All purpose sales and sales rumors/anecdotes thread next gen+

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DSoup said:
There's a difference between cutting staff becuase you can't afford to pay them and cutting staff becuase they are surplus to requirements and I don't think there was any suggestion of the former. Those hideous losses aside, Sony has a ton of liquid assets which is why they were able to secure loans and operate for years in the red. At no point were people sent home without pay. Redundancy packages were, apparantly, quite good. That's not indicative of a company without money. Nor are PlayStation branded screws that most PS4 owners will never see ;)
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I did specify that in the very next sentence! You only ready the first sentences in all my posts, don't you. I'm shocked and horrified. I can't believe this.
 
Rumor per GAF

PSA GermanGAF: Xbox One at Amazon at "heavily" reduced price this weekend
______________________________________________
Begins at 6pm GMT+1 and ends on Sunday.

Wochenend-Angebot: Vom 6.3.2015 18:00 Uhr bis zum 8.3.2015 ist die Xbox One in weiß (inkl. Sunset Overdrive) und schwarz (Standard) stark reduziert

DE_VG_MSGP5_HQP._SL500_V327819443_.jpg


Rumor has it:
 
That's about 50% off the UK price, less than 2 hours to go. I shall eagerly wait to see if someone would go and lie on the internet.
 
If this turns out to be true... a) a serious sign that XB1 isn't doing well in the UK or b) Amazon UK is sitting on a lot of unsold stock.

Is there any XB1 UK sales data (sold through)?

Edit: That should be Germany... duh!
 
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If Sony is making a small profit on all PS4 units prior to any cost reductions, I can certainly see them doing a price reduction when they feel the need to push for increased installed base with a lower price of entry.

Ultimately Sony is in the business of profiting from its Playstation business. And much moreso now than in generations prior. That much does not need to be said. What does however need to be established is that Sony's game business does not need to generate the majority of its revenue from console sales alone (it certainly doesn't right now).

Sony will drop price on the PS4, not because of market pressures like low sales or anything their competitors do, but rather when Sony believes it can generate siginifcantly more profit through sales of games, PS+ subs, media content and HW peripherals, through the additional console sales than the existing profits earned solely on console HW margins alone.

I think some of you forget that the PS4 is not just a product in and of itself. It's a content platform. And the pontential for increased and continued revenue generation for each additional HW sale is likely far more appealing to Sony than the meagre margins they probably skim off the top of existing HW sales.

Sony certianly won't drop the price of the PS4 so that it is selling below cost. I don't think anyone has said or even implied that. But since none of us know how much Sony is currently earning on each box except Sony, Sony is the only one who will be abe to say if and when they'll be able to go lower on the price of entry, in order to make their console accessible to a wider (read: more price conscious) market.

Sony isn't a novice in the console business. I think they know more than any, the value of a HW pricedrop to sell more systems, in order to expand the platform installed based for further content/sub/perhiperal sales.

So to me the only thing that I think is silly nonsense is the premise that Sony will never choose to drop the PS4's price for the sole reason of the box selling really well. There are opportunity costs and many other factors that would cause them to push their console down a pricing curve despite record sales.
 
The only reason to drop the price is if the market shows the current price hinders sales, and the additional sales would be "worth" the loss from a price drop. They certainly have internal metric for this.

Let's say Sony drops the price by $50:

Prediction #1: Next 12 month jump from 14M to 15M consoles, meaning a 700 million dollar loss from the 14 million who would have bought it anyway. Each additional PS4 owner would have cost $700 to Sony. Stupid decision.

Prediction #2: Next 12 months goes from 14M to 21M. Great! About $100 loss per new owner gained who will buy games and ps-plus sub, a dramatic market share increase, it would definitely be worth it. But at the current 399, this is very improbable. There can't be that many people on the fence about the price, or who would buy a competitor's console instead.
 
Prophecy2k said:
Sony will drop price on the PS4, not because of market pressures like low sales or anything their competitors do, but rather when Sony believes it can generate siginifcantly more profit through sales of games, PS+ subs, media content and HW peripherals, through the additional console sales than the existing profits earned solely on console HW margins alone.
Click to expand...

