How to sell next-gen consoles, Marketing, Positioning, and Pricing [2020]

[Deleted member 11852]

I mean, I'm not arguing that it can't be done. Of course it can be done. For example: Sky in the UK decided years ago to subsidise the box and include it in their subscription, however the Sky box must cost like a bag of chips, and the Sky subscription is shockingly high. Also, Sky does not have 100 million subscribers in the UK. So it does make sense.

I think the early Sky boxes, before digital satellite were relatively expensive and the big expense that never really diminished was the installation. Having to send out a dude, with few installations being completed in under an hour due to safe mounting of the dish and fairly-decent wiring to your TV, plus box setup, enabling the card etc and travel to/from etc.

I simply don't know that Sony or MS would see the value in subsidising something that could sell more than 100 million units, making them a loss of, say 5 billion dollars, and lose all the profit they have made on games and subscriptions for that? After all the R&D, time and effort to build those games and amazing subscription services? I really don't see the point of doing that.

I definitely don't see Sony doing much on this, the conventional approach of selling the box as cheaply as possible, selling loads of them and recouping all costs and more with accessories, games and services has worked out very well for them as we know this because PlayStations' finances are transparent. The only time Sony had to price high was PS3 and with the speculation of PS5 possibly being higher-priced (which I take to be above $399) it wouldn't surprise me if Sony did try to subsidise the cost for 12-18 months until they could get costs under control; they've been good at cost-reducing hardware in the past and there are many options for doing this.

I still do not fully understand the economics of GamePass, but it feels like Microsoft are in part subsidising gamers by letting them play loads of games for a low-low price. Who, if not Microsoft, are subsidising publishers for lost sales?

GamePass feels like a long-term thing and to be frank, I think Microsoft do need to be bold given their console base is now third behind Sony and Nintendo. I don't think Microsoft want to to do this, but making games super cheap is something they can do to make their platform more appealing. I'm dubious if it would be viable if, nextgen, Xbox had the greater market share. I think it would diminish in quality/quantity like PS+.

 

[Tkumpathenurpahl]

I mean I don't think they compare at all outside of the fact they both allow streaming games

Yes, apart from both subscriptions (XBL & GP / PS+ & PSN) enabling online gaming, cloud saves, party chat, free monthly games, instant game streaming, and access to a large library, they're barely comparable at all...

PSnow is not on mobile devices

But Remote Play is. Developing that app to access PSNow servers should be trivial.

I hope the presence of XCloud on smartphones lights a fire under Sony's arse here, because I'd like that flexibility.

Also PSnow is not comparable to Gamepass pc just like I would never compare xcloud to gamepass on pc. a 720p stream that is highly dependent on internet and network traffic vs a local experience that you can control ?

I did say "somewhat." Yes, for a PC gamer, Gamepass is the better choice. That said, Sony don't really have incentive to make the PC a particularly attractive platform.

The fact that Horizon Zero Dawn is getting a PC release suggests they may be testing the waters there though.

The problem is what is sony's investment strategy for psnow ? You said it yourself sony wants to sell millions of copies and not sell subscriptions. For MS it makes sense to invest in cloud compute , putting xbox series x in the cloud makes sense for them. They have the data centers , they can use the xsx for machine learning and then get gamers to subscribe. So we know ms will continue to dump money into it.

I didn't say they want to sell millions of copies of games and not subscriptions. I said they don't want their subscriptions to impede the sales of their expensive, popular, profitable games.

My point was that both Sony and Microsoft can counter each other in terms of their services - and therefore bundled services. But day 1 releases of all first party content is the only move that I don't see Sony wanting to match.

I do think PS+ and PSNow need to change in order to make investment in streaming and an instant game library appealing and profitable, but that's a different discussion for a different thread.

But what will sony do. They aren't putting their first party games day and date on their streaming service and there isn't a huge incentive for gamers to purchase it and if subscriptions stay low there is no incentive for sony to invest in it.

I'd rather continue this bit of the discussion in the appropriate thread.

But I don't think the answer is to just surrender their first party sales. It's a tried and true business model of developing a game, selling it, and hoping that sales of that game are profitable after the cost of its development, distribution, and marketing. Streaming is still relatively new, and even the world's biggest video streaming service is bleeding money.

If those subscriptions aren't profitable, a low number isn't such a bad thing. If Gamepass is losing money, the cost of those ~9 million subscriptions are soon going to add up.

MS has already said they will have 1080p and 4k streams with xsx being introduced into their servers. Is sony still going to be at 720p ?

Doubtful. Sony haven't really had to compete on stream quality. Now they will.

Higher resolution streams will cost Sony more money. The PS4Pro is already capable of streaming at 1080p/60, and I'd be amazed if the PS5 isn't capable of at least 1440p/60.

