Can Sony afford to have the most powerful console next-gen? *spawn

[ergem]

Being profitable is measured before paying back debt.

This is the key point. I will not challenge your knowledge with this matter as I am completely clueless how big corporations do their accounting. But your statements doesn't add up.

Current liabilities are everything that will have to be paid within the next accounting period, which for Sony is a fiscal year beginning at the 1st of April and ending at the 31st of March. That $55B is explicitly the accounts and debt that come due and have to be paid back during the current fiscal year. Note that most of it isn't actually debt -- it's accounts due to their suppliers that need to be paid back.

Sony has a current liability of $55B and according to you "being profitable is measure before paying back debt". I don't know of any electronic company including apple has that amount of profit in a year.

I thought it's obvious that that $55B will be part of the expenses debited from the revenue. Thus, profit excludes all debts maturing that year since it will form part of the expenses for that financial year.

I mean I don't see how Microsoft can pay their current liability of $32B.

 

[ergem]

Its not as simple as that. Liabilities come at an interest and payment installments of those long term liabilities have to be made at certain periods. So an amount of cash reserves are actually reserved for liability payments and a remaining amount should be reserved to be able to operate.

That's $21B CASH RESERVES. I think you're confusing it with CASH FLOW.

Cash Reserve vs Cash Flow.

 

[tunafish]

This is the key point. I will not challenge your knowledge with this matter as I am completely clueless how big corporations do their accounting. But your statements doesn't add up.

Sony has a current liability of $55B and according to you "being profitable is measure before paying back debt". I don't know of any electronic company including apple has that amount of profit in a year.

I thought it's obvious that that $55B will be part of the expenses debited from the revenue. Thus, profit excludes all debts maturing that year since it will form part of the expenses for that financial year.

No. Debt isn't income when it's taken, and it isn't an expense when it's paid back. You don't pay income tax when you take your mortgage, do you? The only way it shows up on the income statement (which is used for telling whether you are profitable or not) is in interest expense. Debt is shown on the balance statement, which tells people what the company owns, and on the cash flow statement, which is, among other things, used to judge whether the company is able to pay it's bills.

However, I'd like to point out again that most of the Sony current liabilities are not debt, they are accounts payable. Those are bills that have not been yet paid. The reason they are not considered again before looking at net profit is that they have already been counted once.

Basically, let's say that I'm building and selling widgets. To build one, I need a part from you. You sell it to me, and send me the bill. The second we make the trade, I record the cost of each part you sell me as a expense, likely under "cost of revenue". However, at this point, I still have the cash I intend to use, and the bill. I need to record both of those on my balance sheet -- the cash goes under cash, and the bill goes under accounts payable. At this point, I can have $21B of cash or cash equivalents on hand, but if I also have $35B of accounts payable and 14 billion of retiring debt, I don't actually have a lot of money to spend.

And that would be my point. Even though under a cursory glance it seems like Sony has a lot of money on hand, when you look at it closer, they are quite broke. They are in a situation where they have to take more debt to pay for their bills and the old debt. This is a particularly big problem because with their Baa3 credit rating, taking new debt is expensive.

I mean I don't see how Microsoft can pay their current liability of $32B.

They have $17B of net receivables, they will use those to pay most of it. After that, they will either pay it from their short term investments, or more likely, roll some debt forward and pay it from that. MS will do that because with the present market and their AAA rating, they can borrow short-term cheaper than what they earn from short-term investments. So long as this holds true, their short-term investments will keep ballooning -- once the markets recover from the recession and the real interest rates begin to rise, they will pay all their debt by selling off the short-term investments they've made.

 

[bkilian]

They have $17B of net receivables, they will use those to pay most of it. After that, they will either pay it from their short term investments, or more likely, roll some debt forward and pay it from that. MS will do that because with the present market and their AAA rating, they can borrow short-term cheaper than what they earn from short-term investments. So long as this holds true, their short-term investments will keep ballooning -- once the markets recover from the recession and the real interest rates begin to rise, they will pay all their debt by selling off the short-term investments they've made.

Microsoft didn't even have long term debt until a few years ago. They only took some out because they view it as an investment at this point.

Also current liabilities are often paid from incoming cash flow. Microsoft has a ridonkulous positive cash flow, current liabilities are not a worry for them.