This works if and only if you are able to produce more consoles than there is demand to buy. Currently that doesn't exist.

Example. You can produce 10 million consoles a year. Your cost to produce the console has gone down by 50 USD.
  1. You continue selling at the current price. You are now making 500 million USD extra from hardware sales alone.
  2. You reduce the price by 50 USD. You are making 500 million USD less each year than case 1.

Lets say you can also increase production by another 2 million consoles a year. So 12 million consoles a year with a reduced cost.
  1. You continue selling at the current price. Demand is still higher than ability to produce consoles. You are now making 600 million USD extra from hardware alone.
  2. You reduce the price by 50 USD. Demand is still higher than the ability to produce consoles. You are now making 600 million USD less than case 1.
  3. You continue selling at the current price. Demand is now lower than the ability to produce consoles. You are making at least 500 million USD extra, and you must discount some amount of the extra 2 million consoles to get them to sell. You end up making 500+ million USD extra that year.
  4. You reduce the price by 50 USD. Demand is now lower than the ability to produce consoles. Is that 2 million extra consoles a year generating more than 500 million USD? If not you are still worse off than case [3].
Things don't happen in a vacum.

As long as demand matches or exceeds Sony's ability or willingness to produce consoles, then the decision is easy. Maintain price and make extra much needed profits. Reducing the price does nothing as you do not have the capability of selling more consoles.

You'll note that I put in a key word there. Willingness. It's not just about the ability to contract for more production. Gauging continuing market demand is hard. Especially so if you saturate the market. You'll gain more in the short term by increasing production, but potentially lose in the long term if by doing so you are forced to reduce price too soon. For example. Let's say at the current price point demand for your console worldwide is 15 million. Each year there's new buyers interested in your console at that price point either because they just graduated from college and now have a job, got a raise at work, or just can't wait for a price drop any longer. And let's say that number is 8 million. At a production level of 10 million consoles a year.
  • 1st year you sell 10 million. 5 million excess demand.
  • 2nd year you sell 10 million. 3 million excess demand.
  • 3rd year you sell 10 million. 1 million excess demand.
  • 4th year you sell 9 million. You have a special Holiday or Black Friday sale to sell that excess 1 million. Time for some sales and a reduced price for next year.
  • 5th year you sell 8 million. After that 8 million you reduce price (likely around the holiday season) to sell the rest of your yearly production.
So you got almost 5 years of sales at that high price point. 47 million units sold at X high price. After 5 years, 47 million units sold at X price, 3 million units sold at Y lower price. 50 million install base after 5 years.

Let's say you decide to increase production after that first year to 13 million units since demand remains high.
  • 1st year you sell 10 million. 5 million excess demand.
  • 2nd year you sell 13 million. No excess demand.
  • 3rd year you sell 8 million. You have 5 million in excess stock that can't be sold at that price. You have to have sales and likely price reduce that year.
You ended up with a little more than 3 years of sales at the high price point. Which resulted in a fantastic 2nd year. But you only sold 21 million units at that high price point. After 5 years (lets assume the lower price point continues to have demand greater than production which might not be the case) you've sold 31 million units at X high price and another 31 million units at Y price. Install base is 62 million after 5 years.

So is the 2nd case better or worse than the 1st case? In the first case you enjoyed a large profit margin on hardware for much longer. In the 2nd case you'll end up with more software licensing revenue but with lower profit margins or even potentially taking a loss on some number of that 31 million units at Y price depending on when/if you could price reduce the console. But those cost reductions also means even higher profit margins in the first case.

And that doesn't even factor in the potential, that after the 2nd year in case 2, that you decide to up production capacity again meaning an even bigger potential that you'll need a 3rd price cut before the 5 years is over. But potentially larger install base.

And it doesn't factor in what happens if you greatly increase production, but then demand falls through the floor. Example - Wii.

