Video Games Getting WAY More Expensive?!
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Video Games Getting WAY More Expensive?!

September 12, 2019

– Hey, guys, and welcome to “This Is Now.” While video games are cheaper than ever, the consoles themselves
have gotten super expensive, and there’s a very good chance that they might be getting even pricier. A few months ago, Trump announced that the U.S. had plans to implement new tariffs on 200 to 300 billion dollars worth of goods that are
being imported from China. If you’re not familiar
from your economics class, a tariff is essentially just a tax put onto a good which is being
imported into the country. This is certainly not anything new. Countries set tariffs
on goods all the time. However, included in this new proposal is a massive 10 to 25 percent tax hike on video game consoles. And considering that a whopping 96% of all consoles are manufactured in China, that could be a big, big problem. So, as an American company, isn’t this an absolute win for Microsoft? Get ready for those cheap,
cheap Xboxes, right? Well, no, the tariff
actually has nothing to do with the country that the company is from, but instead, where the country is importing the product
from, in this case, China. So, even though Microsoft
is an American company, they’re still importing
their Xboxes from China and thus are subject to a tax. Now, that tariff is based on the value of the good that is being imported, so say you have a $300 PlayStation Four. Well, now I could have up to a $75 tariff and that’s for every single unit. If that’s the case, it means Sony essentially has two options: either they lose that $75 per unit or they raise the price accordingly which, of course, is
then passed on to you, the wonderful consumer. The tariff is based on the value of the good that is being imported, so say you buy a
PlayStation Four for $300. Well, now, we would have
a tariff of up to $75 for every single unit. That means Sony has two options: either they lose that $75 or they raise the price accordingly which is, of course, passed
on to you, the dear consumer. Oh boy, taxes and tariffs, fun, fun. Now, traditionally, video game consoles sell on a razor-thin profit margin as is or even at a loss, the idea being that you
basically make the consoles cheap as possible so more people buy it, and then Sony or Microsoft
make their money back on game licensing, accessories, Xbox Live, PSN, Xbox Game Pass, PlayStation Now, all the wonderful other things, very much like razor blades
or printers with ink. It gets you on the back end. – [Ken] Who buys ink when the printer is– – Ken, not everyone throws away a printer when you’re done with it. I have had the same $50 printer
for, like, four years now, and I bought ink for it three times. – [Ken] Yeah, but like, I basically kept getting new features by– – Ken, you literally are
destroying the environment by throwing away a printer
every time it runs out of ink. – [Ken] Well, maybe they should
stop making (beep) printers. – For consoles like the
Xbox One and PS Four, which are, of course, at
the end of their life cycle and therefore a little bit cheaper, they’re easier to produce, it’s probably more likely
that both Sony and Microsoft will eat the costs of any tariffs or, at the very least, they won’t continue to discount the devices
when they go end-of-life. However, what about the
next generation of consoles? Take the PS Five, for example, which is estimated to
launch with a $500 price tag or, with this new tariff,
that’ll be a $625 price tag. Now, in many countries,
this is nothing new. For example, when the PS Four
entered the Brazilian market, it cost $1800 due to similar tariffs. Probably, I guess why
they’re still playing the Genesis, not PS Four (chuckles). Man, it sucks to be in Brazil. I’m, I’m sorry. I’m sorry, we have it very good without having to pay
$1800 for our PlayStations. Now, consoles are not the
only things affected either. Most accessories, such
as controllers, headsets, chargers, they’re all produced in China. Now, in their letter,
the Big Three of Sony, Nintendo, and Microsoft
claim that this tariff has the potential to cripple
the entire gaming industry. If console prices get too high, the price will put it out
of reach for many homes which mean, of course,
less people can buy them. Now, if less people can buy them, there’ll be less games sold, and if less and less games are sold, that means studios,
especially the smaller ones, can’t afford to operate
and thus shut down. Now, obviously, that
is a very doomsday take on the entire situation which Sony, Microsoft, and Nintendo are, of course, using
to maximize their point. However, tariffs like this do
have an effect on industries, except we just don’t know exactly what that effect will be yet. As of right now, a large
chunk of electronic tariffs are scheduled to go into
effect on September 1, but things like video games and cellphones have been delayed until
at least December 15, presumably to give those
manufacturers enough time to stock up for the holiday season. Now, a huge side effect to this is that Nintendo has already started looking into moving the
production of Switch consoles away from China and into
other parts of Asia, specifically, such as Vietnam. By doing this, they would
circumvent the tariff and then, of course, could
