NPD Nov. You know you want it!

[TrungGap]

You do realize how console manufacturers typically make back their money, right? You must sale games and right now the absolute number of game sales isn't high enough for game developers of expensive (read: All modern games) games to make back their own investments. The other features of the PS3 are really not that important besides is Blu Ray playback which will only be good for so long (Blu Ray dies or Blu Ray players become very cheap). It's media center like functionality (which is highly limited) is also not going to sell it for long, especially considering its features are not much better than the competition. So I have no clue what you're trying to get at. It can't play the third role if it is that far behind the Xbox 360. Even then, it MUST sale games or it never become profitable.

Yes, I understand console manufacturers make a licensing fee on the games sold. So you can't say, it's selling software good enough and saying it will fail. Of course, I'm assuming they're not killing themselves by dumping these consoles way way below cogs.

I'm pretty sure Sony thought about bluray player and media center functionality. Yes, bluray will come down in price...but so will cost of PS3. And it's a small price to pay up front to win in the video market.

As for the media center functionality...yes, their plan is a mess right now. No clear direction. But I'm sure it's tied to Home and PSN somehow...

 

[Acert93]

Two small notes...

Attach rate is important, but also install base. A tie ratio of 3 with 10M hardware units is 30M software sales. A tie ratio of 4 with 5M units is 20M. Putting this into the Wii/PS3 perspective, the Wii is selling substantially more software than the PS3. This was one of the criticisms placed on the Xbox 360 last year:

The report further adds that the Xbox 360's high software attach rate is “a damning commentary on the limited hardware installed base, most of whom are hard-core gamers.” The analysts add that what is actually needed by Microsoft for its latest console, as well as by third party software publishers, is “quicker adoption of hardware and a rapidly growing installed base on which to sell progressively more game units,” rather than just more games sold per existing Xbox 360 owner.

In conclusion, the authors state, “If the Xbox 360 sports an attach rate of ten by holiday 2007, it will probably be because it has failed to gather critical momentum. What does it benefit publishers and investors if ten games are being purchased by a total audience of 10 million 360 owners? It doesn’t take effort to see that a console with an attach rate of 8 and an installed base of 50 million is superior to a console with an attach rate of 12 with an installed base of 20 mln."

The 360 attach rate has an interesting history. At launch it was about 4 titles per console, which at that time MS was looking at 1M-2M HW units. That rose to 4.6 titles per unit in August 2006 and rose again to 5.3 titles per unit in September 2006 (~6M units). And now we are seeing attach numbers at 6.9 for December 2007 (approaching 13M units ww?). Attach rate is only part of the equation; the real jarring part is that the attach rate continues to (aggresively) increase while the install base continues to grow as well. As an install base grows it is difficult to maintain high software tie ratios.

If a platform has 10M units with a 6 attach rate (60M total software units) and sells 2M units over a course of 3 months, with each of those new customers buying 2 games, that actually brings down your attach rate to 5.3 (64M SW units / 12M HW units). MS has sold fewer Xbox 360s in NA this year than Nintendo has Wiis (about 4M to 5M), but the tie ratios show about a 7-to-4 edge in software for those new customers plus 1.5 units for the existing install base (funky way to look at it, but it drives home the point) which pretty much underlines the point that 360 software sales, overall, are 2x better in 2007. Basically an attach rate is a good general barometer, but it doesn't say much about recent sales or total software volume.

The two big factors are total software volume and total platform growth. You can have a high attach rate, but small install base... or a large install base and small attach rate and still have similar total volume. So it isn't just the attach rate that is noticable, but showing platform growth as well as attach rate growth is the most telling aspect of all of this (i.e. continued consumer activity long past the initial purchase). Likewise any discussion of Wii/PS3 figures cannot be done so outside the context of volume. Even if the the PS3 eventually outpaces the Wii by a game+ in attach rate, if the Wii continues increasing marketshare its software volume will dwarf the PS3.

