Business Approach Comparison Sony PS4 and Microsoft Xbox

[COPS N RAPPERS]

Assuming zero profit margin. It could be, for example, $200 for the console and $175 for Kinect, which is almost as much, for a grand total of $375 and a hefty mark-up because MS thinks that's what the market is willing to pay. How much does a TOF camera cost? $150 from Intel for a lower spec than Kinect 2.

well this is the first time seeing a console bundled with such an attachment at launch, kinect has been bundled with the xbox 360 for some time but the costs were no ware near $500. I'm thinking we're already seeing the tip of the iceberg of how successful the XB1's launch is going to be from the pre-orders. It's sluggish to do the importance of willing to pay that much extra for the attachment.


so Instead of seeing split customers choosing between SKUs of the new console compared to last gen; we're seeing split customers chose between two companies. I'm thinking a lot of gamers in the end will want more incentives to purchase the console.

 

[dagamer]

You think Xbox One minus Kinect could be sold right now for $199?

Considering both MS and Sony are keeping current gen hardware prices quiet high, and only the core 360 SKU is even as low as 199,...it's very unlikely. There's also a 400mm^2 SOC.

Also 499 for XB1 definitely seems like a necessity, given how preorders went. If they were supposedly worried enough about lukewarm preorders to reverse DRM course over them, then stimulating them by cutting $100 if possible would seem a no brainer.

Realistically, the absolute soonest we will have a price cut is next E3. And with Microsoft more than content with leaving even the current 360 at $299, I see no reason to do even that.

We are likely to see the $299 subscription model first before a true price cut. I'm still convinced that will be coming back at some point as a way to boost sales.

 

[AlphaWolf]

You realise that couriers carry regular loads day in, day out? And you realise carriers don't just divvy up packages across their couriers and hope they happen to be in the right areas, right? How many consoles do you think might be pre-ordered in the middle of downtown New York, LA, Hamburg or London - as well as all the regular packages?

FedEx shipping facility on iPhone 5 launch day. Yeah, nearly all those boxes are iPhones. Consoles are bigger ;-)


A midnight launch means your 200 cubic feet store room can magically hold 400 cubic feet to accommodate two consoles launch stock and regular inventory? Unless you're buying your console from the back of a Tardis, I don't think so.

They are not going to sell nearly as many consoles as apple sells iphones on launch day,because they won't have near as many to sell.

And 200 cubic feet? They are selling these out of a fridge box under the freeway? They will just have them sitting on pallets by the checkout. Each store is going to get a few hundred maybe, many of those stores could park a boeing 707 in them. (best buy, walmart, target etc) You're trying too hard. The logistics are nothing, they won't want to launch on the same day because they don't want to share the press with the other.

 

[Johnny Awesome]

IMO Sony needed to be at $399 to compete with MS. Most people have no idea about specs and MS lead last generation in the US (44 million vs. 27 million) and a lot of core gamers will want to keep their Xbox Live accounts.

Don't get me wrong, Sony has knocked it out of the park PR wise and MS has messed up and squandered a lot of their lead, but with the launch games looking identical or even better on X1 and the brand advantage they had coming into this generation, they could afford to be at $499. Sony really couldn't.

 

[eastmen]

They are not going to sell nearly as many consoles as apple sells iphones on launch day,because they won't have near as many to sell.

And 200 cubic feet? They are selling these out of a fridge box under the freeway? They will just have them sitting on pallets by the checkout. Each store is going to get a few hundred maybe, many of those stores could park a boeing 707 in them. (best buy, walmart, target etc) You're trying too hard. The logistics are nothing, they won't want to launch on the same day because they don't want to share the press with the other.

I could fit a good 8 cell phone boxes in the same space as my xbox 360 launch day box. So they wouldn't need to sell as much because the volume of space taken is larger per unit.

Realistically, the absolute soonest we will have a price cut is next E3. And with Microsoft more than content with leaving even the current 360 at $299, I see no reason to do even that.

We are likely to see the $299 subscription model first before a true price cut. I'm still convinced that will be coming back at some point as a way to boost sales.

MS will drop the 360 price this fall. Anyway I'm sure MS knows they can sell X amount of units at $500. If they are making a profit from the get go (and I don't see why not when the ps4 is able to hit $400) then they can reduce the price futher next year as unit sales slow.

