Units sure.
Profitability and not taking the company under, most definitely Microsoft.
All purpose Sales and Sales Rumours and Anecdotes [2019 Edition]
- Thread starter AlNom
- Start date
Units sure.
Profitability and not taking the company under, most definitely Microsoft.
I suppose you can look at it that way and that's probably the only way you can look at it for the moment. I just think it proves there isn't that much demand for streaming games yet or Sony didn't really invest much in the infrastructure or marketing for it because they didn't think it was ready yet and they probably would know.
They have ramped up there investment though recently in that they have expanded. So maybe they feel the time is right now with all the big boys getting in on it so there's going to be a lot of awareness put out there with all the marketing that Microsoft and Google will be doing.
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And what's their source for that number? Also VGChartz, like the software numbers?
VGChartz has the 360 at 85.8M, so maybe?
Better late than never... 
Microsoft Cloud Strength Drives Third Quarter Results
REDMOND, Wash. — April 24, 2019 — Microsoft Corp. today announced the following results for the quarter ended March 31, 2019, as compared to the corresponding period of last fiscal year:
· Revenue was $30.6 billion and increased 14%
· Operating income was $10.3 billion and increased 25%
· Net income was $8.8 billion and increased 19%
· Diluted earnings per share was $1.14 and increased 20%
Revenue in More Personal Computing was $10.7 billion and increased 8% (up 9% in constant currency), with the following business highlights:
· Windows OEM revenue increased 9% (up 9% in constant currency)
· Windows Commercial products and cloud services revenue increased 18% (up 20% in constant currency)
· Surface revenue increased 21% (up 25% in constant currency)
· Gaming revenue increased 5% (up 7% in constant currency) driven by Xbox software and services revenue growth of 12% (up 15% in constant currency)
· Search advertising revenue excluding traffic acquisition costs increased 12% (up 14% in constant currency)
Microsoft Cloud Strength Drives Third Quarter Results
REDMOND, Wash. — April 24, 2019 — Microsoft Corp. today announced the following results for the quarter ended March 31, 2019, as compared to the corresponding period of last fiscal year:
· Revenue was $30.6 billion and increased 14%
· Operating income was $10.3 billion and increased 25%
· Net income was $8.8 billion and increased 19%
· Diluted earnings per share was $1.14 and increased 20%
Revenue in More Personal Computing was $10.7 billion and increased 8% (up 9% in constant currency), with the following business highlights:
· Windows OEM revenue increased 9% (up 9% in constant currency)
· Windows Commercial products and cloud services revenue increased 18% (up 20% in constant currency)
· Surface revenue increased 21% (up 25% in constant currency)
· Gaming revenue increased 5% (up 7% in constant currency) driven by Xbox software and services revenue growth of 12% (up 15% in constant currency)
· Search advertising revenue excluding traffic acquisition costs increased 12% (up 14% in constant currency)
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Deleted member 11852
Guest
Not trying to lose money but being willing to gamble on long term gain over short term loss. What will separate next gen from this gen is the allure of carrying forward your current games, which will certainly reduce the number of folks jumping to the other platform (Xbox to PlayStation, or PlayStation to Xbox) because nobody wants to start their game library over.
As significant market leader, Sony may be willing to take a bigger loss to further cement that lead.
Subscription is $100 a year ($20 per month). If that's 700k subscribers, that's $70 million a year. Depends how much running costs are.
Also, compare it to the other streaming services like OnLive (sold to Sony) and nVidia GeforceNow (currently 300k users?)...basically Sony are the first to have made something meaningful of game streaming. When announced by OnLive, we were all dubious there was any market for game streaming, and we still all are, so the fact Sony have managed to find a sizeable number of users is...a sort of success notable that no-one else has managed.
Silent_Buddha
Legend
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Not that simple. Let's say just for arguments sake that they make 10 USD profit per PS4 sold. That's probably on the low side, but we'll go with that.
Let's then say they were selling them at cost. That means that would be 984 million less USD they made. Basically 1 billion less USD.
They have made 3.84 billion USD in profits so far. That would reduce that to ~2.85 billion USD.
So how much of a loss should they take off to have made the PS4 more attractive for this generation?
