Should you sell the hardware below cost to win the platform?
Every platform launch runs the same argument. One side wants a price that at least covers what the box costs to build. The other wants installed base first and money later. This sheet settles it with ten years of arithmetic: adoption, catalog growth, royalties, and the year cumulative profit finally turns positive.
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After you install, this is the model to open.
Platform Launch Pricing
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
The answer
One click sweeps the price grid. Every row re-runs the full ten years, so the network effect compounds differently in each one.
- Ten-year profit at $400
- $18.2B break-even in year 7
- Best price in the grid
- $350 $23.1B, and $170 under build cost
- Hardware over ten years
- -$1.0B royalties bring in +$23.0B
- At $440, still below cost
- -$3.9B 2.9M consoles, never tips
At the defaults the platform loses $1.0B on hardware over ten years and makes $23.0B on royalties, netting $18.2B after launch funding, with six years underwater before break-even in year 7. Cutting the launch price to $350, a full $170 below build cost, is worth $4.9B more, because the market fills up in year 6 instead of year 9 and every extra year of a full installed base pays royalties. Go the other way and the cliff is brutal: at $440, still $80 under what the box costs to build, adoption never gets going, the platform sells 2.9 million consoles and loses $3.9B.
The model
The model runs a console platform for ten years. Buyers weigh the price against what the console is worth to them, which rises with every game in the catalog, and developers ship games in proportion to the installed base but back off as the royalty climbs toward the rate where they stop shipping altogether.
| Console price | $400 (grid sweeps $300 to $480) |
| Build cost per console | $520 at launch, falling $22 per 10M sold |
| Console value with no games | $420, plus $1 per catalog game |
| Buyers per dollar of surplus | 0.11 million |
| Addressable market | 120 million buyers |
| Developer response | 7 games per million consoles at 0% royalty, none at 50% |
| Launch-title funding | $1,250M a year in years 1-3 (25 titles at $50M) |
| Software spend per console | $200 a year at a deep catalog |
| Royalty rate | 10% in years 1-3, then 30% in years 4-10 |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- If you raise prices, do you come out ahead?If We Raise Prices, Do We Come Out Ahead?
- How long until a customer pays you back?How Long Until a Customer Pays Us Back?
- What gross margin can you actually promise?What Gross Margin Can We Actually Promise?
- One load took three seconds. Is the site faster?Faster Site, Proven Without the Bell Curve
- Every day improved. Could that just be luck?Did the New Process Cut Ticket Times?
- Your churn is a band. What does that do to LTV?What Is a Customer Really Worth?
Every model like this one, and the method behind them: What-if analysis in Google Sheets.