Market Competition, Winners, Losers, Market Landscape and all that jazz... *spawn*

[Shifty Geezer]

What are we even talking about anymore? Why is this even brought up in X1 rumor thread lol.

It was news that an ND spokesperson said XB1 needed to do well. It's not a great subject, I'll admit. Discussion boils down very polarising 'it's doesn't matter if XB1 fails and PS4 is the only next-gen console' and 'competition is great' etc.

 

[Nesh]

Basic flaws of capitalism.

Competition doesn't really solve the problems once a company is big enough to use predatory practices, buy competitors, and sue for trivial patents that they bought using their billions in profits, but it's invariably worse under a monopoly. Workers are paid as low as they can. Product quality is also as low as they can. Profit is, sadly, the measure of success in American society, and it's necessarily paid for by the working class, both as employees and as consumers, this isn't going to change any time soon.

A market where a company makes a huge amount of profit is a significant indicator of failure of the capitalism ideal. It means fair competition didn't happen, the working class lost against the rich, and their own government didn't step in to regulate.

Back to Naughty Dog... the console makers are currently forced to compete among equally strong competitors. This is a great thing that doesn't happen often, we should appreciate it while it lasts. It can help Naughty Dog get a better production budget for their games, because money will have to be invested into first party games instead of being taken as profit. The PS3 and XB1 were designed under a leadership that was arrogant because of the PS2 and 360 success, respectively. OTOH, the PS4 was designed while Sony became an underdog. Without Microsoft and Nintendo breathing down their neck, the PS3 would have been the dominant platform and profitable. It would have justified the arrogance, and we would never have the PS4 as is it right now. Worse, we wouldn't have Knack, I couldn't live in such a world.

As someone who has studied economics and got tired of the bullshit dogmas being spread by economic literature, ideologies and politicians, I agree with this guy

 

[Silent_Buddha]

No, that like a lot of people he is confusing the results of competition with its absence. Competition doesn’t benefit consumers if it can't produce winners and losers.

Every single competitor can be a "winner" in terms of profit and growth. I have the feeling your meaning of "winners and loser" is that applied by forum warriors of whoever has the most market share. However, while that is a goal of every company, it is in many cases irrelevant in determining whether that company and its products are a winner or a loser. As profit and to an extent growth (for publicly traded companies) is the sole determining factor of whether they are winning or losing.

Competition forces a company to innovate or incorporate features from their competitors in order to avoid becoming a loser via losing money. NOT via losing market share.

There have been cases of companies actually losing despite having the greater share of the market because that product division is operating at a loss.

Likewise there are plenty of cases of companies actually winning (making a profit) despite having a small share of the market. Apple computers immediately comes to mind here. As does their phone business when compared to Samsung. Yet I doubt anyone would consider the company or their products as "losers."

Options alone don't benefit anyone. Buyers benefit when companies attempt to differentiate their product in order to gain a sales advantage. The byproduct of that is a sales disparity. A sales disparity is the natural and expected result and does not equate to a "lack of competition".

And as stated a sales disparity does not equate to "losing." Otherwise Honda would be a massive "loser" for the past 3-4 decades as their sales volume greatly lags behind Toyota, Nissan, Ford, Chevrolet, the Volkswagen group, etc. Hell, for many decades Chevrolet led the world in sales volume for automobiles despite not having the best, or the most innovative, or the most reliable, or the most profitable, etc. cars in the world. Yet, I doubt many consumers would have thought of them as the grand champion winners of all things automotive.

A loser is only a company that fails to make a profit on products sold or products that fail to make a profit. Sales volume relative to competitors is only one factor in that and not always the most important.

Regards,
SB

 

[Deleted member 11852]

Again, in terms of this discussion - which was a 3rd party developer saying that it's better to have competition - of course! They want to sell their games to as many end users as possible and the market is better for them with more competition.

It was a Naughty Dog developer, who are a Sony first party studio which rather undermines your cynical and judgemental statement.

Developers, for the most part, aren't fanboys. Events like GDC and Develop are great examples of forums where developers freely share the secrets of successful software, they don't hoard them as is common in other competitive markets where companies fight over patents. It's probably because there are few barriers for individuals to move between working at a Sony first party studio, a third party or a Microsoft first party studio.

 

[Shifty Geezer]

Every single competitor can be a "winner" in terms of profit and growth.

Not true. A market generating $n dollars can only support m number of businesses. The console space has shown by-and-large it can only support three major players, and typically it's been with one of those struggling to make money. An influx of new competitors would dilute the market revenue, and eventually some of them will lose to make room for the few success players.

