Business Approach Comparison Sony PS4 and Microsoft Xbox

[liolio]

Samsung

For real?
The company that can produce mostly all the parts of of proper home console would buy chips from AMD (among other parts)?
That is bound to Android and Google and work on its own OS?
That have the "Galaxy" brand name that is so strong that lot of clueless customers know "samsung and galaxy" and are quite ignorant of what "Android" is.

 

[Scott_Arm]

If games consoles weren't a profitable business Sony would have dumped PlayStation by now. For anybody taking notice, they've been downsizing/refocusing the less profitable businesses (e.g. TVs, cameras), expanding their profitable businesses (semiconductors, particularly CCDs) and completely axing their unprofitable/too-low-margin-to-be-worth-it business without (Vaio).

Kaz Hirazi recently said "It is likely that PS4 will become the platform which exceeds the profits earned with PS2". The recent $78 loss for PlayStation was attributed to the PS4 launch and shutting down some old MMOs. Sony ought to be nailing it for content delivery; PlayStation in the home and on the move, TV, movie, game and music studios and a TV, music, game and movie distributor. If anybody is looking to synergise through vertical integration of content production, ownership, distribution rights and delivery platforms, it's Sony.

And that's been his plan since becoming CEO in April 2012. They've now cut most of the fat and are beginning to work together. Prior to PS4 launch you would never have got the head of Sony Movie Studios at a game console announcement. Crazy times.

So you're agreeing with me that content delivery is an essential part of running a profitable console business and that a pure gaming console is no longer a profitable business?

 

[Deleted member 11852]

So you're agreeing with me that content delivery is an essential part of running a profitable console business and that a pure gaming console is no longer a profitable business?

I think that most people's expectations of a console today is that it'll offer basic content delivery but that's a different argument to profitability.

I see folks on my friends list using Netflix on their PlayStation. Using Netflix doesn't profit Sony in any way. The question is would those people still have bought a PlayStation if it didn't offer Netflix, or DVD/Blu-ray playback? If the answer is still yes then it's hard to make a case that content delivery is essential to profitability. My cousin bought a PlayStation 3 only for Blu-ray. That's not profitable for Sony, console sold at a loss, no game sales made. Games sales, and licensing third parties, are usually where the profits are at.

 

[Deleted member 11852]

Apple buying an expansive piece of hardware running on an OS they will have a hard time supporting, caring for services have way lesser penetration than their in house product, it makes no sense sorry.

Apple or Amazon selling hardware with a Windows OS is a mind boggling prospect. All of Apple's platforms are build around a common kernel (BSD) and framework and that seems to be where Amazon are going with everything they have, excepting the basic Kindles.

How would anybody else even advance and develop the core operating system of Xbox One

 

[London Geezer]

I think that most people's expectations of a console today is that it'll offer basic content delivery but that's a different argument to profitability.

I see folks on my friends list using Netflix on their PlayStation. Using Netflix doesn't profit Sony in any way. The question is would those people still have bought a PlayStation if it didn't offer Netflix, or DVD/Blu-ray playback? If the answer is still yes then it's hard to make a case that content delivery is essential to profitability. My cousin bought a PlayStation 3 only for Blu-ray. That's not profitable for Sony, console sold at a loss, no game sales made. Games sales, and licensing third parties, are usually where the profits are at.

Well well well... If your friend bought lots of Bluray movies, chances are Sony would have profited a little bit, since I have a strong feeling that at these prices, Bluray movies are extremely profitable. They cost almost as much (sometimes more) than a cinema ticket but the cost of making the movie itself was already accounted for ages before. Sure there would have been variable amounts of marketing costs related to the release of the disc, and the production of the disc itself, but still. It's almost like getting free money on work you did in the past.
Bluray in itself isn't profitable because not many people are buying the discs, relative to other mediums.

 

[Scott_Arm]

Apple or Amazon selling hardware with a Windows OS is a mind boggling prospect. All of Apple's platforms are build around a common kernel (BSD) and framework and that seems to be where Amazon are going with everything they have, excepting the basic Kindles.

How would anybody else even advance and develop the core operating system of Xbox One

They wouldn't. They'd basically buy the brand and the talent and put out their own box with their own OS. That's why selling doesn't really make any sense. Even amongst the companies that could possibly enter the console business, none of them really make sense for buying Xbox. Plus, if being in the console business was really lucrative, these other companies would be jumping in and doing it already. The game business is a huge gamble. It's too much of a gamble to make the investment for not a lot of return relative to other businesses. Releasing a dirt cheap tv box with limited hardware in the $50-100 range, and selling movies seems to be much less financially risky, and probably more profitable relative to the investment.

 

[Scott_Arm]

I think that most people's expectations of a console today is that it'll offer basic content delivery but that's a different argument to profitability.

