Why Japan Gets All the Price Cuts: A Console Conundrum

The recent introduction of a discounted Japan-only version of the PS5 has sparked a significant increase in sales, with figures quadrupling in the first week. This move by Sony, following in Nintendo's footsteps, is a response to Japan's economic struggles, including a weak yen and stagnant wages, which have made consumer technology products increasingly unaffordable. The creation of Japan-only hardware editions, locked to the local digital store and with limited language options, is a strategic decision to maintain a presence in a crucial market. However, it begs the question: why aren't similar pricing strategies being applied in other markets? The affordability crisis is a global issue, and consumers worldwide are feeling the pinch of price inflation. It's likely that companies like Sony have crunched the numbers and determined that these price cuts make financial sense, given the 'razors and razorblades' model of selling consoles as loss leaders to generate revenue from software sales. The commitment to this model by Nintendo and Sony is evident in their willingness to sell consoles at a discount in Japan, with the expectation of recouping losses through software sales and other revenue streams. But if this approach is viable in Japan, why not in other countries? The answer may lie in the instability of component costs, which has led to price hikes in recent years. Console manufacturers are understandably cautious about committing to aggressive pricing strategies, given the uncertainty surrounding key component costs. Nevertheless, this cautious approach has resulted in consoles becoming increasingly expensive, rather than decreasing in price over their lifespan as they once did. This shift has significant implications for the market, as consoles are no longer accessible to casual, impulse-buying consumers. The role of platform holders in the industry has evolved, and they seem to have lost their appetite for taking risks to build and grow new markets. Instead, they focus on maintaining their existing customer base, rather than pushing to expand their reach. Japan's consumer price sensitivity may be a canary in the coalmine, but it's not unique; it's a symptom of a broader trend that's replicated in markets worldwide. If Nintendo and Sony can make a concerted effort to build the Japanese market through discounted hardware and increased financial risk, it's difficult to see why a similar approach isn't justified in other markets as well.