All purpose Sales and Sales Rumours and Anecdotes [2021 Edition]

[Deleted member 11852]

FWIW Netflik still owes $10-15 billion
https://www.nytimes.com/2021/01/19/business/netflix-earnings-debt.html

Isn't spending borrowed money how most companies operate? Borrowed money is tax deductible. Money in the bank is taxable. At least in the whacky US of A where Netflix is headquartered. So being in debt is financially sounder than being liquid.

You generally want to sideline liquidity or tie it up so you can justify borrowing at low rates.

Does this make sense? Not to me as a European but America is the land of dreams. If those dreams were fuelled by alcohol, cheese, mushrooms and cocaine.

 

[Eolirin]

So Netflix started off profitable and became more profitable when they changed what and how their service operated. So GamePass, not profitable after four years, is not like Netflix.



Nobody is saying Microsoft is bleeding money, all that was said is that it's not profitable. It is the blind notion that GamePass will just become profitable if enough people subscribe I question. Some costs, like server hosting, will not materially increase given Microsoft's these costs now and in the future are likely heavily amortised through Azure, but content licensing will increase proportionately. More subscribers = higher licensing costs. This happened to Netflix and it happened to Amazon to the point where both had to license less and make more.

If Microsoft want to make GamePass profitable, and I assume they do, they need to change something. Like Netflix and Amazon.

I'm sorry, what evidence do you have for license cost increases being exactly proportional with or greater than Game Pass revenue growth? Your entire argument rests on that assumption and I don't think there's any way you can possibly have the information necessary to know that that's the case.

 

[AlphaWolf]

Phil Spencer and others at Microsoft have spoken explicitly about GamePass. We know the score because they've clarified it, as have others like Tom Warren at the Verge who been semi-officially releasing Microsoft-sourced information for a while.

So what? I'm not claiming gamepass is making money.

If you followed Netflix at all you would know the world wasn't all bullish on their venture into streaming either.

 

[Eolirin]

I also don't think xcloud will help gamepass get more subs.

$10-$15 a month is already a hard sell among the gamers (for different reasons). I couldn't imagine how the casual gamers would be willing to sub when their f2p phone games are enough for their casual entertainment.

xCloud is already helping them get more subs in South Korea, from people who do not and will not own consoles. But it's going to be a very regional thing; the South Korean market is almost uniquely suited to an xCloud sub play. They're used to renting time at PC cafes to play games, and they've got a fantastic internet and mobile infrastructure.

It's definitely not going to get them casual gamers at this point in time though.

It's more about expanding the surface area for Xbox right now. Making the service device agnostic. The pay off for that won't come for years.

 

[Johnny Awesome]

We've been hearing the "MS doesn't make money on Xbox, therefore they'll bail soon" argument for about 20 years now. Now it's the "MS can't make money on GP" argument.

Now who's the brick wall?

I predict that MS sinks another $10+ billion into content before they even smell a profit on GP. Their goal is to make an irresistible service and they are half-way there.

Certainly almost no Xbox owner will be without GP at some point within 5 years and I think people will be shocked at how many PS fans pick up an XSS for $200 at some point just for GP, not to mention the PC side and xCloud.

IMO it's all adding up to 100+ million full paying subscribers by 2030.

 

[Deleted member 11852]

I'm sorry, what evidence do you have for license cost increases being exactly proportional with or greater than Game Pass revenue growth? Your entire argument rests on that assumption and I don't think there's any way you can possibly have the information necessary to know that that's the case.

Firstly, I never claimed costs would be greater with "revenue growth", I said number of subscribers. This divorces the number of people actually subscribed to GamePass from what they may (or may not) actually pay Microsoft. E.g. Rewards, cheap GamePass subscriptions.

But in terms of data to support my posts, Eurogamer did an in-depth feature on the profitability of GamePass in February and spoke to Microsoft's Ben Decker (Head of Gaming Services marketing at Xbox) and Sarah Bond (Vice President of Gaming Ecosystems at Xbox) as well as number of developers and publishers in confidence who confirmed the monetary recuperation of their games in GamePass. The more subscribers, the more downloads, the more downloads, the more "bonuses" (licensing costs).