Going back to my point of the services being comparable, Sony already have the hardware to use Remote Play at 1080p, and they have the network infrastructure to stream. It's not a reach to think higher resolutions are on the cards.

MS has a pc client in preview now also

Which proves my point of each platform's services being able to match the other's, move for move.

Right now the only advantage sony has is a library but that may not be an advantage when xcloud actually launches

That's a hypothetical that assumes Sony will just stand still.

Also sony has already had to drop the price of their service to compete with game pass and stadia. https://bgr.com/2019/10/01/playstation-now-price-drop-should-you-buy-now/

Right, but that's because of competition in the market. Thereby proving that, like any business, Sony will respond to shifts in the marketplace in order to keep themselves comparable and competitive.

 

[Shifty Geezer]

You walk into a shop.
PS5 $500
Xbox Series X $35*

What seems better for an average Joe for an impulse buy.

As I said, MS has had these options for two generations. Have they shown considerable traction? Not to my knowledge. Therefore, it shouldn't be floated as a plausible sales strategy for next-gen, unless it can be shown it works and MS can rely on it as a sales strategy enough to factor it into their pricing policy.

 

[BRiT]

As I said, MS has had these options for two generations. Have they shown considerable traction? Not to my knowledge.

Something like a Pandemic might change the value proposition of it.

 

[AzBat]

That's not the $100 cheaper though. It's same price but better value due to what's bundled.
It's not a $500 PS5 vs $400 xsx price tag

As @turkey was able to say better...

All access which I think was the start of this idea is paid monthly. The total cost might be the same but the up front cost would be drastically different.

I was saying "Think of it another way:". It's value is the same, but your upfront cost is still $100 less. But that's not to say they can't sell it at $500 & get the 12-months subsription free either. Diffferent options could be made.

Still, it is not 100$ cheaper, it is identical price. "value" may be more than without the service but still price is the same.

Do people count that "this TV costs 1000, but it comes with 3 months of viaplay/netflix so it costs only 950 now!", I dont think so.

See above.

People that have invested in xbox ecosystem now = they probably already have the subscription, so maybe they give more value to the "free" 12months, or maybe they give less, but they would have bought more of it anyway

There's a thing called stacking. If you're purchasing it All Access style it would just stack on what you already have. If you're purchasing without the monthly fee & it's just a free code in the box, then it could stack or MS may decide it can only be used for new accounts. I would hope it's the former, but I wouldn't be surprised if it's the latter as there is precedence there.

They have tried the past two generations but it's never gained traction.Is there any particularly reason to think the market has changed its buying preferences?

New generation. All bets are off. But yeah I get what you're saying. My thinking is that Phil has stated that they "will not be out of position on power or price". If Lockhart is not real(so far I haven't seen anything that proves it is), then that means to me that MS will sacrifice price to match Sony. My suggestions were just ideas on how they could do that & with a new generation MS has already thrown the book out on how to do a launch. So look out for that curve ball because I think it's coming.

Tommy McClain

 

[Shifty Geezer]

Something like a Pandemic might change the value proposition of it.

But how-so? What's the standalone price of the XBSX going to be set at? $500 with the assumption some will buy via a subscription service? $400 at a $100 loss assuming most will be buying and paying more than that via subscription? Subscription only?

I presume when MS designed this thing, they had a price in mind, selling for $xxx in stores, designing for that price-point, and those plans either did assume lots of sub-based hire-purchase agreements, or not, and pandemics weren't part of that decision making.

 

[AzBat]

You're still hung up on a stand-alone purchase price. There is no spoon.

Tommy McClain

 

[Shifty Geezer]

I don't know what you mean,

 

[Deleted member 11852]

I was saying "Think of it another way:". It's value is the same, but your upfront cost is still $100 less. But that's not to say they can't sell it at $500 & get the 12-months subsription free either. Diffferent options could be made.

This is the value argument again. If you like the games that GamePass is offering, it is tremendous value - no argument. However, if you do not, it isn't. And that's very much a subjective thing.

Look at it another way, at the end of last month, Microsoft announced there was over 10 million GamePass subscribers (including PC) and Xbox One sales are around 50-55m now I believe. If GamePass is universally valuable, why aren't there anywhere near as many GamePass subscriptions as there are Xbox One owners?

Clearly, for the vast majority of Xbox One owner, GamePass isn't valuable enough to pay for ergo if monetary value is less that what I otherwise would cost. I wouldn't buy a Ferrari for £100,000 but I would but would for £25,000. So what's the value proposition of a Ferrari? Like GamePass, it's different for different people.

Likewise, if Sony bundle 12 months of PS Now with PS5 to help me swallow a $500 price tag, that is actually of zero value to me. I'm not going to use it.