Imagine if the PS4 had always been 50 USD less than what it was during its LTD? ~4.925 billion USD would have been the cost to Sony. That would have made it almost as unprofitable as the PS3, if it wasn't able to then generate an additional 5+ billion USD in software profits (and that number grows for each additional console sold). Are there even that many potential gamers (for a 50 USD cheaper PS4) interested in PS4 gaming to generate enough additional software revenue to gain that much profit?
PS1 and PS2 used a loss leader strategy and that's part of the reasons those generations didn't generate as much profit as the PS4 generation. Although I'm not sure if the numbers being thrown about in the past couple pages include currency inflation.
IMO, Sony got almost the perfect balance of console cost and console price this generation which was a significant contributor to them doing so well. That along with the increased importance of add-on (DLC, lootboxes, etc.) digital sales for both first and third party games.
Regards,
SB
Not that simple. Let's say just for arguments sake that they make 10 USD profit per PS4 sold. That's probably on the low side, but we'll go with that.
Let's then say they were selling them at cost. That means that would be 984 million less USD they made. Basically 1 billion less USD.
They have made 3.84 billion USD in profits so far. That would reduce that to ~2.85 billion USD.
So how much of a loss should they take off to have made the PS4 more attractive for this generation?
- 10 USD means yet another ~984 million USD lost.
- 20 USD means yet another ~1.968 billion USD lost.
- 30 USD means yet another -2.952 billion USD lost.
- Etc.
Imagine if the PS4 had always been 50 USD less than what it was during its LTD? ~4.925 billion USD would have been the cost to Sony. That would have made it almost as unprofitable as the PS3, if it wasn't able to then generate an additional 5+ billion USD in software profits (and that number grows for each additional console sold). Are there even that many potential gamers (for a 50 USD cheaper PS4) interested in PS4 gaming to generate enough additional software revenue to gain that much profit?
PS1 and PS2 used a loss leader strategy and that's part of the reasons those generations didn't generate as much profit as the PS4 generation. Although I'm not sure if the numbers being thrown about in the past couple pages include currency inflation.
IMO, Sony got almost the perfect balance of console cost and console price this generation which was a significant contributor to them doing so well. That along with the increased importance of add-on (DLC, lootboxes, etc.) digital sales for both first and third party games.
Regards,
SB
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They obviously would know how much they can cost reduce over the lifetime of the console. No one in there right mind would expect them to make a loss over the long run.
The point I was trying to make is that console have always been loss leaders at launch and I feel there is even more reason now for that business strategy. Obviously it will be within reason, if they can't cost reduce much over the first year they won't take a big hit. I feel the one area where there's potential is the NAND Flash storage, might be pretty expensive to begin with.
True, but they've done a lousy job of advertising that. It was introduced quietly to a streaming service without anyone knowing. Maybe we should discuss Sony's marketing strategy?
Those other consoles didn't have $50 a year subscriptions though. So going back to your theoretical maths, for a $10 loss on the hardware, that's $1 billion lost for each unit, but then $25 gained on subscriptions (50% adoption rate of a $50 fee) every year, so over five years, $12.5 billion. That extra income is taken over time, so you want more people buying earlier to get more subscriptions and sales.
The maths XBat is presenting needs consideration of the sub revenue to hardware losses to find the sweet spot. If you ignore that, all hardware losses are bad, but factoring that in, if a certain amount of loss leading can result in a certain significant increase in platform growth, that's a significant net win.
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Deleted member 11852
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It is that simple, it's called loss leading economics and this has beenSony's economic model in consoles since the original PlayStation.
If Sony took a $30 product loss on every single one of the the ~95m PS4 unit sales over the past six years it would have cost Sony almost $3Bn at this point. Do you know how much revenue Sony took in 2018 (one year) for PSN services and subscriptions (PS+, movies, games, music, micro transactions - everything not hardware)? It was over $12Bn.
For four generations Sony has launched consoles at a high price and taking a loss initially. Overtime they cost-reduced until eventually selling at much lower prices at an actual profit. What used to inform cost-decisions was adapting to attach rates, e.g. average number of games per user but now attach is much wider than games because Sony take a cut of all transactions that happen in their ecosystem - games and their microtransations (the juggernaut that is Fortnite etc), movies, TV, music and other subscriptions that renew through the PlayStation app etc. This is a much larger revenue stream than hardware.