I see folks on my friends list using Netflix on their PlayStation. Using Netflix doesn't profit Sony in any way. The question is would those people still have bought a PlayStation if it didn't offer Netflix, or DVD/Blu-ray playback? If the answer is still yes then it's hard to make a case that content delivery is essential to profitability. My cousin bought a PlayStation 3 only for Blu-ray. That's not profitable for Sony, console sold at a loss, no game sales made. Games sales, and licensing third parties, are usually where the profits are at.

I have my doubts that people would buy a next-gen console that didn't offer any kind of video or music content. But what reason did Sony have for not supporting mp3 on PS4? It's so they can try to get people to sign up to Music Unlimited for $10 a month, which conveniently plays back music while you are gaming. I don't doubt that you can turn a profit on a console, but the financial risk is massive. Look at Nintendo. They have no content outside of games, and Wii U is tanking. Last gen they made a killing on the Wii. King to a pauper overnight. Sony and Microsoft need to mitigate risk by selling content, to make sure they stay profitable. PS3 and 360 weren't particularly profitable businesses. I guess they made some money near the end of their lifecycle, but then that money just gets spent prepping for next-gen. The reason there aren't more players in the business is because it costs a huge amount of money to get in, and there isn't enough money to make it worth the risk. That's why Microsoft is trying to leverage content and services that could be attractive to more people. The strategy might fail depending on how you measure failure, but it's a clear sign that pushing a games only box is long dead. Despite how Sony is marketing PS4 to gamers, don't kid yourself into thinking it's a games only box.

 

[Shifty Geezer]

The game business is a huge gamble.

It's mostly suicide. It only really makes sense now as a Trojan for other services. The business of profiting from games stopped being a great idea in the 90s, I reckon. Come PS2, success comes down to a runaway hit or not. A marginal hit (GC) is okay if you're just a little computing company content to have a smallish business (which probably can't exist in the new mobile-influenced market), but for mega-conglomerates, the profits from selling computer games offset by the RnD and potential losses from a bad generation make it a waste of time. Only if you can use consoles to hijack consumers into your ecosystem does it make sense. eg. I'm not going to buy iPad or Mac (well, I have for development, but they'll never be my platform of choice). I'm not going to be shopping on iTunes or the app store. But if Apple made an awesome games console that I'd want, it'd be a platform I'd likely use to consumer content, and that'd help promote their ecosystem. This is exactly the value XB brings to MS. It's was exactly the opportunity PS3 presented Sony only for them to categorically cock it up and be playing catchup to everyone else!

 

[liolio]

They wouldn't. They'd basically buy the brand and the talent and put out their own box with their own OS. That's why selling doesn't really make any sense. Even amongst the companies that could possibly enter the console business, none of them really make sense for buying Xbox. Plus, if being in the console business was really lucrative, these other companies would be jumping in and doing it already. The game business is a huge gamble. It's too much of a gamble to make the investment for not a lot of return relative to other businesses. Releasing a dirt cheap tv box with limited hardware in the $50-100 range, and selling movies seems to be much less financially risky, and probably more profitable relative to the investment.

Which is kind of my point, Apple, Samsung, Amazon (any big company that could afford the console business) are better off with their own brands than with Xbox.

It makes no sense for big actors to buy Xbox as a brand. Worst case scenario for MSFT is not selling xbox, but putting it to rest (at least the hardware) and strongly promote gaming on their existing OS line, push steambox like initiative, etc.

For me the CEO answer is pretty clear, they are not considering a sale, as for why he would answer such question? Whereas imo the XBOX activity is not "saleable" the evocation of a sale even matched with a clear denial of such intention "grants" value (for investors) to the brand and the investment MSFT put into it. Truth is xbox is a part of MSFT overall strategy and as such it is relevant and can justify heavy investments but it can't be presented as something with a resale value.
So for me the CEO answering that question is cleverer action that it looks (trying to put oneself in the position of an investors, share owner, etc).

 

[blakjedi]

The Rise of One Microsoft:

The “One Microsoft” strategy is just getting started and evidently this year, almost all of Microsoft’s engineering teams — from Azure to Office, Bing to Skype — took part in the crafting of a priority memo prepared by Treadwell’s team that states what the company will be including in its next big release of Windows.

“Before, there was a Windows team, a Windows Phone team, an Xbox team. While there was general agreement of the value of (having a) common core and consistency of design, there were organizational lines that we had to cross to achieve that,” Treadwell said. “There just aren’t these barriers now.”

http://microsoft-news.com/joe-belfi...-windows-with-the-new-one-microsoft-strategy/

Its kinda do or die now for MS so this strategy though late, is welcome.

 

[Shifty Geezer]

Exactly the same thing as Sony went through, except it seems Sony are still having shakeups and rejigs and fat trimming.

 

[MrFox]

Exactly the same thing as Sony went through, except it seems Sony are still having shakeups and rejigs and fat trimming.

The similarities are uncanny. They even call the strategy "One Microsoft"

Sony CEO Kazuo Hirai left the theatrics at home during his opening day keynote this morning, instead choosing to focus on the company's vision of the future and his push to unify its disparate divisions. Since he took the reins last year, he's been preaching a unified approach, something he calls "One Sony."

