playing online you can massively increase the lifetime of games.
They can play people all over the world, play in groups, form leagues and win cash prizes.
You have a captive, and presumably interested, audience for related products without advertising in eight different magazines.
And you can start selling other services like email and internet access.
It is here that the third round of the Console War will be won or lost.
But one word of warning - remember the Dreamcast? It was originally advertised with the strap line 'Six billion players online'...