 

[eastmen]

No and yet the PS4 Streaming App is, which I think bodes well for a PS Now app launching before or in parallel to PS5's launch. Fundamentally, it's the same technology with the only difference being what you connect too. I wonder if the issue here is not technical but circumventing the retail cut apps need to pay to Apple (and Google) for in-app subscriptions/payments.



If I was Sony I would want to sell copies of games to people with PlayStations (for maximum profit) and sell subscriptions to people without a PlayStaton - who would otherwise never have any reason to give Sony any money for games. How they achieve this is another matter. But there will be people who both own a PlayStation and want to play games remotely who.

Also remember that Microsoft using Microsoft's own servers for xCloud is not free, Microsoft have to pay for that. It's not like there is an excess of 'free' server time because Microsoft continue to expand their server infrastructure to meet commercial demand. I remember that nutty suggestions that Sony didn't have to pay for Blu-ray drives for PS3 because they make them. Sony's Optical Devices unit made Blu-ray drives to sell, if they paid to make a drive then give it (free or subsidised) to another division of Sony (PlayStation) then it's bad for your unit's bottom line and good for theirs - ultimately Sony is paying.

Microsoft are expanding Azure, on which xCloud runs, because demand for it is increasing so it's not like Xbox can use 'free' unused capacity. Expanding server infrastructure, particularly building new data centres, is insanely expensive and Microsoft will need to do this for gaming where low latency is critical. Nobody cares if a round-robin-packet-trip for Netflix is 2 seconds.

1) I dunno if we have seen anything from sony indicating that. They may have a phone app sure but they might also not. If they are trying to by pass the app stores then its still a feature that doesn't have parity with xcloud

2)If sony puts exclusives out the same day on the streaming platform as part of the subscription it will of course disrupt people from buying the game. Why pay $60 when you can just stream it? There will be some portion that still want to own the game but perhaps fewer who do. Of course if they are stuck at 720p for streaming that may be a reason. But then where is the value for PS Now if its all old games ?

3)Of course its not free for MS however demand on Azure is not constant, data centers on the east coast will hit peak during the day for office / share point and teams and then start to wind down as evening approaches and school and work are done while gaming will spin up. This happens in every time zone. XSX servers that may have otherwise been dormant during the day could be used for machine learning tasks

What does sony's hardware do when there is no one streaming ?

 

[Deleted member 11852]

1) I dunno if we have seen anything from sony indicating that. They may have a phone app sure but they might also not. If they are trying to by pass the app stores then its still a feature that doesn't have parity with xcloud

You haven't seen anything from Sony indicating what? There has been a PS4 Remote Play app for Windows, iOS and macOS for years. It's the same tech they need for PS Now. What many companies with a service take issue with with regarding Apple's walled garden is Apple taking a (IIRC 30%) cut of purchases made in-app. Releasing an app for a platform with a few hundred of millions of users could eat Sony's retail cut for everybody making payments through that app.

2)If sony puts exclusives out the same day on the streaming platform as part of the subscription it will of course disrupt people from buying the game. Why pay $60 when you can just stream it? There will be some portion that still want to own the game but perhaps fewer who do.

I can't see Sony doing day 1 PS Now releases, but maybe day 30 releases. I.e. the game hits the service after a month. Anybody really keen to play the game at launch is going to buy it, everybody else - including those who would have waited for a sale - will get to play it a month later. The behaviour of the core won't change, the behaviour of those on a budget won't change.

3)Of course its not free for MS however demand on Azure is not constant, data centers on the east coast will hit peak during the day for office / share point and teams and then start to wind down as evening approaches and school and work are done while gaming will spin up. This happens in every time zone. XSX servers that may have otherwise been dormant during the day could be used for machine learning tasks

This assumes Azure is not also powering a tons of apps and services that also peak outside of work hours.

What does sony's hardware do when there is no one streaming ?

Folding @ Home? ¯\_(ツ)_/¯

 

[iroboto]

If GamePass is universally valuable, why aren't there anywhere near as many GamePass subscriptions as there are Xbox One owners?

In addition to what you posted, also a variety of other possible reasons: Availability in country. Availability of internet, whether they even use their xbox for gaming purposes Etc. etc.

 

[Deleted member 11852]

In addition to what you posted, also a variety of other possible reasons: Availability in country. Availability of internet, whether they even use their xbox for gaming purposes Etc. etc.

Indeed. And will the reasons cease to be barriers when Xbox Series X launches? If not, GamePass will offer no more value in five months than it does now. This is kind of my point. Less than 20% of Xbox One owners subscribe to GamePass. It's not universally valuable.