 

[liolio]

Well I'm not sure that you had to make that point
Comparing MSFT and Sony on a financial basis and coming to that kind of conclusion is either denial or fanboyism.

To the point I think that Sony doesn't need the most powerful system to win. I still think that they have to aim for a price point that MSFT could not reach without losing too much money.
Then it is marketing, it is a matter of promoting their strengths properly, potent system to keep up with the competition, lower price, free online.
As a side note, having their strong franchises ready for launch would imo serve them better than an extra 1/2 TFLOPS, GT6 comes to mind among others franchises.

 

[Gitaroo]

if sony and ms are both aiming for the same entry price it may still have a chance to make it the most powerful system, because its hardware specs is one thing, who knows if either one of them are going to pack in some fancy gimmick that might be expensive to produce like a kinect 2 or something so they have to low the specs a bit to make up for the price.

 

[MrFox]

MS and Sony are competing for the same market, being successful in that market has only a few hypothetical "best" strategy. I don't think losing billions of dollars to gain a little more market is one of them. If it was, the 360 wouldn't have been built the way it was.

 

[DJ12]

The question should be can Sony afford NOT to have the most powerful console next gen.

 

[kagemaru]

The question should be can Sony afford NOT to have the most powerful console next gen.

Yes, they can afford to NOT have the most powerful console next gen, same for MS.

Of course that's not the point of this thread or even really worth asking since we already know the answer.

 

[liolio]

The question should be can Sony afford NOT to have the most powerful console next gen.

And in which way would you contribute to that POV?
Imo people (and I would say in the gram sheme of things, few people) have been crazy bent on specs this gen because of multiple factors, mainly:
*the system are a wash
*That is not what PR from both companies state in the first place (MSFT started the 1TFLOPS bullcrap that escalated for years... and not to their advantage).
*Their was a significant difference in price of those systems.

For all that, there is still an ongoing fight for a few people but overall I would question how specs affected most buyers of those systems. I would bet that price, functionality, free or paying online gaming, exclusive and brand strength made up most of the buyers mind not who win by a few pixels or frame per second.
With free online and strong brand recognition and BRD as a bonus, Sony has been doing quiet well as soon as they got the price at a reasonable level.

Out of 60 millions owners of ps3, 120 millions of ps360, how many cares about "the Cell", Xenon/Xenos, or can tell what the acronym FLOPS means or even what 1080P is vs 1080i (they could tell resolution but go ahead and ask 1080 x "???" ?
I would assume that most, and by a wide margin, just don't give a fuck about even knowing what those names means/are.

 

[MrFox]

I'm going back on my earlier opinion. For most gamers, the price difference in the case of Sony was justified by the inclusion of Wifi, HDMI, bigger and replaceable HDD, much lower noise, integrated Bluray and not having to pay for the complete online experience. All of that feature set was considered a bargain by anyone with a calculator. Later on, many those advantages disappeared, but certainly not the most important ones. I don't think there will be any difference of that kind between PS4 and 720, unless MS is stupid enough to disable Bluray playback (doubtful), or if Sony still gives online for free (doubtful), while MS continues to charge for it. The edge of features set would be lost next gen, so the ability to charge a higher price will also be lost. The only advantage Sony has left is their lower production cost compared to MS.

I don't think anyone owning a PS3/360 is actually staying with or leaving their favorite console for next gen because of any technical metric. Only PC gamers are fanatic enough, and they have a PC anyway because they want the best, whatever the price. And it's fun to tweak and overclock.

There was a big poll from IGN about next gen and brand loyalty, the large majority don't expect to switch brand, without even knowing what the next one will be (all three were about equal at 70%). Trying to make a console significantly more powerful than the competition while absorbing billions in losses is suicide, both for Sony and MS.

 

[liolio]

I'm going back on my earlier opinion. For most gamers, the price difference in the case of Sony was justified by the inclusion of Wifi, HDMI, bigger and replaceable HDD, much lower noise, integrated Bluray and not having to pay for the complete online experience. All of that feature set was considered a bargain by anyone with a calculator. Later on, many those advantages disappeared, but certainly not the most important ones. I don't think there will be any difference of that kind between PS4 and 720, unless MS is stupid enough to disable Bluray playback (doubtful), or if Sony still gives online for free (doubtful), while MS continues to charge for it. The edge of features set would be lost next gen, so the ability to charge a higher price will also be lost. The only advantage Sony has left is their lower production cost compared to MS.