 

[Deleted member 11852]

Well well well... If your friend bought lots of Bluray movies, chances are Sony would have profited a little bit, since I have a strong feeling that at these prices, Bluray movies are extremely profitable.

Well they only profit when they cancel out the loss on the console sale. How much do you think Sony profit on a Sony distributed Blu-ray movie?, and also on a non-Sony distributed movie? One hundredth of a cent maybe, on the latter?

I have my doubts that people would buy a next-gen console that didn't offer any kind of video or music content. But what reason did Sony have for not supporting mp3 on PS4? It's so they can try to get people to sign up to Music Unlimited for $10 a month, which conveniently plays back music while you are gaming.

And yet Plenty of people bought a PS4 even though it doesn't play MP3s. On that point, "Sony" said it was something they believed people really wanted (numbers no doubt of PS3 usage to play music) but I suspect the omission was also due to lack of time and wanting to save on licensing - it's the same reason the Blu-ray player software isn't installed by default; Sony only pay the licence when you download the software.

I personally don't listen to music through my. Part of it is to do with a I'm energy conscious and powering up a console + TV to play music isn't something I'd do, even if it had the best interface ever - and that brings me to biggest reason, the interface simply lacks compared to a docked iPhone.

I don't doubt that you can turn a profit on a console, but the financial risk is massive. Look at Nintendo. They have no content outside of games, and Wii U is tanking.

I am not surprised the Wii U is tanking, it's underpowered and lacks the single most appealing aspects of the Wii for casuals, uncles, grannies and non-core gamers. Anybody could pick up the Wiimote and start waving it around and instantly get it. The tablet controller looks uninvited to me.

Despite how Sony is marketing PS4 to gamers, don't kid yourself into thinking it's a games only box.

Of it's not, that's why it bundled [in the UK] with Netflix, BBC iPlayer and onDemand apps for other rather terrestrial TV channels, and even the IGN video app. It's why it comes with Music Unlimited and Movie Unlimited. But the relative lack of importance is revealed by their less prominent positioning in the interface.

 

[eastmen]

The same OS in all of MS's products would be a huge thing.

Developers able to write for windows 8.1(or 9) and have the code work for the xbox one and windows phone is a huge deal. That is a lot of people able to purchase that program

 

[JPT]

Not sure about other services, but you get a referal fee from Netflix if somebody signs up to it through your platform. Got this verified from an ISP that have installed netflix on their deployed STB.

 

[London Geezer]

Well they only profit when they cancel out the loss on the console sale. How much do you think Sony profit on a Sony distributed Blu-ray movie?, and also on a non-Sony distributed movie? One hundredth of a cent maybe, on the latter?

Hence, the more movies he buys, the more profit Sony makes (or loss reduced). Which was my point. But of course I have no idea how much Sony makes on a Sony produced Bluray (I'd expect a fair bit), nor a movie by any other publisher (I'd expect very little, whatever the royalty payment is).

 

[Kaotik]

Nadella was recently quoted as saying MS needs to build the next big thing.

Seems like X1 with K2 was what they hoped the next big thing would be, especially paired with Mehdi's quote about selling a billion units.

He said the whole console generation could sell billion+, mut that xb1 would

 

[Deleted member 11852]

Hence, the more movies he buys, the more profit Sony makes (or loss reduced). Which was my point. But of course I have no idea how much Sony makes on a Sony produced Bluray (I'd expect a fair bit), nor a movie by any other publisher (I'd expect very little, whatever the royalty payment is).

If you think the economics of the gaming industry is complicated, the economics of movie profits is worse. The production company [of the movie] aren't always the distributor and depending on the distribution deals, the production company may not get as much as the distribution company - they are taking the risk, after all.

Anyway, we're a bit side tracked, but I very much doubt that the cost economics of Sony's investment and return on Blu-ray did not factor in the cost of negating a loss on the player sale (a PlayStation 3). Income for disc sales, or indirectly for licensing technology to playback the discs, or duplicated the discs, already has a ton of R&D costs to cover without adding on the overhead of PlayStation 3 being sold at a loss.

The bottom line being profits will go to another division of Sony, not PlayStation. At the end of the day each part of Sony has to stand by its literal bottom line.

 

[JPT]

The bottom line being profits will go to another division of Sony, not PlayStation. At the end of the day each part of Sony has to stand by its literal bottom line.

So you are saying that Sony PS decided on Blue-ray just because of the larger storage space then....

Each part must contribute, but its also possible to incur more expenses in on part if another part will get tons of more profit.

 

[-tkf-]

So you are saying that Sony PS decided on Blue-ray just because of the larger storage space then....

Each part must contribute, but its also possible to incur more expenses in on part if another part will get tons of more profit.

The extra storage clearly played a part. Sony did not expect their console to be artificially constrained by the 360.