Business Approach Comparison Sony PS4 and Microsoft Xbox

[-tkf-]

Looking from the outside you'd think that would be the reason, but there's a lot of stuff going on behind the scenes that we're not privy to. More later.

From the outside i see both Sony and Microsoft providing basic features no matter if you are a subscriber or not. They update the console, they keep the shop alive and they patch and update your games.

The extra services on the PS4 includes several VOD services and browser. Sony needs to update those as well. So i can see extra bandwidth there.. but no so sure if that would be expensive. Usually it's small apps.

 

[Blazkowicz]

Anyway, back to the app. It was based on Silverlight initially. Since then it has been rewritten by Netflix themselves a couple of times. Once a HTML5/Webkit app & most recently using their own native platform. Supposedly it makes it easier to update Netflix across multiple platforms. As Shortbread alludes to below, we have no idea if MS is being charged any kind license fee to bring it to their platform. I don't think they are myself. Would be kind of backward if they were no?

To me it's highly likely that MS and Netflix have an agreement.
Hell, putting other people's content behind a paywall would be fishy if the other party had no say.

A new stupid analogy : you walk into a cybercafé and buy a hour of internet access for one euro (or US version, you go at Starbucks, get a drink and use the wifi). Then the guys that work at the place comes up and tell you "oh, if you want to access forum.beyond3D.com you'll have to pay 10 euros". I wonder if Beyond3D could sue. Or what if Windows pops a window up that says "It appears you're trying to run Photoshop. Please send 100 euros to Microsoft to continue"

Then again in the case of something like Windows or Xbox One, you can say it's a matter of software licensing and you can say nearly what the hell you want in a software license.

 

[dobwal]

To me it's highly likely that MS and Netflix have an agreement.
Hell, putting other people's content behind a paywall would be fishy if the other party had no say.

A new stupid analogy : you walk into a cybercafé and buy a hour of internet access for one euro (or US version, you go at Starbucks, get a drink and use the wifi). Then the guys that work at the place comes up and tell you "oh, if you want to access forum.beyond3D.com you'll have to pay 10 euros". I wonder if Beyond3D could sue. Or what if Windows pops a window up that says "It appears you're trying to run Photoshop. Please send 100 euros to Microsoft to continue"

Then again in the case of something like Windows or Xbox One, you can say it's a matter of software licensing and you can say nearly what the hell you want in a software license.

Nope. Netflix already has deals with smaller cable companies that will put the Netflix app directly on the setup box and within the channel guide. I doubt Netflix functionality is not going to be tied to a cable sub in those setups.

And more than likely, any cable deal will come with Netflix providing a portion of the sub revenue, associated with those users, to the cable company.

 

[dobwal]

That's a good question. When MS became the 1st console to stream Netflix they wrote the app themselves. They even paid for exclusivity to get the app. So that's probably why they put it behind the paywall: to offset costs of bringing it to their platform. With the exclusivity gone you have point, why are they still requiring Gold? Might be like you said, because they can. Lot easier to keep it behind a paywall when your subscribers are already used to it. But I agree they are no longer in a position to justify it being behind a paywall anymore.

Anyway, back to the app. It was based on Silverlight initially. Since then it has been rewritten by Netflix themselves a couple of times. Once a HTML5/Webkit app & most recently using their own native platform. Supposedly it makes it easier to update Netflix across multiple platforms. As Shortbread alludes to below, we have no idea if MS is being charged any kind license fee to bring it to their platform. I don't think they are myself. Would be kind of backward if they were no?



As I said above I don't think so, but does Netflix make enough money from subscribers to offset their IT & movie/TV license costs? If not, it might make sense for them to charge manufacturers a license fee. But that's just Netflix. No way every media service on Xbox Live requires a license fee too.

Tommy McClain

Netflix is looking for ubiquity. They are not going to charge a fee. They are looking to spread into cable boxes which mean paying fees to cable companies.

 

[blakjedi]

skype is basically free on everything but Xbox One. I definitely agree with the sentiments supporting exposure of the apps outside of the paywall... MS makes very mysterious decisions. Then when they make the obvious and correct decision (office for iPad) they celebrate...

 

[AzBat]

skype is basically free on everything but Xbox One. I definitely agree with the sentiments supporting exposure of the apps outside of the paywall... MS makes very mysterious decisions. Then when they make the obvious and correct decision (office for iPad) they celebrate...

Agreed. It's possible that it will find its way outside the paywall, but MS are waiting for E3 to announce that. BTW, it also could be that they don't want XB1 being sold just as a Skype system. They wouldn't make any money off game sales & might take a loss on the hardware.

Tommy McClain

 

[blakjedi]

Agreed. It's possible that it will find its way outside the paywall, but MS are waiting for E3 to announce that. BTW, it also could be that they don't want XB1 being sold just as a Skype system. They wouldn't make any money off game sales & might take a loss on the hardware.

Tommy McClain

to some degree they need mindshare more than profit... get the box into peoples houses and the game sales will come...

 

[zed]

skype is basically free on everything but Xbox One.