What do you mean by most gamers? the early adopters that bough the system at its launch price?
I don't see how they qualify as "most gamers'. I won't discuss the value the ps3 offered for the price that is so 2006 lol. Still Sony has been doing way better as soon as they got their system price competitively and not in absolute term (the + you spoke about) but in comparison to MSFT offering. they are now even or above.
Wrt to free online, I think that it would be pretty bold to believe that Sony can match MSFT policies that easily. They have a different user base as MSFT, MSFT managed to attract 20 millions people with significant buying power and willing to pay for a good online service. It is not straight forward to assume that Sony can to do same without a possibly unwanted impact on its user base at large.
I would not be surprised if those 20 millions people make msft more money that 40 other millions (through live but I suspect they buy more games).
It is clearly a marketing thing, but costumers are not equal. Plenty of brand (cars sorry...) have tried to get into the high end and failed for example and not because the models sucked.

I don't think anyone owning a PS3/360 is actually staying with or leaving their favorite console for next gen because of any technical metric. Only PC gamers are fanatic enough, and they have a PC anyway because they want the best, whatever the price. And it's fun to tweak and overclock.

Well that is an odd view of the PC market, most of the PC gamers I would say don;t spend much on hardware and sadly not a dime on software...
Anyway people have intensive to stick to a brand, but that if whatever you bough last gen still works on the new system. personally I don't give a fuck about brand royalty, I've always sold the system I owned 6months to 1 year ahead of a new system launch ( so while it had still some value) and choose between what is available but on average people have some brand loyalty.

There was a big poll from IGN about next gen and brand loyalty, the large majority don't expect to switch brand, without even knowing what the next one will be (all three were about equal at 70%). Trying to make a console significantly more powerful than the competition while absorbing billions in losses is suicide, both for Sony and MS.

Well polls are polls, plenty of people who vote can't buy a +400$ system for example they wait a few years. I think that when it comes down to the decision price is the determining factor.
Well thing is I believe that MSFT and SOny are no longer equal when it comes to subsidizing hardware so whereas losing billions is stupid I would not put both companies on an equal footing.
By the way I think that for MSft the design failure cost them lot of money not subsidizing (or not that much), they paid the rrod, then had to rely on solid cooling solution, all of that because the system was rushed and they refuse to delay it passing the problem to the costumers in a pretty inelegant manner (even though they reacted "well" if that is possible in those circumstances...).

Anyway I believe that Sony has a lot of thing going for them, I hope that the exec won't have come to the conclusion that they have to provide costumers with a power house ala PSV with all the good it made to them.

 

[Mobius1aic]

The win next gen will be based on software and the user experience, just like with the current. Being within a certain earshot to the Xbox 3's performance for multiplatform titles should be enough. Easing the development process with already developed hardware and software for the new console should help to ease up some of the time and expense of a new generation if they go that direction. Sony can't afford to go over the top again, unless their plan is fool proof, which it won't be. The PS3 cost them way too much money, the Vita hasn't really taken off, and the rest of Sony's businesses are falling by the wayside in the face of better competition.

Sony continuing their trek in the console business is a dubious one at best.

 

[MrFox]

What do you mean by most gamers? the early adopters that bough the system at its launch price?
I don't see how they qualify as "most gamers'. I won't discuss the value the ps3 offered for the price that is so 2006 lol.

Yes, I was thinking 2006 launch when I wrote that, and I was projecting my own perception of what happened to "most gamers" because I didn't want to be alone
I would certainly agree that they waited WAY too long to do the price cut, but they had no choice, they were waiting for the silicon shrink, and a redesigned low cost bluray optical block. But has there ever been a moment where the 360 lowest SKU wasn't about $100 less expensive? The SKU without HDD?

Wrt to free online, I think that it would be pretty bold to believe that Sony can match MSFT policies that easily. They have a different user base as MSFT, MSFT managed to attract 20 millions people with significant buying power and willing to pay for a good online service. It is not straight forward to assume that Sony can to do same without a possibly unwanted impact on its user base at large.
I would not be surprised if those 20 millions people make msft more money that 40 other millions (through live but I suspect they buy more games).