If Sony sells 10m ps4s at $400 bucks breaking even and MS sells 8m making a profit then MS is in a better postion. Worse if sony is loosing money at $400 and MS is making money at $500 which is what I believe the case is

 

[Deleted member 11852]

And 200 cubic feet? They are selling these out of a fridge box under the freeway? They will just have them sitting on pallets by the checkout. Each store is going to get a few hundred maybe, many of those stores could park a boeing 707 in them. (best buy, walmart, target etc) You're trying too hard.

I live in Europe (London, UK). Stores of that size aren't that common and the number of big stores is dwarfed by the number of little stores. For lots of folks in Europe their nearest game store will be a small shop on the high street. A pallet of consoles by the entrance?

 

[AlphaWolf]

I could fit a good 8 cell phone boxes in the same space as my xbox 360 launch day box. So they wouldn't need to sell as much because the volume of space taken is larger per unit.

And if they sell 1/10th as many consoles as apple sells iphones they'll both be thrilled. Apple moved 37.1 million in a quarter.

 

[dobwal]

I guess its a given that just because you have product launch, you ship all your products meant for launch to all retailers over a 1 day time period.

I'm guessing MS, Sony and Nintendo have a pretty good ideal how to logistically handle product delivery since more than likely they have discussion with delivery services and retailers beforehand. Made easier because its the holiday season where couriers have already beefed up staffing and capabilities to deal with holiday deliveries that dwarf console launch numbers by many orders of a magnitude.

Launching two consoles on the same day can be facilitated by longer leads times.

 

[eastmen]

I worked for gamestop for a number of years. The stock rooms are tiny and also double as break rooms . Generaly they carry a few of each system . On launch day I would imagone they would carry many times more. The last console launches I was still an employee and we reived them abkut a week early but we still had sone come in day of launch

 

[temesgen]

BGR is now reporting a rumor we have already discussed that the Kinect senor cost as much as the XB1; if that is truly the case isn't it likely that the PS4 is selling at a decent profit at $399.00?

http://news.yahoo.com/kinect-costs-almost-much-xbox-one-build-230038241.html

 

[BoardBonobo]

I could fit a good 8 cell phone boxes in the same space as my xbox 360 launch day box. So they wouldn't need to sell as much because the volume of space taken is larger per unit.




MS will drop the 360 price this fall. Anyway I'm sure MS knows they can sell X amount of units at $500. If they are making a profit from the get go (and I don't see why not when the ps4 is able to hit $400) then they can reduce the price futher next year as unit sales slow.

If Sony sells 10m ps4s at $400 bucks breaking even and MS sells 8m making a profit then MS is in a better postion. Worse if sony is loosing money at $400 and MS is making money at $500 which is what I believe the case is

They would probably be making a decent profit that price if they weren't including the kinnect. Remember that Sony had to drop the camera to hit that price point at a profit. And whether or not it's true that the BOM for the kinnect is the same as the XB, I'm guessing it is or pretty close to, the PS4 camera will be significantly cheaper to produce.

I'd say that MS are breaking even at best with the XBone and Sony are looking at a modest profit per PS4. They went into this generation saying that they were not going to sell at a loss...

 

[dagamer]

They would probably be making a decent profit that price if they weren't including the kinnect. Remember that Sony had to drop the camera to hit that price point at a profit. And whether or not it's true that the BOM for the kinnect is the same as the XB, I'm guessing it is or pretty close to, the PS4 camera will be significantly cheaper to produce.

I'd say that MS are breaking even at best with the XBone and Sony are looking at a modest profit per PS4. They went into this generation saying that they were not going to sell at a loss...

Listening to the verbiage that Sony execs use, it's clear that the PS4 is selling for a loss though not a "massive" one, otherwise they would have said they were going to make a profit.

Source: http://www.eurogamer.net/articles/2...or-loss-to-be-incurred-with-the-launch-of-ps4

Also, by their own words, there were always aiming for a $399 price point, so it's clear the eye was never going to be included in the box with the systems current specs(in otherwords, Sony didn't drop the Eye to magically make the system more profitable, it was likely dropped to pay for 8GB GDDR5 RAM instead of 4).

