Business Approach Comparison Sony PS4 and Microsoft Xbox

[Squilliam]

There are no usage fees for iPad. I use the same Internet connection that I use for my computers, consoles and yes, mobile devices...

I guess you're not in the target market then.

Microsoft wants to charge people to use a service. So far they have done a pretty good job of convincing people that the cost is worth it. It looks like they are spending even more money with the Xbox One to make people feel the cost they pay is justified. Probably their only major weakness in this approach is that they don't cater to the people who barely use online or use it infrequently enough for it not to be good value. Maybe they will reach a point where you can play online with a group of random people and have them not be dicks so long as you have not been a dick in the past. If they can assure me that my one or two multiplayer match-ups per week are full of cooperative and nice people at my skill levels then I would definitely pay them to not have one of my few chances to play games ruined by some dickhead -- this is something hardcore gamers simply don't understand.

 

[Gradthrawn]

Used game activation fee rumored to part of the used game price at the retail shop, comes out of the retailers cut. There are further rumors of used game sells being tied to only retailers that have access to MS' system's to deactivate the game on the original account. Still nothing official, but I think the picture is finally coming together. This doesn't address person to person second hand market, but I don't know if they intend to.

 

[dobwal]

There are no usage fees for iPad. I use the same Internet connection that I use for my computers, consoles and yes, mobile devices.

There's no analog to the XBL subscription, or whatever they may call the fee to have Kinect change your TV channels for you.

You can't re-sell iOS games or apps. But you can install them on any device, not locked to a given device.

And the games and apps. are not $60 so you don't care as much that you can't re-sell them to recoup your costs, finance more software purchases.

No, paying to use second-hand games or play online or use other features of the hardware that you paid $400-500 for and $60 for the software is an order of magnitude more onerous than what you encounter on mobile devices.

Oh and it may be a walled-garden but there's way more breadth of content available than for the console ecosystems. Now the games aren't as pretty or as deep (in general) but you have to assess the value proposition.

You can build those type of business model when your product retails for almost twice it's BOM and you charge $100 premium when doubling up on flash from 16-64 GBs.

Apple is in the volume business. It shares hardware across 4 product lines and sales more A chip based hardware during a holiday quarter than MS or Sony can muster over a generation with the 360 or PS3. That's one christmas season versus 7-8 years. One whole year represent more units than the 360 and PS3 combined over their lifetime at price points more inline with the PS3's launch prices for its most dominant products. All with 45% gross and 35% profit margins.

All apple does is extract most of the cost and profit of its hardware and services up front, while MS and Sony does it over time.

 

[wco81]

You can build those type of business model when your product retails for almost twice it's BOM and you charge $100 premium when doubling up on flash from 16-64 GBs.

Apple is in the volume business. It shares hardware across 4 product lines and sales more A chip based hardware during a holiday quarter than MS or Sony can muster over a generation with the 360 or PS3. That's one christmas season versus 7-8 years. One whole year represent more units than the 360 and PS3 combined over their lifetime at price points more inline with the PS3's launch prices for its most dominant products. All with 45% gross and 35% profit margins.

All apple does is extract most of the cost and profit of its hardware and services up front, while MS and Sony does it over time.

True but I'm sure the console makers would love to have smart phone and iPad volumes.

But developers set the prices of the apps, not Apple or Google.

I think one reason prices are low is the competition. If you price a tower defense game at $5, it won't get noticed because there are dozens which are free or 99 cents.

For whatever reason, people are willing to pay $500 for iPads and even more for flagship phones. So yeah the volumes make it possible to have liberal drm compared to consoles, not to mention anyone can develop apps while you have to have some money to get the dev kit for consoles.

Regardless of the reasons, mobile devices have a lot of cheap content and no usage fees unless you want to use a lot of mobile data. So can the console makers get away with more costly usage fees?

 

[patsu]

I think $60 may be too steep. Not every console game is worth $60.

Hopefully the indie developers will show us the way. I don't really need or want very long games.

 

[JB9861]

Yeah, because so many people bought consoles to play games and streaming apps ended up being a great fringe benefit.