start a domino effect where all these manufacturers
take their business elsewhere. Now, when you get into
world trade and economics, obviously, it is an incredibly
complicated subject, specifically when it comes
to things like tariffs which can come and go and… It gets messy, right? But the general gist is this: so far, we’ve been incredibly
fortunate around the world to have super strong global trade where PlayStations can be sold
for a couple hundred dollars everywhere except Brazil. However, those days do look
like they’re coming to an end. Now, it would be unfair
to make it seem like this is all some kind
of unprecedented move by certain U.S. presidents. In fact, tariffs and trade wars are a lot more common
than you might think, and some of them have
pretty insane effects on the global trade that are well beyond just the mere video games,
such as the chicken tax. Matt, what is a chicken tax? What, you hosted last week, what? I can’t host one… I wanna host one episode! – In the late 50’s and early
60’s in the United States, advancements in both animal
husbandry and agriculture led to a massive increase in the amount of chickens being bred and thus meat being produced. At the same time, Europe was
recovering from World War II, and the availability
of chickens was scarce and thus super expensive,
especially in France and Germany. U.S. farms started to export
their surplus to Europe, and the consumption of
chickens skyrocketed worldwide and everyone was happy. While European consumers were happy, the farmers accused the U.S. of putting them out of business, so in 1962, Europe imposed a 25% tariff which was 10 times higher
than the average tariff on chicken imported from the U.S. Of course, this massively
hurt the U.S. market which led to America increasing tariffs on other goods from Europe and thus led to more
retaliation back and forth. Does this sound like a
trade war you’ve heard of? Like video games, maybe? – [Austin] What? Oh, is that how you’re shoehorning this terrible segue into the video? – Wow! This was a big deal and
it grew to include things like potato starch, dextrin,
and brandy, among other things. How are those related to chickens? And all falling under this
nefarious “chicken tax.” Since then, pretty much
all of those tariffs have been eliminated except
for one: commercial trucks, because the trade war
totally makes sense, right? Like, yeah? – [Both] No, no. – [Ken] Wars are bad. – Okay. – [Ken] Don’t advocate for Matt. – While the U.S. chicken
market was booming, the U.S. auto market saw a steep decline, and this was caused by an increase in the number of foreign
trucks and cars being imported, especially the VW cargo van that had become super
popular in the 1960’s. – [Ken] Damn hippies. – Yeah, it’s definitely the hippie van. – [Austin] War is not the answer, okay?! – So, to get back at
Germany for their tariffs, the U.S. imposed a 25% tax on the import of all foreign trucks or vans directly affecting the sale
price of those VW buses. And more taxes equals
higher-cost vehicles. However, only cargo vans
were affected by the new tax. Passenger vehicles were not. Are there seats in the back? If so, you’re good to go with a relatively small 2.5%, maybe 4% tax, but if there’re no seats
in the back, chicken tax! – [Ken] Chicken tax! – Enjoy your 25% tariff. – [Austin] What?! – Yeah.
– [Austin] 25%?! – Go directly to jail. Do not collect $200. – [Austin] Matt, trade wars are bad! Why are you doing this to me? – Obviously, foreign automakers still want to sell their
trucks in the U.S., so they came up with a
clever way around the tariff known as the chassis cab loophole. Essentially, automakers would just add the cheapest possible
seats to their small trucks before exporting them directly to the U.S. When they arrived, they would
immediately remove the seat before sending them off to dealerships. One of the most famous examples
of the chassis cab loophole was the Subaru Brat, which was super ugly. – [Austin] How dare you. – Ha ha! Similar to the El Camino, the Brat was half car
and half pickup truck because it did not have a back seat. It fell under that small
cargo truck tariff, so basically, what they did was they took two of the
cheapest, crappiest seats that were rear-facing, and they had these little handlebars. The chicken tax was implemented
to protect the U.S. market, but ironically, it made
things way more difficult. Like we said before, the tax applies to not the country of origin for the company, but the country from where
they’re importing goods from. So, actually, that same exact
thing happened with Ford. The Ford Transit was
originally made in Spain and then Turkey and then
imported with those rear seats. Alternatively, Mercedes-Benz
imports all their Sprinter vans into the U.S. in pieces
and then assembles them in Charleston, South Carolina. Thank you for watching
this episode of “This Is” and you can check out some of
our other episodes right here. Be sure to subscribe and
ring that notification bell ’cause if you don’t, Matt’s
kids won’t get into college. – The most important thing here is that you clicked on a
video all about video games, and now you’re learning about tariffs. Congratulations, Matt, you’re teaching the kids
new information every day. – What’s this about my kids
not getting into college?

Only registered users can comment.

