The Switch 2 is now the fastest selling console of all times. And for me, there is a lesson in here somewhere about basic economics. A lot of people said that the Switch 2 was "too expensive", but I actually think that the price is right. How do I know? There are fewer scalpers around, and they aren't having the field day that the Playstation 5 gave them.

Lamborghini makes about 10,000 cars a year, and sells them all. If they sold their cars for half the price, they would still sell the same number of them, and just make less money. Lower prices only make sense if there is an oversupply (or infinite supply, like a video game), and selling more at a lower price makes more money than selling less at a higher price.

The PS5 launch was bad economics. Demand far outstripped supply, leading to scalpers shifting thousands of units. The problem is that this doesn't make the console cheaper, because customers still pay a higher price; and the money isn't going to the maker of the console, who could invest that money into making better hardware and software, but to scalpers, whose earning will never benefit the gamers.

Since the end of the pandemic-induced peak demand, gaming news have been full of stories of layoffs and studios closing down. Which is to say that currently the industry is often spending more money on making games and hardware than what they are earning. There aren't any good solutions for that. Either companies need to reduce costs, e.g. by using AI instead of humans to make games, or simply making cheaper and less good games; or they need to earn more money, e.g. by raising prices. Neither of these solutions will be popular. But the popular solution that we have seen so often in the tech sector is that the customer is getting more than he paid for, because investors sunk so much money into a company that is operating at a loss. That isn't a sustainable business model either.

Somebody saying that the Switch 2 is "too expensive" just means that it is too expensive *for that person*. An economic "too expensive" would be if the consoles would sit unsold on the store shelves, which clearly they don't. Economics in general is about how to distribute limited supplies, and while capitalism sure has its flaws, it is up to now the best answer humanity has found for that question. The people who want the console the most are identified by them being willing to pay for it. That would work better in a system with less inequality, but that isn't exactly Nintendo's fault. Me, I gladly gave my money to Nintendo for that Switch 2, and hope they are using the money to make more great games for that console.

- posted by Tobold @ 8:06 AM Permanent Link