Huh MS own skype IIRC

It does not compute, basically if you support MS and buy their console you get punished
(just checked)

On 10 May 2011, Microsoft Corporation acquired Skype Communications

So it is owned by MS!
(facepalm gif - this is a good question a journalist should ask, "what are you thinking", it wont happen though since journalism doesnt really exist in gaming/IT stuff)

 

[Scott_Arm]

Looks like Kaz Hirai may be losing his job soon. Maybe did a good job with PS4, as much as executives can be involved with that, but not so much with the rest of the company. They're looking at a $1.2 billion loss for the fiscal year, even after the success of PS4. They just revised their estimates for an additional $200 million loss, bringing them to $1.2 billion. That's the second time they've downgraded, from what I'm reading.

http://www.theglobeandmail.com/repo...mate-by-more-than-two-thirds/article18358129/

If my understanding is correctly, they were around 67.5% below the operating income they projected at the start of the fiscal year.

http://www.sony.net/SonyInfo/IR/financial/fr/13revision_sony.pdf

 

[BoardBonobo]

Looks like Kaz Hirai may be losing his job soon. Maybe did a good job with PS4, as much as executives can be involved with that, but not so much with the rest of the company. They're looking at a $1.2 billion loss for the fiscal year, even after the success of PS4. They just revised their estimates for an additional $200 million loss, bringing them to $1.2 billion. That's the second time they've downgraded, from what I'm reading.

http://www.theglobeandmail.com/repo...mate-by-more-than-two-thirds/article18358129/

If my understanding is correctly, they were around 67.5% below the operating income they projected at the start of the fiscal year.

http://www.sony.net/SonyInfo/IR/financial/fr/13revision_sony.pdf

It looks as though a large part of that is bigger than expected right downs on PC inventory. After they declared they were ceasing production of the Vaio line demand tailed off more than expected. They were obviously not expecting enough!

 

[Deleted member 11852]

After they declared they were ceasing production of the Vaio line demand tailed off more than expected. They were obviously not expecting enough!

I've had Vaio's and had a great experience with them but wouldn't buy one now. Prolonged support would be my concern.

 

[Scott_Arm]

I'll be curious to see if Vaio and BluRay really cover the entire 1.2 billion loss. When they release the real financials, people will dig. The gaming division should be in good shape.

 

[London Geezer]

How can they make a loss on Bluray? And Bluray what, hardware or disc sales? I'd be surprised if it was the first, since they get some cash from every Bluray player out there. But I don't see many people actually buying Bluray movies.

 

[mrcorbo]

How can they make a loss on Bluray? And Bluray what, hardware or disc sales? I'd be surprised if it was the first, since they get some cash from every Bluray player out there. But I don't see many people actually buying Bluray movies.

Apparently, they have to account not only for the faster than expected (based on their expectations anyway) decline in physical media sales, but also for the decrease in the value of the businesses around those sales (production, manufacturing, licensing) which they have a prominent position in.

 

[Deleted member 11852]

How can they make a loss on Bluray?.

Sony's investment in Blu-ray way more than many Blu-ray consortium partners. They invested in the underlying R&D that made Blu-ray discs possible and, accepting they make a little cash on patents and licensing of the technology, it sounds like they banked on Blu-ray being relevant a lot longer than they now anticipate, with many people switching to streaming solutions.

What Sony are doing is writing off the anticipated long-term profit/loss for Blu-ray earlier, doing it this year. And unless there are more business unit skeletons in Sony's closet, this should be their last really bad year. It was expected to be bad, it's just worse than they expected.

 

[mrcorbo]

Sony's investment in Blu-ray way more than many Blu-ray consortium partners. They invested in the underlying R&D that made Blu-ray discs possible and, accepting they make a little cash on patents and licensing of the technology, it sounds like they banked on Blu-ray being relevant a lot longer than they now anticipate, with many people switching to streaming solutions.

What Sony are doing is writing off the anticipated long-term profit/loss for Blu-ray earlier, doing it this year. And unless there are more business unit skeletons in Sony's closet, this should be their last really bad year. It was expected to be bad, it's just worse than they expected.

Yup.

Here's the actual notice Sony issued.

And here's the relevant text from that notice:

Sony expects to record approximately 25 billion yen in impairment charges mainly related to its overseas disc manufacturing business. Primarily due to demand for physical media contracting faster than anticipated, mainly in the European region, the future profitability of the disc manufacturing business has been revised. Consequently, Sony has determined that it does not expect to generate sufficient cash flow in the future to recover the carrying amount of long-lived assets, resulting in an expected impairment charge. Primarily due to the reason mentioned above, the fair value of the entire disc manufacturing business also has decreased, resulting in an expected impairment of goodwill. The forecast for income before income taxes was revised downward reflecting the above-mentioned downward revision in consolidated operating income.

 

[Dave Baumann]

I've had Vaio's and had a great experience with them but wouldn't buy one now. Prolonged support would be my concern.

Ever single one of my four personally bought laptops was a Vaio. I've currently got no idea where I'd go when my current one gives up the ghost.

 

[MrFox]

Ever single one of my four personally bought laptops was a Vaio. I've currently got no idea where I'd go when my current one gives up the ghost.

Same here, I always ended up with the high-end Vaio 13.3 for nearly 10 years, despite the fiddling needed every time to install linux. These laptops never had any equal from any competitors, specially in power-to-weight ratio.

But they are very expensive, the high-end laptop market isn't big, it's mostly owned by Apple, and Sony can't compete in the low-end. The entire PC business is dwindling in the consumer space, and the enterprise space doesn't buy high-end laptops. I can't say I'm surprised they're not profitable.

 

[BoardBonobo]

I'll be curious to see if Vaio and BluRay really cover the entire 1.2 billion loss. When they release the real financials, people will dig. The gaming division should be in good shape.

The gaming division is $175 million in profit.

 

[Deleted member 11852]

The gaming division is $175 million in profit.

I've often wondered about console lifecycle accountancy.

If the Government produced games consoles, each console would start with a massive loss representing the R&D and cost to bring it to market but it seems like Sony cost that R&D from the profits of other devices (previous PlayStations) then start with a blank slate.