The games business model is to make the hardware and sell it at a loss on first release. As components decline in cost over time – 50% a year is about right as a rough guess – then the hardware moves into profit until the next upgrade stage of the cycle. The aim is to have something of a wash to a bit of a profit over that lifecycle.
The profit comes from collecting a share of the software revenues that then plays on the hardware. That’s just what the business model is:
Sony is facing a £5bn law suit over claims it has “ripped off” PlayStation customers by charging a 30pc commission on online video games.
The collective legal claim against the Japanese firm is being brought by former Which? director and consumer rights expert Alex Neill, who said nearly nine million gamers could be owed as much as £562 each.
The claim was filed with the Competition Appeal Tribunal on Friday.
With physical game cartridges this was enforced via the IP on the chip that allowed the game to be played. This is about online.
But the same task exists. This case is trying to show that the entire business model – hardware cheap, make it up on a software margin – is an illegal business model. As if giving away razors to sell blades were illegal.
So, what are the chances here?