Game console makers have long understood that the real value of home entertainment isn’t in the hardware – it’s in the services that make that hardware hum. That’s never more true than now, particularly as network-connected consoles become the norm. Users will pay monthly fees for connectivity, downloads, upgrades, and wireless services – all of which eventually outstrip the revenues generated from the onetime sale of hardware. In fact, game console makers lose their shirts on their products.
It’s the old razor-and-blade axiom. Razors costs almost nothing. They are extremely cheap. But blades – the functioning, replaceable component – are extraordinarily pricey.
Now TiVo – which has long been rumored to be one bad quarter away from oblivion – is floating the idea that it may give its set-top boxes away in hopes of creating a large enough critical mass (and enough digital services) that it can recoup its hardware losses and make itself profitable.
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