Judging from my own circles of friends, I agree there's a big difference in user base, MS gamers are the competitive kind and online is very important in general. The games considered the best are different on 360 and PS3. Would anyone really switch to MS if Sony starts charging for online? They'd be a little angry, but their favorite games are still on the Sony platform, there's nowhere else to go. That's the reason for brand loyalty, it's as long they make the right kind of games, they'll buy the console. I have more than one friend who went through multiple RROD 360 and eventually bought the "black-one-what's-it's-name" to solve the problem. I had a big discussion about it and they don't care, they will keep buying MS consoles, because that's where their favorite games are, and competitive online gaming is core to their gaming habit.

Well polls are polls, plenty of people who vote can't buy a +400$ system for example they wait a few years. I think that when it comes down to the decision price is the determining factor.
Well thing is I believe that MSFT and SOny are no longer equal when it comes to subsidizing hardware so whereas losing billions is stupid I would not put both companies on an equal footing.

I think there's a wall where people won't pay more (xmax family budget, etc..) At launch both PS3 and 360 were too expensive. 400 seems to be a good maximum price point for next gen (because inflation says hi), but if MS is 349 and Sony is 399 with some added value, I think they can still have a user base parity.

By the way I think that for MSft the design failure cost them lot of money not subsidizing (or not that much), they paid the rrod, then had to rely on solid cooling solution, all of that because the system was rushed and they refuse to delay it passing the problem to the costumers in a pretty inelegant manner (even though they reacted "well" if that is possible in those circumstances...).

There's been fuckups on both sides, but MS it could be resolved after the first redesign, and Sony's expensive Bluray and yield issues were solved with time and later shrinks.

Anyway I believe that Sony has a lot of thing going for them, I hope that the exec won't have come to the conclusion that they have to provide costumers with a power house ala PSV with all the good it made to them.

One thing the PSV proved is that a powerful console isn't enough without the games. The PSV is amazing technically, and I think the biggest problem was the impossibility of having BC, even when it launched in japan they kept buying the PSP for a while. I don't believe it was because of the price. Let's see if an upcoming Vita price cut proves me wrong

I'm aware I'm currently wishful thinking because I really want a powerful next gen. Not the cheap SoC everyone is talking about

 

[Lucid_Dreamer]

At this point, I think "more powerful" is moot, since 90% of the games will be cross-platform. They'd be better off trying to make the systems as close to each other as possible. Power sure as hell didn't decide this last generation, did it?

I agree. Having the most powerful system only seems to be perceived, if your multiplatform games look and perform better. If it's, generally, only the games that can fully take advantage of the system; it's usually seems to be written off.

Sony should make their next-gen system architecture like Geico (so easy a caveman could do it). Then, there should be little idle CPU/GPU time, at the very least.

If MS put ALL their cash into making a console, they could bring more money to bare. Whether that money could overcome all Sony's hardware designing knowledge and cost saving methods (using their own products, etc), who knows? The same applies even with both companies going to AMD for their BASE product. Remember, these are going to be customized. To what level of customization will happen, who knows? Hardware IP, then, becomes a factor. IP can override just cash being thrown at a project.

 

[function]

I agree. Having the most powerful system only seems to be perceived, if your multiplatform games look and perform better. If it's, generally, only the games that can fully take advantage of the system; it's usually seems to be written off.

I disagree. Regardless of reality, fanboys will always perceive their favourite system to be the most powerful regardless of how overwhelmingly their platform loses in almost every apples to apples comparison.

A couple of exclusive titles will work wonders to maintain the reality distortion field of the faithful.

 

[NRP]

function,
You're my new favorite dev, LOL!

 

[function]

Sorry, but I'm not a dev!

I'm a hobbyist who's bad at everything. I know just enough to know how bad at everything I am.

I also remember what it's like to be a fanboy. The angst, the mental gymnastics, the joy and the sadness. Sometimes I laugh at my old self. Sometimes I cry.

 

[NRP]

Oh. I thought you were a (lazy) dev. Still one of my favorite posters though.

 

[function]

Thanks, that's very kind of you.

(You're right about the lazy bit btw. My chums who are real devs sometimes do 70 hour weeks during crunch. Hahaha!)