Computers in general have gotten a lot cheaper over the past several years.  Lots of RAM, fast processors, and big hard drives are cheaper than ever.  This has put a serious crunch on manufacturers, as lower component cost and fierce competition has commoditized the PC market and thus slashed profit margins.  However, there’s one place in computer-land where everything is expensive and profit margins are huge - premium gaming computers. 

As almost anyone who has followed component prices over the years can tell you, most types of components have gotten significantly cheaper.  However, one type has gotten significantly more expensive - high-end video cards.  As gamers try to get a competitive advantage by upping framerates, and a more immersive experience by upping the resolution and turning on eye candy like antialiasing and anisotropic filtering, video cards have gotten pretty sophisticated.  This trend has also been driven by game producers, who are making their products more and more detailed.  As a result, the price of a high-end video card keeps on rising - from $300 to $400 to $500 to $600 just in the past few years.  And of course, the latest craze of combining two or more video cards in SLI or CrossFire has made video card setups even more expensive.

High-end processors have also gotten more expensive, as gamers demand processors far faster than the norm to keep up with their SLI video card setups.  And in both the cases of processors and video cards, the highest-end ones make a huge profit for their manufacturers, as they normally speed-bin identical chips (put them in different categories based on how fast they can run).  Considering that the Athlon 64 3700+, at $200, is the exact same core and thus has the same manufacturing cost as the Athlon 64 FX-57, at nearly $1000, the FX-57 represents a huge profit margin comparatively.

That’s to say nothing of the full computers.  Those who don’t have the know-how or the desire to put together their own gaming computers are willing to pay thousands of dollars to get a state-of-the-art system from Alienware, VoodooPC, Falcon Northwest, and the like.  These often feature value-adds like top-tier support and fancy cases and paintjobs, but those just mask the fact that these companies are making a killing on the computers they sell.  Commodity PC manufacturers are jealous; Dell has tried to break into this market with its XPS lineup, but has recently purchased Alienware, giving truth to the old adage, “If you can’t beat ‘em, join ‘em.”  Except that in this case, it’s more like, “If you can’t beat ‘em, buy ‘em.”

E3 (Electronic Entertainment Expo), which is going on as I’m writing this, is proof of what a large industry gaming has become.  But it also begs the question, are people crazy to buy such expensive systems?  For $400, you could get an Xbox360; for $500, you could get a Playstation 3.  The Nintendo Wii’s pricepoint has not been announced, but with such a silly name it hopefully should be cheaper than either system.  Sure, the games end up being pretty expensive (the console manufacturers lose money on every console they sell but make it up in game licensing fees), but in the long run it’s still cheaper to get a console.

In the past, consoles couldn’t match PCs.  They weren’t as powerful, didn’t have as good control schemes for first-person shooters and RPGs, and didn’t have online gaming capabilities.  But now, they are very powerful and have robust networking capabilities, and their controllers (especially the Wii’s) are getting increasingly better.  Plus, most of them use industry-standard USB ports, so you can hook up a keyboard and mouse to get your FPS on.

A couple of years back the gaming world was abuzz about the Phantom console, which basically packed a full-powered PC into a console form factor.  The Phantom turned out not to materialize (to stay a phantom, so to speak), but the latest generation of consoles have done what it promised.  They are now essentially full-featured PCs, purpose built for gaming and multimedia.