So what? I'm not claiming gamepass is making money. If you followed Netflix at all you would know the world wasn't all bullish on their venture into streaming either.

What do you mean "so what?'. You introduced the comparison with Netflix. I don't know what Netflix's business model has to do with GamePass at all. TV show and movie production and game production are very different ecosystems with very different economic structures because streaming TV and movies has a very low barrier to entry and a much larger global consumption market.

We've been hearing the "MS doesn't make money on Xbox, therefore they'll bail soon" argument for about 20 years now. Now it's the "MS can't make money on GP" argument.

Dude, you seriously need to quit with this. Nobody is saying MS can't make money with GamePass but some folks are asking how Microsoft will transform a non-profitable business to a profitable business. Please apply some critical thinking here, questioning things isn't opposing them and dismissing them. It's just asking questions.

Asking questions isn't bad, evil, dismissive or combative. Fundamentally, accepting statements without question is contrary to how I was educated.

 

[Johnny Awesome]

It's fine to ask questions, but there's no point in debating with someone who can't see the parallels between Netflix and GamePass.

I'm ok agreeing to disagree though DSoup. I like you and you add a lot to the discussion around here.

 

[Deleted member 11852]

It's fine to ask questions, but there's no point in debating with someone who can't see the parallels between Netflix and GamePass.

What are the technical and economic parallels between GamePass and Netflix?

Netflix is available on pretty much every platform with a screen in the world. There are 1,000x as many TV and movies produced for every game, in a much shorter timeframe. The differences vastly outweigh the similarities.

 

[BRiT]

No GamePass non-game discussion would be complete without breakdown article like this: https://xboxera.com/2021/04/23/xbox-game-pass-is-microsoft-on-track-to-be-the-netflix-of-games/

 

[eastmen]

@DSoup I’d bail mate, I did for my sanity...I now talk to brick walls and get movement on their position.



I’m going to reply one last time.

1) yes I did but you ignore me or twist what I say or change the argument
2) it’s a higher % markup on RRP - the same reason how we know demand for PS5 is higher than XSX that you chose to ignore

That’s it now, I’m out for my sanity.

So again

1) So what is the answer. Yes they are making more disc editions because it makes them more or looses them less. or because disc edition is more popular ?

2) I'd love to see the study done on pricing for me to see this . I go to ebay and search for ps5 and put show me sold and There are more disc edition units but I see non bundles all selling for $600-900 and some bundles going for 900+

For May 29th the most expensive Ps5 disk version non bundle I have found sold is $920 and the highest sold digital was $850. So it was less than the $100 price difference. For that one day may 29th. I did however see a bunch of disk and digital going for a lot less. The lowest Digital sold was $125 shipping from mexico. Dunno what that was about but after that there was a $630 digital and a $650 bluray edition.

I just don't see what you see. About the only thing I really see is the price of the ps5 scalped is coming down for both models and there are almost 5-1 listings in favor of the disc edition. Oh and if your willing to buy a ps5 from another country its cheaper

 

[eastmen]

xCloud is already helping them get more subs in South Korea, from people who do not and will not own consoles. But it's going to be a very regional thing; the South Korean market is almost uniquely suited to an xCloud sub play. They're used to renting time at PC cafes to play games, and they've got a fantastic internet and mobile infrastructure.

It's definitely not going to get them casual gamers at this point in time though.

It's more about expanding the surface area for Xbox right now. Making the service device agnostic. The pay off for that won't come for years.

I wouldn't be surprised if even the S makes headway in SK. Its small and cheap. I already sent one to a friend and at the $225 price point I got it for he loved it. Its his second console (first being a switch)

 

[Deleted member 11852]

No GamePass non-game discussion would be complete without breakdown article like this: https://xboxera.com/2021/04/23/xbox-game-pass-is-microsoft-on-track-to-be-the-netflix-of-games/

Whilst an interesting recap on where GamePass has come from inception, it does not address any of the economic considerations. I've read similar narratives addressing PS Now and how did that work out? ¯\_(ツ)_/¯.