The very definition of competition is trying to take resources or success away from your rivals. If you're not trying to do that, you're not competing. MS competing and being successful means taking money away from Nintendo and Sony, and vice versa. Or if not them, from other companies where people choose to spend on games instead of something else.

 

[Deleted member 11852]

Not true. A market generating $n dollars can only support m number of businesses. The console space has shown by-and-large it can only support three major players, and typically it's been with one of those struggling to make money.

Well that's a different discussion. The console market has supported there (or more) companies for several generations.

Last generation would likely been profitable for all if not for Sony's insane PS3 R&D and subsidising Blu-ray and Microsoft's woes with RRoD, but neither of those profit sucking costs were attributed to the competition, it was self-inflicted.

This generation, well it's a little early to tell, but Nintendo look as though they may end up with a less but like the preceding generation, and if this pans out it will again be self-inflicted, that is them generally mis-judging the market and alienating third party developers.

The very definition of competition is trying to take resources or success away from your rivals.

This is true, although the economics of consoles aren't based on people picking one or the other, with profits front-loaded like phones and tablets. Like many things - TVs, cars - many families will have more than one console. Even after a purchase the competition continues and why first party titles and exclusives are important. Sony wants me to buy The Last of Us Remastered instead of the Master Chief Collection. In reality, I can afford both but not everybody can.

But there's more than enough consumer spend (still) in the console market for everybody to make some profit. If you look back over the failures of the last few generations, they were due to companies shooting themselves in the foot. Or the head.

 

[shredenvain]

Good post Soup.

 

[Silent_Buddha]

Not true. A market generating $n dollars can only support m number of businesses. The console space has shown by-and-large it can only support three major players, and typically it's been with one of those struggling to make money. An influx of new competitors would dilute the market revenue, and eventually some of them will lose to make room for the few success players.

The very definition of competition is trying to take resources or success away from your rivals. If you're not trying to do that, you're not competing. MS competing and being successful means taking money away from Nintendo and Sony, and vice versa. Or if not them, from other companies where people choose to spend on games instead of something else.

Of course, there are finite consumers. But it is entirely possible for all competitors to make a profit and thus "win." It's also possible for all competitors to make a loss and thus all "lose." It's also possible for the market share leader to "lose" because they are losing money while a company with a far smaller piece of the pie makes a profit and "wins." For example, despite Honda selling far less automobiles than Chevrolet, they consistently posted a profit while Chevrolet posted losses in many years in the 1990's and 2000's despite have a much larger share of the worldwide automotive market.

How many competitors a market can sustain is just one variable, as is market share, as is product costs (only one part of determining profit margins), operating efficiency (management, marketing, etc.), and more.

I was just addressing the extremely narrow viewpoint that the "winner" is always the company selling the most of X item. And yes, that is certainly a winner in terms of sales volume, but is rather meaningless on its own. Who came out better between say Tomb Raider (still hadn't made a profit through its first year of sales, but I believe is finally profitable) or Torchlight II (was making a profit within it's first month of sales) despite Tomb Raider selling significantly more copies at a higher price and thus "winning" the sales volume title between those two.

Yes, I rambled on a fair bit beyond just agreeing that with finite buyers you can't have infinite sellers. Ooopsie.

Regards,
SB

 

[DuckThor Evil]

Nintendo could perhaps be small and nimble Honda, Xbox or Playstation not so much... Those consoles weren't built or their business projected as being a small but still profitable venture. They need marketshare/volume and failure to do would be bad. Comparisons to Apple aren't very useful here, their business model is completely different.

 

[blakjedi]

Does being second equal losing now?

 

[DuckThor Evil]

Does being second equal losing now?

I have a feeling it does... I'm not very bullish on traditional home consoles anymore. It has rarely been very lucrative even for the winner. I doubt it will provide good results for the two behemoths. I'm not a believer in great market growth. We'll see what happens, but I wouldn't be surprised if worldwide numbers end up being PS4+One < PS360, with One taking the bigger hit, but even for Sony It won't be a big cash cow.

 

[Silent_Buddha]

Nintendo could perhaps be small and nimble Honda, Xbox or Playstation not so much... Those consoles weren't built or their business projected as being a small but still profitable venture. They need marketshare/volume and failure to do would be bad. Comparisons to Apple aren't very useful here, their business model is completely different.