Well that's a poor reflection on companies giving streaming boxes away! A gaming console with an access fee has found success in a market you've been playing around in for 5 years or so. Roku is riding the bench while smart TVs and tablets take over the living room. And even popular gaming consoles will have a sizeable niche out there.

 

[RancidLunchmeat]

No maybe not XB1 version Live but the main features on 360's Live that the PS3 lacked due to technical constraints won't be a problem on the PS4. The likelihood is strong that the PS4 online experience will be very much in line at the very least, with what we received last gen especially considering Plus.

You're were paying for Live so how does PSN Plus act as a barrier, if it provides the same services you are use to paying for? In all likelihood the PS4 with a Plus subscription will be superior in at least a few areas.

Oh, I think we're in agreement. I think the PS4 online services should be able to offer the same experience as 360-Live and perhaps even slightly enhanced. But I think those services are going to come at a price, at that's going to be quite a slap in the face to the PS4 fanboys. I don't think it will matter to the majority of gamers, who either won't pay for those services, or are simply used to the idea that those services come with a cost because of the proliferation of paid Live subscribers.

However, I am skeptical about Sony's ability to actually make good on the vision they showed at the PS4 reveal because they've been unable to do so for PSN up until this point.

And, I don't think the PS4 will be able to offer anything like the One-Live services that MS is rolling out. Their console isn't built from the ground up with those services in mind, and PSN doesn't have nearly the 300,000 servers at their fingertips that MS is reporting to be rolling out.

I think the argument is a stale one, and illogical to boot. All those things that make Live better than PSN and will make One-Live superior to PS4N come at a cost. A large cost. In terms of hardware design, in terms of software interface, in terms of Cloud networking, and in terms of the actual server banks.

Sony can't be offering the same level of complexity (even if they had the technical wherewithal), because they didn't build it into the design of the PS4, and they don't have the network infrastructure. All their machine focuses on is using its hardware for optimizing games.

So it comes down to a decision point for the consumer. Do you want to play games that might look slightly better (because the power difference still isn't there), on a free but befuddling network, or do you want to have the ability to play a game, take a skype call while playing, pause the game, watch a TV show, invite the Skype person into the game when they get home, and continue seamlessly from where you were previously at an additional cost of $60 per year?

MS has been working on Live for more than a decade, and have been working with cloud based consumer products since 1997.

They have a huge head start in this department, it makes sense they should have the superior experience, it's been a company-wide initiative from the start - in order to get their customers on-line for the ultimate goal of selling them services and products with a click of the button.

Sony's PSN seems to be more of a kneejerk reaction to the shock that consumers would actually want these services and be willing to pay for them, and also be willing to pay for digital products that really don't even exist. They're very late to the game, they realize it, and that's why while they are working to improve it, they are focused on other things.

 

[patsu]

Yeah, Sony will need to show their user experience in E3. Would definitely like to see how live streaming/spectating and the general game services work (e.g., party management and community services).

They should keep things simple.

From the recent info about XBL's cloud service, we can infer that MS need a pure VM approach in Xbox One because they need to guard against potential remote attack from the server.

 

[wco81]

I think $60 may be too steep. Not every console game is worth $60.

Hopefully the indie developers will show us the way. I don't really need or want very long games.

I believe the past year, sales were lower than in the previous year. So this generation peaked a couple of years ago.

You see games discounted fairly quickly to $40 so prices aren't holding.

Of course with new generation, they will try to maintain SRP longer, if not outright raise the SRP, as they did back in 2005-06.

Mobile games may be eroding some of the demand for console games, at least at the margins.

 

[wco81]

Yeah, Sony will need to show their user experience in E3. Would definitely like to see how live streaming/spectating and the general game services work (e.g., party management and community services).

They should keep things simple.

Keep it simple and keep it free. If that means no voice chat like XBL, I could care less. Not willing to pay to talk.

Certainly not going to pay to use Netflix or non gaming features which can be used on other devices without some kind of service fee.

 

[Nesh]

The only advantage I remember experiencing with my XBOX Live over my PSN account was better matchmaking and chat.
Other than that I havent experienced anything else that makes me think that once Sony implements a batter matchmaking and party system people will still prefer XBOX Live unless MS adds new important functions and features that werent there before, that will still be absent on the PS4

 

[patsu]

Hmm... the cloud service is not meaningless or useless. MS may need more time for the cloud platform to grow up, but benefits like dedicated server gaming is real.