 

[BRiT]

I've read similar narratives addressing PS Now and how did that work out

You mean because Sony doesn't seem to be pushing it or investing in it at the same levels?

 

[zed]

Isn't spending borrowed money how most companies operate? Borrowed money is tax deductible. Money in the bank is taxable. At least in the whacky US of A where Netflix is headquartered. So being in debt is financially sounder than being liquid.

Thats valid in other countries as well.
The thing is this 10-15 billion dollars netflix still has to payback with interest, thus even after 23 years still Netflix has not broken even, perhaps it breaks even ~2030, Im sure they will announce it when it happens

 

[Deleted member 11852]

You mean because Sony doesn't seem to be pushing it or investing in it at the same levels?

If you have reliably-and-sourced information on how much Sony and Microsoft are investing in their respective services, I would be very interested in seeing it.

For what it's worth, I definitely do not think (because there is zero information to suggest) that Sony are investing billions of dollars into PS Now. Similarly, I don't think investing billions of dollars into a venture is any guarantee of success. Look at Windows Phone OS. Sony's investment in Cell, Apple's investment in many disastrous projects, Google's investment in many disastrous projects (simply too many to list), HP and Cisco's investment in many disastrous projects.

It comes down to bottom lines. What investments result in what net profits.

Thats valid in other countries as well.
The thing is this 10-15 billion dollars netflix still has to payback with interest, thus even after 23 years still Netflix has not broken even, perhaps it breaks even ~2030, Im sure they will announce it when it happens

If you believe that accumulating debit too avoid tax is not a mainstream investment tactic and separate from net income then how do you explain Apple's $112BN of debt? Or Microsoft's $59Bn of debt? When you have money, debt is not the same as when you are poor. Debt is how you pay less tax

Netflix have, since 2003, spent less than than they spent (profits vs. debt).

 

[goonergaz]

So again

1) So what is the answer. Yes they are making more disc editions because it makes them more or looses them less. or because disc edition is more popular ?

2) I'd love to see the study done on pricing for me to see this . I go to ebay and search for ps5 and put show me sold and There are more disc edition units but I see non bundles all selling for $600-900 and some bundles going for 900+

For May 29th the most expensive Ps5 disk version non bundle I have found sold is $920 and the highest sold digital was $850. So it was less than the $100 price difference. For that one day may 29th. I did however see a bunch of disk and digital going for a lot less. The lowest Digital sold was $125 shipping from mexico. Dunno what that was about but after that there was a $630 digital and a $650 bluray edition.

I just don't see what you see. About the only thing I really see is the price of the ps5 scalped is coming down for both models and there are almost 5-1 listings in favor of the disc edition. Oh and if your willing to buy a ps5 from another country its cheaper

*Sigh* very last time

1) It's not a simple 'yes' or 'no' - profit comes in many ways - look at MS with GPU - losing money, but their long term plan will be to make money I'm fairly certain! Sony need to not lose sales to the opposition, the way to do this is to get the correct supply and demand with price to match. They have a team a experts who would have guided them to the current strategy - they didn't just put a finger in the air, roll a dice or say 'disk version is the smaller loss leader let's go with that' or anything else...it's a mix of all things that lead to where we are...but the bottom line (as it were) is to not lose sales by producing the right quantities of hardware in the predicted ratio.

2) You really shouldn't keep just random sampling but what's good for the goose...

Last 2 PS5 disk consoles on UK eBay sold for average ~35% markup
Last 2 PS5 digital consoles on UK eBay sold for average ~25% markup

UK eBay has disk version available 2:1

= demand is higher for disk version.

I'm stepping out for good now, just agree to disagree for crying out loud...I mean, where is the proof that people who are price sensitive are buying more digitally in a long term sustainable way (ie not caused by lockdown)? I'm still waiting even though I've answered all your questions with evidence where appropriate, not just some bizarre outliner tale.

