

Ask HN: Does selling electronic equipment at a loss actually happen? - zitterbewegung

I'm really questioning the idea of selling electronic equipment at a loss to recoup by selling media related to that equipment. Does this actually happen? Does anyone have any examples with evidence to back this up?
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byoung2
This is the model used by video game console makers. The cost to develop,
market, and sell a console (e.g. Playstation, XBox) far exceeds the sticker
price for each console sold. In 2005, each XBox 360 sold represented a loss of
$126 for Microsoft. They make that money back on licensing fees they charge to
game and accessory vendors, as well as through XBox Live subscription fees and
on-console purchases.

Source: [http://www.gamespot.com/news/6140383/microsoft-
taking-126-hi...](http://www.gamespot.com/news/6140383/microsoft-
taking-126-hit-per-xbox-360)

Mobile phone carriers also employ this model. They often give away phones for
free or at a token price of $99, when the hardware easily costs hundreds more.
In exchange, you have to sign a 2 year contract, where you promise to pay them
$1200-2400 whether you use the phone or not.

Dell used this model for a while with their Dell-branded LexMark printers.
They would give the printer away for free with any computer purchase, but the
printer only accepted Dell-branded ink, which was identical to the LexMark
ink, but had a special chip that identified it. They sold this ink at quite a
markup over the LexMark ink to make their money back on the printer loss.

To be successful at this, you need to have a captive audience and a lot of
traction. The phone company has it easy because you sign a contract. With the
video game console maker, you take a big gamble if the console doesn't take
off (ask Atari how this works out). If you are planning on something like the
Dell printer, be careful that counterfeiters don't steal your market.