  1. I really hope that companies move their productions out of China. This whole tariff war that Trump started was really pointless.

  2. Unfortunately, this will make uneducated people indirectly hate Trump. People just see a raise in price without looking at the whole picture.

  3. Tariffs are prices at how much it costs to make. Not on the MSRP.
    So if it cost $250 to make, and MSRP is $500. Tariffs are priced at $250, not $500.
    So it will be an extra $62.50. Not $125.

  4. Get a PC. All the games are free. Yeah, I know casual console players will say they can buy games used, but most PC gamers never paid for their games. Sure, there are games that are difficult to get for free, but if that's the case, I don't support them and they get no publicity to sell more games.

  5. Ken is a genius. Buying a decent printer is loads cheaper than buying more ink. Oh my! Sorry environment. I’ll make it up to you!

  6. This is what happens when manufacturers build outside a company's country of origin. It's a risk that companies and consumers face when this occurs

  7. IK it sounds stupid but imagine of china just said fuck it,and they stopped selling to america,nothing anymore

  8. is there no way they can pull a sony ps2 tax avoidance and classify their consoles as personal computers?
    I'm sure they have already thought of this though

  9. Making your videogames cheaper means more people will buy it and that means more money but no they're dumb and make the games expensive which means less people will buy them

  10. Thankfully, the price of the Playstation 4 dropped significantly over its life cycle in Brazil. This generation I went with Microsoft mainly because of the Xbox Game Pass (it's a crazy good deal), but I am considering picking a PS5 on the upcoming generation due to backward compatibility with PS4 games.

    I am sure that Trump taxes will get circumvented by console manufactures easily though, so maybe the issue won't be a big of a deal.

  11. What about Oculus? Does oculus apply to this tax? I’m worried because replacement touch controllers for my quest might be very expensive

  12. Matt is not a suitable presenter. And I HATE the fake acting between presenters. This is starting to look like an awkward live TV show from the 90s

  13. I really enjoyed this video. Thanks for informing us about the history of taxes, also Matt should host more. No hate, amazing work from all of you guys.

  14. I don't live in the US.


    Sony, Microsoft and Nintendo should convince Trump that it will have a bad effect on the economy.

  15. In my opinion gaming is definitely going to get more expensive over the ninth console generation here in then USA. Certain cities like Chicago are already charging a digital tax. And let’s be real here to the United States government we exist to pay taxes and die. If you can do something without them making money from it they’re not going to let you do it. I see it as only a matter of time before it’s a nation wide thing.

  16. I only buy things on Sale anyway so I'll be grabbing those slim versions of the PS5 and Xbox?. The games that release over that 2 year period would drop to $20 anyway too so that's even more money saved. Same thing I did this generation.

  17. Trump really wants ‘American’ only products.
    Yet he and others wonder why the Japanese or Germans do better in cars while American companies charge more for nothing.

  18. So, Muricans get to pay the same price for consoles as Europeans. But you have a lower VAT on basically everything.
    Really not a big deal

  19. you do know there are many other options like enter to a "trade deal" that benefits both side? Imagination is your only limitation. Companies could streamline their cost as well making them more lean (trim the fat). They could manufacturer some of the parts in the other country (say the US) or assemble the unit elsewhere or in the US while getting the parts from US companies that dont have the tariff.

    Stop being lazy thinking saying there are only two options. Only dumb people say that. There are infinite options. Even Nintendo is making slower (suppose to be cheaper) hardware but thier mark-ups are high even in games with lower res / lower fps. Because Nintendo is focusing on IP and portability which gives them differentiation factor. So it's not really just about low cost – it's about value customers get that covers the price.

    Such a dumb video please stick to games or tech trends.

  20. This wouldn’t rlly change UK prices right cuz manufacturing shipments will still be the same price to go from China to UK right

  21. If consoles disappeared from the industry… Sure, it'd affect them in the short term but it wouldn't kill the industry… as there is another platform that publishers love to overlook that is pretty popular.

  22. The increase of 10% to 25% is clearly a step to eliminate the domination of china for manufacturing goods, when companies hear about the 25% tax they'll move on for some other country providing them cheap labour like pakistan or india. Thus less manufacturing in china

  23. To be fair… there are more then a few printers that cost less when new then the price you'd have to pay to replace all cartridges. Frankly, I'm surprised more people don't just throw away their "old" printers when they're out of ink and just buy new ones.

  24. But what about the conditions of the chinese workers? Seems strange to not mention… Free trade has allowed western companies to exploit countries with lower salaries for cheaper labor instead of having to pay FAIR wages in their production. Cheaper for us while we try to ignore the exploit that got us that price.

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