Not loss leaders. Maybe close to "cost" but not loss leaders.
The reason is the length of the lifecycle. Say you spend $100M developing a video game console. That seems outrageous. You ship 100 000 units to stores for the early adopters, and some goof says $100M/ 100 000 = $1000 per console just for the R&D costs. These must be a loss leader!
But by the end of the cycle you've sold over 100 million units, so the R&D cost was under $1 per unit. You also get to do relentless cost engineering. When you spot a way to reduce the BOM by 4¢ on a product you're going to sell another hundred million of, that is Four million dollars you just added to the company's profits. Moore's law is on your side over that period of time too.
I was going to say something similar to you, but then I read https://www.investopedia.com/articles/investing/080515/econo... and found that consoles are loss leaders. With the plan of making it up in subscriptions, licensing, and games produced by the manufacturer.
In other words it is a "sell the razors at a loss and make it up on razor blades" strategy.
> In 2006, at the time of PS3’s launch, each console was sold at a loss of around US $240 per console
That would be a loss leader if the plan was you sell those launch consoles and then exit or move on to a new product having lost $240 per console.
But that was never the plan, the plan was you sell millions more consoles over many years and so overall they're profitable.
It's not razors and razor blades, Gillette sent me a free razor when I was a teenager because that's a razors and razor blades model. Sony doesn't give away consoles because they make money selling the console. They didn't make money on the first few million, which doesn't matter because they sold over a hundred million after that.
The reason they don't do razors and razor blades is because the attachment rate is much lower than most owners imagine unlike for razor blades. It's typically going to be 5-6 games per console. PS4 actually hit 8 games per console but that's a fantastically successful machine nearing the end of its life.
So, if you're losing $240 per console but you hope you can shift six games per console that is $40 per game you need to recoup to break even.
If you go out to a third party developer and you say "We want $40 per sale" they are going to laugh in your face. This isn't Apple strong-arming independent developers, the big games publishers (most obviously Take Two and Activision) absolutely are powerful enough to walk away from such a deal knowing that their competitors will do the same and then the console is dead.
Not loss leaders. Maybe close to "cost" but not loss leaders.
The reason is the length of the lifecycle. Say you spend $100M developing a video game console. That seems outrageous. You ship 100 000 units to stores for the early adopters, and some goof says $100M/ 100 000 = $1000 per console just for the R&D costs. These must be a loss leader!
But by the end of the cycle you've sold over 100 million units, so the R&D cost was under $1 per unit. You also get to do relentless cost engineering. When you spot a way to reduce the BOM by 4¢ on a product you're going to sell another hundred million of, that is Four million dollars you just added to the company's profits. Moore's law is on your side over that period of time too.