Decisions like these are not easy ones to make for a CEO or CFO. Case [1] is the conservative and safe play. You cannot lose actual money assuming the demand is there. Case [2] has the potential for more money but also has the potential to lose you money. And there's a good chance that when you do make money it may not be more money than case [1]. And you have to make those decisions without knowing what the actual yearly demand will be. It won't be like our contrived case above where we know what yearly demand is going to be like for initial price point. In the real world, it may be more or it may be less. It will also likely fluctuate wildly on a year by year basis, further complicating things.

What we do know. Sony isn't in the greatest financial shape. They are going to lose a lot of money for the current fiscal year (which ends this month). They will be under pressure to make a profit for the next fiscal year, although they've mitigated that somewhat by continuing to be in "restructuring mode" mode for the next 2 fiscal years. However, they NEED to have their existing profitable divisions continuing to do well and/or improving in order to keep share holders happy.

Knowing that. Do they play it risky? Or do they play it safe? I'd say they continue to play it safe until the company is on better financial footing. It doesn't mean they will. But it's what I would do. It virtually guarantees (as much as can be guaranteed in a fluctuating business environment) that they'll do better YoY not only for the next year but for some years after. The chances of that happening with a riskier strategy goes down for multiple years, but with the risk comes potential for greater reward. I just don't think that Sony are quite in a position yet where they can take the risk.

Sony are likely going to wait until demand is lower than their ability to supply consoles. And they are crossing their fingers that it doesn't happen before they can cost reduce the console.

Regards,
SB
 
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And just something I think that helps illustrate how any sales tracking service that only tracks physical sales is going to be less and less relevant as this generation goes on for games.

If we believe that Amazon US is at all representative of the US buying market.

Titanfall: Digital edition (PC) is the #17 best selling game for 2015 and the #4 best selling game for March so far. If it stays at #4 (unlikely) I doubt it'd show up on NPD whereas it likely would if it was a physical copy.

BF4: Premium Service (PC Online Code) at #7 for March and #59 for 2015 is doing massively better than the than any other BF4 SKU. The PS4 copy is the only other version to chart (#100 march, unranked for 2015) and the PS4 version is cheaper at 28.69 USD versus 39.99 USD for the PC digital. Don't forget to add in sales tax to the PC version as well, but no sales tax for the PS4 version which is sold by a 3rd party.

Before you get on a horse and start thinking I'm just posting this to show that PC > console or whatever, I'm going to say that it's entirely possible that the BF4: Premium Service (PC Online Code) could possibly (unlikely) not be outselling the PS4 online version of BF4. As the top 3 products on the Amazon page are PSN gift cards. Granted, those could be used for just about anything.

But it makes a point. Physical sales trackers are going to become less and less relevant when it comes to software sales.

Case in point. PSN gift cards are massively outselling XBO gift cards. XBO has also beaten PS4 in the US for sales of a few multiplats (looking at Feb.) in NPD which tracks physical sales. But I'd be willing to bet, that if you add in online sales, that PS4 probably beat XBO in almost all multiplat sales. But we'll likely never know as there isn't (as yet) a reliable service that tracks all online game sales. And likely never will be.

Regards,
SB
 
Silent_Buddha said:
...
Case in point. PSN gift cards are massively outselling XBO gift cards. XBO has also beaten PS4 in the US for sales of a few multiplats (looking at Feb.) in NPD which tracks physical sales. But I'd be willing to bet, that if you add in online sales, that PS4 probably beat XBO in almost all multiplat sales. But we'll likely never know as there isn't (as yet) a reliable service that tracks all online game sales. And likely never will be.

Regards,
SB
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Never is a VERY long time. ;)
 
Globalisateur said:
Never is a VERY long time. ;)
Click to expand...

Companies are often (not always) happy to report good numbers. They rarely wish to report bad numbers. When they do, they generally tend to lump a whole lot of things together. For example, Sony with PS2 + PS3 numbers. Microsoft with XBO + X360 numbers. But when things are going good they love to report those numbers. Sony with PS4 only numbers and Microsoft with X360 only numbers. Software publishers are the same way.

Hence it is unlikely we'll ever get good numbers for online sales. Valve, for example, won't report any numbers and heavily discourages (prohibits) anyone selling on Steam from reporting Steam sales numbers for their games.

Regards,
SB
 
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