I'm not sure about PS4 as there hasn't been much discussion over just how cost effective it will be with regards to node transitions for the APU as there has been with the XB1 APU (MS appears to have designed it specifically to maximize how much and how efficiently it can be shrunk). Although we already have a bit of a clue with regards to PS4 using GDDR5 which is unlikely to cost scale down in the future to nearly the same extent as DDR3 (DDR3 sells multiple orders of magnitude more chips than GDDR5). And with that GDDR5 comes the choice of memory controller which at least with regards to GPUs appears to be the most difficult part of the chip to shrink when smaller nodes become available.

It's entirely possible that XB1 could still end up being profitable even if they suffered a 2:1 or 3:1 loss in marketshare compared to Sony by the end of the generation. Whether that would be acceptable to shareholders, however, is another thing entirely. Assuming you get the shareholders on board, XB1 could still survive even if profits were slim. The same can't necessarily be said about Sony if they were to only manage to end up 1:1 or slight better in comparison to the XB1 by the end of the generation. All of course, depending on the final size of the market by the end of the generation. In their current state, they not only need the PS4 to succeed, but they need it to succeed BIG and generate significant profits. That could, of course, change if other parts of their corporation can either turn things around or do better.

It will be very interesting to see what Sony's next yearly financial report is like. Unfortunately we won't see that for another 9-10 months. But we should start getting a fair idea by the end of the 3rd financial quarter (Holiday quarter). If PS4 continues with the hot selling and continues to move a lot of software (I expect it will), then the games division stands a good chance of being a significant profit generator. All assuming, of course, that other parts of their console division don't tank the profits generated by the PS4 turning the division from a winner into a loser (I personally don't see this happening).

Regards,
SB

 

[specwarGP2]

Back to Naughty Dog... the console makers are currently forced to compete among equally strong competitors. This is a great thing that doesn't happen often, we should appreciate it while it lasts. It can help Naughty Dog get a better production budget for their games, because money will have to be invested into first party games instead of being taken as profit. The PS3 and XB1 were designed under a leadership that was arrogant because of the PS2 and 360 success, respectively. OTOH, the PS4 was designed while Sony became an underdog. Without Microsoft and Nintendo breathing down their neck, the PS3 would have been the dominant platform and profitable. It would have justified the arrogance, and we would never have the PS4 as is it right now. Worse, we wouldn't have Knack, I couldn't live in such a world.

But PS2 was dominant and profitable and yet Sony greenlighted games like Shadow of the Colossus even though Ico was a commercial flop.

 

[SlimJim]

But PS2 was dominant and profitable and yet Sony greenlighted games like Shadow of the Colossus even though Ico was a commercial flop.

That is correct; PlayStation always had games like Vib Ribbon, Parappa, even puzzle games.
They never crapped on facilitating unique or non-mass (market) appeal games.
I never saw Sony as arrogant. If you want to know what arrogant is, look at Microsoft after they launched the Kinect. They thought they hit a low-budget goldmine and closed a lot of studios down. They only greenlit Kinect titles, or sequels to proven titles.
They thought they didn't need great studios like Bungie, or even great exclusives..

This is why I think Sony needs to be the winner: we know what happens when Sony is king: look at the PS1 and PS2 periods, or even PS3: they always try to get the best entertainment for consumers. Not only american gun-loving consumers, but all consumers, in every market.
Even if the game is not a commercial succes, they will still believe in the vision and keep the developer on board.

We also know what happens when MS thinks they are king....

It would be an unhealthy industry is MS came on top this early generation. So my conclusion is that it's good to have a true deserving winner, because it will force the lesser companies to improve themselves.

 

[Prophecy2k]

That is correct; PlayStation always had games like Vib Ribbon, Parappa, even puzzle games.
They never crapped on facilitating unique or non-mass (market) appeal games.
I never saw Sony as arrogant. If you want to know what arrogant is, look at Microsoft after they launched the Kinect. They thought they hit a low-budget goldmine and closed a lot of studios down. They only greenlit Kinect titles, or sequels to proven titles.
They thought they didn't need great studios like Bungie, or even great exclusives..

This is why I think Sony needs to be the winner: we know what happens when Sony is king: look at the PS1 and PS2 periods, or even PS3: they always try to get the best entertainment for consumers. Not only american gun-loving consumers, but all consumers, in every market.
Even if the game is not a commercial succes, they will still believe in the vision and keep the developer on board.

We also know what happens when MS thinks they are king....

It would be an unhealthy industry is MS came on top this early generation. So my conclusion is that it's good to have a true deserving winner, because it will force the lesser companies to improve themselves.

I think its a little un-realistic to come to conclusions like this, as you are forgetting one fundamental fact about both Sony and MS: i.e. both companies, in terms of their personnel make-up, are quite different than back in the days when either Sony was dominant, or MS were enjoying success with the 360.

