Money For What? Better Not Be For Nothing. Part II

And to continue:

Enter the exclusivity deal. We've all seen how it works. Game A is coming out for Console A as an exclusive, and that's usually all we know. What we don't see is the fat roll of cash that the makers of Console A have given the game publisher to not release Game A on Console B. The reason for the payment to the publisher is to effectively pick up the difference between the sales of Game A to both consoles versus just one. In my previous example an exclusive could have cost the developer a lot of money, money needed to recoup development costs. But, if Console A's maker decides to pay for the right to be exclusive, then it's all good to the publisher. Console A gets its exclusive, and the publisher gets to make back its investment in the game. There is another option for the console makers, too.

A timed exclusive is really similar to a full exclusive, with a couple of exceptions. First, the timed exclusive is just that - timed. After a certain waiting period the title will become available to a rival console. Having an exclusive high quality AAA title (what we know as system sellers), even for a limited time, can conceivably boost console sales. A game like Halo has the potential to greatly increase profits for a console manufacturer, and thus, having the title exclusive to you will help to persuade little Timmy to buy your machine, and not the other guy's. What the consumer doesn't know usually is when a title is an exclusive or just a timed exclusive (recently Lost Planet and BioShock coming soon). The only way we, the consumer, finds out is when the game is announced (considerably later) and scheduled for release. Secondly, the cost of buying a timed exclusive is much less prohibitive then buying the title outright. This leaves more money for the console makers to develop their own first party games and promote their respective systems.

With Microsoft just recently (after the Halo 3 launch) in the black and Sony at over one billion in deficit, the exclusive tactic just doesn't seem to make a lot of sense. Spending a ton of money just so the other guy can't get it may sell a few systems, but it isn't a good strategy in the long run. What the console makers have to realize (Nintendo is definitely in the forefront here) is that first party games are cheaper then locking up a third party game, and helps consumers to identify with your products. Mario will forever be associated with Nintendo, and more recently, Master Chief will always be with Xbox. And Sony..Well, Sony needs to work on it still, but you get my meaning. The bottom line is that exclusives are expensive (an estimated $50 million for exclusive Xbox GTA DLC proves the point) and may not work to sell consoles, no matter how good they are.