 

[eastmen]

*Sigh* very last time

1) It's not a simple 'yes' or 'no' - profit comes in many ways - look at MS with GPU - losing money, but their long term plan will be to make money I'm fairly certain! Sony need to not lose sales to the opposition, the way to do this is to get the correct supply and demand with price to match. They have a team a experts who would have guided them to the current strategy - they didn't just put a finger in the air, roll a dice or say 'disk version is the smaller loss leader let's go with that' or anything else...it's a mix of all things that lead to where we are...but the bottom line (as it were) is to not lose sales by producing the right quantities of hardware in the predicted ratio.

2) You really shouldn't keep just random sampling but what's good for the goose...

Last 2 PS5 disk consoles on UK eBay sold for average ~35% markup
Last 2 PS5 digital consoles on UK eBay sold for average ~25% markup

UK eBay has disk version available 2:1

= demand is higher for disk version.

I'm stepping out for good now, just agree to disagree for crying out loud...I mean, where is the proof that people who are price sensitive are buying more digitally in a long term sustainable way (ie not caused by lockdown)? I'm still waiting even though I've answered all your questions with evidence where appropriate, not just some bizarre outliner tale.

1) again are you going to sell more of a model that looses you more money up front or one that looses less up front or even makes you a profit.

Right now sony is supply limited and the parts that are supply limited are not the casing or bluray player. But the bluray models sell for $100 more and do not cost $100 more to produce. Switching over to digital versions of the console will not create more supply but will only decrease the profits or increase the losses.

Its why sony is producing and selling more disc based systems.

2) I didn't do any random sampling. I looked at USA ebay listings from May 29th which is today for all systems sold. Those were the highest prices. The ps5 digital is $400 and the ps5 disc is $500.

 

[Deleted member 11852]

1) again are you going to sell more of a model that looses you more money up front or one that looses less up front or even makes you a profit.

This is not true. Nintendo sold more Switch consoles (at profit) in the same period after launch than Microsoft or Sony sold Xbox One or PS4 consoles (at a loss).

 

[Eolirin]

This is not true. Nintendo sold more Switch consoles (at profit) in the same period after launch than Microsoft or Sony sold Xbox One or PS4 consoles (at a loss).

I think you misread what he wrote there.

He's saying that it would make sense for Sony to prioritize manufacture of disk drive ps5s over digital only ps5s given that they're supply limited on silicon components and cannot meet demand generally.

 

[Eolirin]

Firstly, I never claimed costs would be greater with "revenue growth", I said number of subscribers. This divorces the number of people actually subscribed to GamePass from what they may (or may not) actually pay Microsoft. E.g. Rewards, cheap GamePass subscriptions.

But in terms of data to support my posts, Eurogamer did an in-depth feature on the profitability of GamePass in February and spoke to Microsoft's Ben Decker (Head of Gaming Services marketing at Xbox) and Sarah Bond (Vice President of Gaming Ecosystems at Xbox) as well as number of developers and publishers in confidence who confirmed the monetary recuperation of their games in GamePass. The more subscribers, the more downloads, the more downloads, the more "bonuses" (licensing costs).

Licensing costs will go up with subscribers, as will revenue, and it's the relative rate of those increases that matter.

You were asserting they'd need to change how they handle the service because the rising licensing costs would scale in proportion to sub increases, which implies that you think that the revenue increases driven by more subscribers would not be able to keep pace with those rising costs.

That's only true if those costs do in fact scale linearly (or faster) with the revenue increases. If they scale slower than revenue does, then that doesn't happen. If it's slower, then they really do just need enough subs and the only question is can they get enough subs.

This is something you've expressed skepticism about, because you've talked about not buying the argument that they will become profitable just by growing large enough. But the only way that makes sense is if we take for granted that the licensing costs grow at a rate that puts that break even point out of reach or makes it outright impossible. There's nothing to support that though. It's pure speculation on your part. I've previously highlighted a number of reasons why licensing cost growth may be much slower than with something like Netflix even. Not even taking into account the shift to a heavier first party mix.

And that article doesn't support what you're asserting around the sustainability of cost. It implies quite the opposite.

That licensing costs will go up is not in question though. That just really doesn't matter by itself. It only matters in the context of relative revenue growth.