Whilst of course there is always a fundamental company culture that the broad sweep of employees within an organisation generally conform to, there is always exceptions to the rule.

Late-PS3/PS4 Sony is an example, where a traditionally distinctly stuck-in-their-ways company was influenced very positively by a small group of employees (i.e. Cerny, Shu Yoshida, House etc) who felt the best direction for the playstation business to go in was one radically different to what they had done in the past.

Equally, the people running Xbox during those Kinect-driven years, are no longer running Xbox (MS even has a different CEO now), so with a new change in upper and Xbox management, we might see a very different MS, if (in the unlikely event that) they started to pull out ahead in the current console race.

There are a lot of factors to consider. Whilst, at the same time my own personal opinion is that Sony tends to go broader with the genres and types of games they produce and support, and this approach appeals more to me. On the other hand I wouldn't write off MS based on their recent history, but I would remain weary of them.

 

[steveOrino]

Well, the entertainment industry as a whole is a tough nut to crack from a purely business point of view because of tastes and how those tastes change over time. Yet, it seems companies continue to try and always fail to turn it into a numbers only game.

You see this with products like the Early PS3 and currently X1. They only look at the end product of their past success and totally forget how they got there when creating the next product.

Core gamers are THE early adopters and should be the ONLY consumer these companies should care about. Gaming is the only thing that separates that big expensive plastic box from a $99 Apple TV. Why they continue to think people want to pay 500-600 dollarydoos to watch TV is truly mind blowing.

 

[milk]

Whilst of course there is always a fundamental company culture that the broad sweep of employees within an organisation generally conform to, there is always exceptions to the rule.

Late-PS3/PS4 Sony is an example, where a traditionally distinctly stuck-in-their-ways company was influenced very positively by a small group of employees who felt the best direction for the playstation business to go in was one radically different to what they had done in the past.

Equally, the people running Xbox during those Kinect-driven years, are no longer running Xbox, so with a new change in upper and Xbox management, we might see a very different MS.

Whilst, at the same time my own personal opinion is that Sony tends to go broader with the genres and types of games they produce and support, and this approach appeals more to me. On the other hand I wouldn't write off MS based on their recent history, but I would remain weary of them.

Very well put points by both. I agree its safe to say that from the beggining up to now, sony has mantained this tradition of supporting a broad range of titles and not shy away from experimental ideas. They seem to, more than MS or Nintendo, want to support gaming culture as a whole and not just their platform (of course, their message being, gaming IS our platform) so I'd say they deserve some praise there. But whats amusing is that the lattest radical changes on sony's culture from the launch of ps3 up to now, were greatly influenced by 360's success, and from learning a thing or two from the way MS handled that project, which would probably not have happened were sonny to be the lead once again on the past generation from the outset.
So after all, tha's an exemple of competition being benneficial to the industry infact.

 

[Cyan]

I think you mean a guy who works at Naughty Dog said that. A guy whose expertise is not economics.

Competition is good, because without it PS4 wouldn't be the console it is today.

Without it games like Gears of War or Mario Kart wouldn't exist, since they'd just be "another game in the list of your overcrowded console".

Both created some kind of new genre or influential mechanics. With a single console they wouldn't get the promotion they deserve.

So while Shifty says that there could be potential advantages to having a single console, I see none, not a single one. There is no way around it.

 

[Cyan]

Every choice in life has upsides and downsides and none should be ignored. If there was only one console platform, there'd be negatives and positives, just as there are negatives and positives to having multiple players.

I see no positives in that. I am a brand person. I prefer Xbox, Roland over other music manufactures, Levi's or Zara jeans compared to others. But I also like Yamaha sounds, and Springfield jeans.

You cannot put all of your eggs in one basket; i.e., like if you are in love, you can't place your life worth on the answer, reactions of one single person...

Well... it has to be that way. Because people come from all walks of life. xP :smile2: So...

 

[Shifty Geezer]

I see no positives in that.

No platform exclusives that you can't play without shelling out on a whole other box that does exactly the same job. All your friends on the one service without some being on one platform and others being on another. Better utilisation of the hardware because devs can focus on the one machine instead of serving multiple different hardwares. Better economies of scale for components enabling lower prices.

Some of the potential advantages are mitigated by a company operating in a self-serving fashion, which is what people expect, but it doesn't have to be that way. However, that's a whole RSPCA discussion about capitalism and human nature and blah blah. Suffice to say, there are certainly positives to having a single platform even if one 1) doesn't value them personally and 2) would expect the monopoly to misuse its position and shaft consumers.