Keep it simple and keep it free. If that means no voice chat like XBL, I could care less. Not willing to pay to talk.

Certainly not going to pay to use Netflix or non gaming features which can be used on other devices without some kind of service fee.

I do see dedicated MP gaming (vs P2P gaming) as real value to core gamers. It can make a real difference to the game. e.g., Dark Souls' co-op worse than Demon's Souls co-op. It would be good if both Sony and MS support dedicated gaming nextgen. Personally, I will probably play P2P (for free !) for most games, but I am happy to hear that Dark Souls 2 will use dedicated servers.

EDIT: It also looks like Microsoft has been prepping this for years. The entire concept reminds me of Kutaragi's Cell Everywhere (or Cell cloud) vision. Even the APU's ESRAM reminds me of Cell's LocalStore in terms of programming model. Kutaragi also bragged about running multiple OSses on top of Cell's Hypervisor. Perhaps they were anticipating Sony's move, but Cerny changed lane and pursued a different goal.

It's good to see 2 different technical approaches nonetheless. I wonder if some developers, like Epic, will become specialized cloud service providers.

 

[dobwal]

True but I'm sure the console makers would love to have smart phone and iPad volumes.

But developers set the prices of the apps, not Apple or Google.

I think one reason prices are low is the competition. If you price a tower defense game at $5, it won't get noticed because there are dozens which are free or 99 cents.

For whatever reason, people are willing to pay $500 for iPads and even more for flagship phones. So yeah the volumes make it possible to have liberal drm compared to consoles, not to mention anyone can develop apps while you have to have some money to get the dev kit for consoles.

Regardless of the reasons, mobile devices have a lot of cheap content and no usage fees unless you want to use a lot of mobile data. So can the console makers get away with more costly usage fees?

Profits off hardware is so good that Apple doesn't emphasis profit generation on the software side. A whole app store full of 99c/free to play apps doesn't bother apple as it only probably has to generate enough profits to pay for the cost of the services. It doesn't have to represent a profit center like software does on a console.

Xbox Live is probably going to offer some form of media content tied to subs. A NetFlix like service while trying to offer exclusive compelling content on top seems likely. There has been rumors of MS bringing Heroes back and MS has already showed us the Halo TV series. There is actually a lot of content available thats basically untapped. MS could simply produce movies and TV series around franchises gamers already know.

Would you not be interested in Metal Gear based TV series especially if it was well produced, had good writing and was well acted. How about a COD, BF, Graw or Rainbow 6 thats similar to Cinemax's Strike Back or a GTA thats mimicks "The Wire" in terms of delivery? How about a Bethseda version of Game of Thrones? How about animes based on video game franchises like Borderlands, Far Cry, Resident Evil or Fallout.

Thats basically all conjecture as we don't know what MS will actually offer, but there are a ton of possibilities that may or may not be able to encourage a rather significant portion of XB1 potential userbase to pony up extra usage fees.

 

[patsu]

Speaking of nextgen services, it's high time for Sony and Microsoft to introduce a marketplace for users to trade games and virtual items. Give a cut of the game resale back to the people who labored for them.

It should be done before enforcing the used game DRM.

 

[RancidLunchmeat]

Keep it simple and keep it free. If that means no voice chat like XBL, I could care less. Not willing to pay to talk.

Hasn't Sony already promised to do more than that? If they deliver on what they've promised, they won't do it for free.

Now maybe, if they're smart, they'll put all the Live-like features behind a paywall and still allow free multiplayer gaming.

I'm sure that would make the "gamers" happy.

 

[RancidLunchmeat]

Yeah, Sony will need to show their user experience in E3. Would definitely like to see how live streaming/spectating and the general game services work (e.g., party management and community services).

Wow, for a second there I thought I was the only one who remembered that Sony didn't actually show anything at their "reveal", while MS actually demoed the features in real time.

I think lots of these "gamers" that are flipping out over MS's showcase should go back and re-watch Sony's. Because I just did and they said interesting things like: "We have a dedicated second processor that is always on so it can update games while you are doing other things.. OR EVEN WHEN IT'S TURNED OFF."