Up until now new consoles either didn't have this ecosystem, or didn't have it to this extent we've seen this generation. What also separates the launch of current and previous generations of consoles to what comes next is this generally meant building a new customer base. Next generation there is a much greater likelihood that folks owning a PlayStation or Xbox will pick that again if they are invested in the ecosystem because that carries forward. This gives Sony and Microsoft the option to adjust the pricing curve out of the gate. Instead of pricing new consoles high with a loss, price lower with a greater loss, then reduce those losses with traditional cost-cutting measures and get them under control before dropping the price again. You can afford to do this when you have a massive ecosystem-driven revenue stream to support it - which Sony do thanks to PS4's success.
True, but they've done a lousy job of advertising that. It was introduced quietly to a streaming service without anyone knowing. Maybe we should discuss Sony's marketing strategy?
I was listening to finnish gaming podcast last week. Sony psnow sponsors them and there was ad in the podcast for psnow. Maybe sony is marketing but it's very targeted to specific niches which are most likely to reach people interested of psnow.
Silent_Buddha
Legend
Of that 12 billion USD, how much was profit? Yes, 30 USD decrease in the cost of each PS4 only reduces total LTD revenue (small drop compared to that 12 billion USD for just one segment in one FY) by ~3 billion USD. But that reduces not only their revenue but their profit.
Considering they've made total profits of 3.84 billion USD LTD for the PS4, how much more revenue would that generate? And more importantly than that would it allow them to generate more additional profit than the 3 billion USD loss on hardware sales?
Obviously the relationship is unlikely to be linear and this will be grossly inaccurate...
- 98.4 million consoles at current console price = 3.84 billion USD in profit.
- 98.4 million consoles at 30 less USD for the life of the console = 840 million USD in profit.
- Linear scaling would require more than 400 million consoles to be sold at a lifetime cost reduction of 30 USD.
- That of course assumes that software tie ratio, service and sales subscriptions also scaled similarly to the first 98.4 million.
- It's unlikely that these ratios would increase significantly with a massive surge in userbase, especially considering you're lowering the cost in order to attract more cost conscious consumers.
- In that case, it may be that you'd need to sell 500 million consoles in order to generate the same amount of profit as 98.4 million consoles at the current LTD selling price.
- Again this is gross generalization (economies of scale may help somewhat, for example), but even if off by a factor of 2-3, should illustrate that simply reducing cost to increase user base in order to generate more profit isn't so simple.
- Would a person that spent 299 USD on a console spend more money on software and services if they bought it at 269 USD instead?
- Would a person that would only buy a console at 269 USD but not 299 USD spend more money on software and services than a person that was willing to spend 299 USD on a cosole?
- Generalize that to the various price points that PS4 has had during it's LTD. How many more people would be willing to spend more money on software and services if the console was consistently 30 USD less?
- Would the PS4 at 30 USD less over its lifetime have led to 1.25x, 1.5x, 1.75x, 2.0x, or more sales?
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Also one related piece of data. 2018 featured far less hardware price promotions. As a result G&NS revenue increased a modest 18.9%. Profit on the other hand increased a massive 75.3%. That was with a modest decrease in hardware revenue. Increased sales due to price cuts may have increased hardware revenue, but would have reduced profits for the category.
Regards,
SB
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I don't argue against any of this, though it will be somewhat counterbalanced by the need to offer retailers greater margins due to these same changes. I'm more arguing it won't have as dramatic an impact as had been speculated.
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Deleted member 11852
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22.5% for FY2018. This doesn't sound like much but like Apple (and presumably Microsoft), much of this is zero-effort skimming a percentage of transactions through their ecosystem.
You seen focussed on an eternal static loss, which isn't what I said. Selling consoles at all is a means to an end; to get people int the ecosystem where it is then easier to profit from revenue skimming. Ideally you want to be able to sell all of the consoles you sell, as you manufacture then, at as high a price as you can charge.
At launch there will always be the reliable early adopters for which the day 1 price isn't an issue. In such cases, selling at a loss isn't arguably is something you can hold off on until demand drops off. It could leave a slightly sour taste in the mouth but early adopters are generally used to this.
Sonys financial situation back in 2013 would not have been conducive to this, nor could they be sure that any of the existing PlayStation 3 owners would buy a PlayStation 4. But in the transition to the next consoles you can take your library with you which will a reason not to jump platforms.
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