 

[AzBat]

You act like value is bad word. I don't disagree with a lot of your discussion on value. But I will state again new generation can lead to new ways to sell the console. That's the whole point I brought All Access/Game Pass into the discussion. If you don't agree, then I will agree to disagree & leave the discussion.

Tommy McClain

 

[Quadbitnomial]

1) I dunno if we have seen anything from sony indicating that. They may have a phone app sure but they might also not. If they are trying to by pass the app stores then its still a feature that doesn't have parity with xcloud

The goal has always been to support many platforms.

 

[Deleted member 11852]

You act like value is bad word. I don't disagree with a lot of your discussion on value. But I will state again new generation can lead to new ways to sell the console. That's the whole point I brought All Access/Game Pass into the discussion. If you don't agree, then I will agree to disagree & leave the discussion.

I get that, but in respect to pricing - as in making a higher-priced console appear better value, the 'value' aspect is very subjective. You value GamePass, I do not not. I do not value PS Now either.

Ergo, if I was a person for whom a $499/$549 console made me think twice about pre-ordering for launch day and the pill to sweeten that price was a 12-month GamePass or PS Now subscription, neither pill would work. And the only metric we have of GamePass's appeal is subscribers with is, at most, 20% of Xbox One owners.

That could change. It could rocket. It could nosedive. Personally, I think the flaw with all-you-can-eat-games subscriptions is that the vast, vast majority of gamers are casuals who don't play double-digits a week or even a month. If you're one of those those who plays one game for 3 months, GamePass may not appeal if you're only buying games über cheap in sales.

 

[Shifty Geezer]

Ergo, if I was a person for whom a $499/$549 console made me think twice about pre-ordering for launch day and the pill to sweeten that price was a 12-month GamePass or PS Now subscription, neither pill would work. And the only metric we have of GamePass's appeal is subscribers with is, at most, 20% of Xbox One owners.

That subscription rate isn't very revealing either as you can get subscriptions for free or in stupidly low priced deals. The whole 'subscription supported' model hasn't got any real argument behind it beyond it being a possibility. As you say, anything could happen, but there's no evidence here and now to show a subscription based console model will account for any meaningful sales.

 

[eastmen]

You haven't seen anything from Sony indicating what? There has been a PS4 Remote Play app for Windows, iOS and macOS for years. It's the same tech they need for PS Now. What many companies with a service take issue with with regarding Apple's walled garden is Apple taking a (IIRC 30%) cut of purchases made in-app. Releasing an app for a platform with a few hundred of millions of users could eat Sony's retail cut for everybody making payments through that app.

So where is the cloud servers for it ? Costs are much higher when you need to provide the hardware for your customers vs having them bring it.

Apple doesn't take a cut from Netflix or from audible. They just remove purchasing from the app.

I can't see Sony doing day 1 PS Now releases, but maybe day 30 releases. I.e. the game hits the service after a month. Anybody really keen to play the game at launch is going to buy it, everybody else - including those who would have waited for a sale - will get to play it a month later. The behaviour of the core won't change, the behaviour of those on a budget won't change.

and maybe then psnow would have increased value. But that's ifs and whens.

Behavior takes time to change. When you introduce something new to the market it takes awhile for people's purchasing habits to change. Its not over night. Game passes value might increase because of the additional studios MS has purchased and might purchase in the future. Gamepass might have the biggest effect on the used market at first. Its a low cost way to play the most games and with Gamestops a heart beat from bankruptcy it could spur adoption.

This assumes Azure is not also powering a tons of apps and services that also peak outside of work hours.

MS continues to build out to meet demand, the xcloud servers would be gaming first and then compute / machine learning after. For gaming demand is more constant in the late afternoon into evening. I don't see ms spinning up word on xcloud for an exchange server getting hosted on xcloud.

Folding @ Home? ¯\_(ツ)_/¯

big money maker there

 

[AzBat]

Can't account for any meaningful sales when it's only 1 test option at the end of a generation. Until they reduce the number of options for a sale or launch lock-and-step at the beginning of a generation it will never account for more than what it already has achieved.

Tommy McClain

 

[Shifty Geezer]

Can't account for any meaningful sales when it's only 1 test option at the end of a generation.

Two generations. XB360 and XB1. Obviously 360 didn't have Game Pass and GWG wasn't even a thing when it launched, but MS has offered sub-based options twice now, and AFAIK they haven't accounted for significant sales. Certainly MS didn't introduce an instalment plan option for XB1 at launch based on the results of their XB360 Entertainment For All.

I agree there's nothing conclusive, but the little evidence there is of instalment-based gaming being a meaningful launch feature of XBSX is against the notion. It's less supported than the notion of having a Cell is PS5 as an audio processor and for BC...