Hmm.. How's it going to do that if it isn't always on and always connected?

They also made comments about the social networking features and camera being always on as well.

You guys really need to go re-watch their presentation. You skip the CGI, not-in-game footage of the games. That should reduce the time of the reveal substantially.

Oh, and the best part? How they touted the ability to pause a game and then instantly resume play without having to reload the game!

Sounds a little weak compared to the One's capabilities in that arena now, doesn't it? But right, the "entertainment" aspects of the One aren't going to make gameplay better. "Gamers" would much rather have to leave the PS4 on pause and then be able to resume play, instead of pausing the game or actually multitasking like the One offers.

The one interesting difference was Sony's repeated statement of making the "gamer" the focus of the universe and mobile devices and taking the experience beyond the living room, while MS did the exact opposite. That the living room is the center of everything, including the gaming experience.

That contrast was certainly apparent.

Then again, one company demonstrated their vision and the other simply talked about it. I think Sony has a lot to show for at E3. Not just the console, not just playable games, but also their new network and social capabilities. And after the One reveal, I think everybody is going to look at their network and social capabilities and respond with a "Uhhhh... so what? The One can do all that plus all this other stuff at the same time."

Seriously guys, go watch the Sony reveal again.

 

[DJ12]

Real time? Thought it was already confirmed that nothing was really running on real hardware on stage.

Where as the sony conference had gameplay on stage in the form of killzone.

 

[RancidLunchmeat]

The only thing I've read that stated it wasn't real time was an IGN Middle East website, quoting some guy on Twitter (who may or may not be important/reliable, I just don't know who he is) saying that the guy's hand was in his pocket while issuing commands.

So, unless you have a better link, no. I wouldn't say that it's been confirmed.

But if it wasn't done in real time, it certainly would be disappointing. Then again, I'm sure Wired or any number of legitimate news outlets that got to demo the unit after the reveal would have mentioned that it wasn't as smooth or as quick as the reveal presentation if that were the case.

Just like I'm sure that if Wired or any number of legitimate news outlets that got to demo the PS4 after the reveal thought that Killzone didn't look as good as it did in the reveal they would have mentioned it as well in their articles..... Oh, wait.

 

[Bagel seed]

I haven't heard of any live demoing for press after the event. Pretty sure the only real time footage was COD Ghosts.

 

[dagamer]

Wow, for a second there I thought I was the only one who remembered that Sony didn't actually show anything at their "reveal", while MS actually demoed the features in real time.

I think lots of these "gamers" that are flipping out over MS's showcase should go back and re-watch Sony's. Because I just did and they said interesting things like: "We have a dedicated second processor that is always on so it can update games while you are doing other things.. OR EVEN WHEN IT'S TURNED OFF."

Hmm.. How's it going to do that if it isn't always on and always connected?

They also made comments about the social networking features and camera being always on as well.

You guys really need to go re-watch their presentation. You skip the CGI, not-in-game footage of the games. That should reduce the time of the reveal substantially.

Oh, and the best part? How they touted the ability to pause a game and then instantly resume play without having to reload the game!

Sounds a little weak compared to the One's capabilities in that arena now, doesn't it? But right, the "entertainment" aspects of the One aren't going to make gameplay better. "Gamers" would much rather have to leave the PS4 on pause and then be able to resume play, instead of pausing the game or actually multitasking like the One offers.

The one interesting difference was Sony's repeated statement of making the "gamer" the focus of the universe and mobile devices and taking the experience beyond the living room, while MS did the exact opposite. That the living room is the center of everything, including the gaming experience.

That contrast was certainly apparent.

Then again, one company demonstrated their vision and the other simply talked about it. I think Sony has a lot to show for at E3. Not just the console, not just playable games, but also their new network and social capabilities. And after the One reveal, I think everybody is going to look at their network and social capabilities and respond with a "Uhhhh... so what? The One can do all that plus all this other stuff at the same time."

Seriously guys, go watch the Sony reveal again.

What's worse is how much poo pooing everyone was doing around the Sony Press Event in February from not showing the box. The Internet is fickle.