 

[AzBat]

I always assumed they originally planned 2 SKUs. They just chose not to announce their $499 PS4 Eye SKU to make their value proposition better than Microsoft's.

Tommy McClain

 

[Kb-Smoker]

I always assumed they originally planned 2 SKUs. They just chose not to announce their $499 PS4 Eye SKU to make their value proposition better than Microsoft's.

Tommy McClain

And what would you play with that PSeye? Not a single game uses it. Only way they get a $499 sku is pack a game with the eye. But not a single game is based on it. There is just no proof that they ever plan to pack in the PSeye. Its clear they wanted to hit the $399 price point from the word go.

The only thing i have seen is a free tech demo that they demo at E3 that even uses it...

 

[eastmen]

And what would you play with that PSeye? Not a single game uses it. Only way they get a $499 sku is pack a game with the eye. But not a single game is based on it. There is just no proof that they ever plan to pack in the PSeye. Its clear they wanted to hit the $399 price point from the word go.

The only thing i have seen is a free tech demo that they demo at E3 that even uses it...

there are some hooks built into the os for the eye. The leaked images show the eye + ps4 and that knack game. There is also a built in game I think.


Anyway I highly doubt the Kinect costs as much as the xbox one. If sony is not making a profit at $400 then how much is MS loosing at $500. It doesn't make any sense .

 

[BoardBonobo]

there are some hooks built into the os for the eye. The leaked images show the eye + ps4 and that knack game. There is also a built in game I think.


Anyway I highly doubt the Kinect costs as much as the xbox one. If sony is not making a profit at $400 then how much is MS loosing at $500. It doesn't make any sense .

Not an awful lot about how MS are handling the xbone makes any sense. As for how much they are loosing, I guess that would be the price of the kinnect and then a, smallish, margin on the box itself. It seems that this time around MS are the ones who have run up the massive investment bill, with their extra cloud backbone, kinnect etc.

 

[AlphaWolf]

Not an awful lot about how MS are handling the xbone makes any sense. As for how much they are loosing, I guess that would be the price of the kinnect and then a, smallish, margin on the box itself. It seems that this time around MS are the ones who have run up the massive investment bill, with their extra cloud backbone, kinnect etc.

So by your estimation kinect 2.0 = more than $100 + GDDR5 costs? I expect the PS4 is more expensive than the XB1 (kinect not included). The XB1 might have a larger SOC but that should be more than covered by GDDR5 costs.

I don't think kinect is cheap, but I really don't see Sony having a margin advantage on the total hardware shipping in the box.

 

[dagamer]

So by your estimation kinect 2.0 = more than $100 + GDDR5 costs? I expect the PS4 is more expensive than the XB1 (kinect not included). The XB1 might have a larger SOC but that should be more than covered by GDDR5 costs.

I don't think kinect is cheap, but I really don't see Sony having a margin advantage on the total hardware shipping in the box.

Simply put, I don't see how Microsoft isn't making more money than Sony with each unit sold. And this isn't a race to the most units sold, but most profit made. Losing money doesn't do you any good, otherwise boht companies should give away their boxes!

They key is to sell enough that developers can't ignore your platform. The Wii U clearly never passed that bar.

 

[dumbo11]

Simply put, I don't see how Microsoft isn't making more money than Sony with each unit sold. And this isn't a race to the most units sold, but most profit made. Losing money doesn't do you any good, otherwise boht companies should give away their boxes!

- if Sony sell 4 million consoles at $50 profit, Sony would make $200m this year, and $0 next year.
- if Sony sell 8 million consoles at $0 profit, but sign half of those up to PSN+, Sony would have an income steam worth $480m a year.

It is in the manufacturer's best interest to sell "at near zero profit".

 

[AlphaWolf]

It is in the manufacturer's best interest to sell "at near zero profit".

No.

It is in the manufacturers best interest to sell the product at a price which nets them the most revenue.

What if the math works like this...
Sony sells 4million at $50 profit, or Sony sells 4.1 million at $0 profit. Obviously consoles have a revenue stream outside of the hardware, but that doesn't mean that the hardware can't be part of the revenue stream. Just because consoles have launched as loss leaders in the past it doesn't mean you should expect them to continue to do so in the future as shareholders don't like to see quarters where they lose billions.