 

[AlphaWolf]

Two small notes...

Attach rate is important, but also install base. A tie ratio of 3 with 10M hardware units is 30M software sales. A tie ratio of 4 with 5M units is 20M. Putting this into the Wii/PS3 perspective, the Wii is selling substantially more software than the PS3. This was one of the criticisms placed on the Xbox 360 last year:



The 360 attach rate has an interesting history. At launch it was about 4 titles per console, which at that time MS was looking at 1M-2M HW units. That rose to 4.6 titles per unit in August 2006 and rose again to 5.3 titles per unit in September 2006 (~6M units). And now we are seeing attach numbers at 6.9 for December 2007 (approaching 13M units ww?). Attach rate is only part of the equation; the real jarring part is that the attach rate continues to (aggresively) increase while the install base continues to grow as well. As an install base grows it is difficult to maintain high software tie ratios.

If a platform has 10M units with a 6 attach rate (60M total software units) and sells 2M units over a course of 3 months, with each of those new customers buying 2 games, that actually brings down your attach rate to 5.3 (64M SW units / 12M HW units). MS has sold fewer Xbox 360s in NA this year than Nintendo has Wiis (about 4M to 5M), but the tie ratios show about a 7-to-4 edge in software for those new customers plus 1.5 units for the existing install base (funky way to look at it, but it drives home the point) which pretty much underlines the point that 360 software sales, overall, are 2x better in 2007. Basically an attach rate is a good general barometer, but it doesn't say much about recent sales or total software volume.

The two big factors are total software volume and total platform growth. You can have a high attach rate, but small install base... or a large install base and small attach rate and still have similar total volume. So it isn't just the attach rate that is noticable, but showing platform growth as well as attach rate growth is the most telling aspect of all of this (i.e. continued consumer activity long past the initial purchase). Likewise any discussion of Wii/PS3 figures cannot be done so outside the context of volume. Even if the the PS3 eventually outpaces the Wii by a game+ in attach rate, if the Wii continues increasing marketshare its software volume will dwarf the PS3.

It's posts like this that make me miss the reputation feature. Well done. Would read again +++

 

[JNewt427]

So from what I can read here in this thread, is the PS3 isn't doing to well?, what happens to a console if it truly does bomb. What kind of time frame would finally put the nail in the coffin, 3 months, 6 months?. Would it even come to that? I was actually thinking of buying a PS3 because I play SOCOM CA online(PS2) and I am looking forward to SOCOM Confrontation on the PS3, but the game has receantly went TBA in it's release date?.

With the PS2 is still selling? would Sony actually drop the PS3 console? I know there are some strong answers needed when something doesn't make a profit.

How many billions was spent in making the PS3 a reality?

 

[Nesh]

How much is Sony losing currently? If they pass the break even point in a year or so I am expecting the PS3 to continue its life normally

 

[AlphaWolf]

So from what I can read here in this thread, is the PS3 isn't doing to well?, what happens to a console if it truly does bomb. What kind of time frame would finally put the nail in the coffin, 3 months, 6 months?. Would it even come to that? I was actually thinking of buying a PS3 because I play SOCOM CA online(PS2) and I am looking forward to SOCOM Confrontation on the PS3, but the game has receantly went TBA in it's release date?.

With the PS2 is still selling? would Sony actually drop the PS3 console? I know there are some strong answers needed when something doesn't make a profit.

How many billions was spent in making the PS3 a reality?

Keep in mind most of the 'PS3 is doing badly' is mostly in context of North America. It's doing better in Japan and Europe, although I would think worse than Sony would have liked.

I don't doubt that the PS3 is in it for the long haul and Sony isn't going to close up shop with the Playstation brand anytime soon. The biggest fear for PS3 owners will be that the 360 will become the primary build platform and that the PS3 would lose exclusives. Again in a NA context.

 

[RobertR1]

Sony will not be dropping the PS3. If a major publisher such as EA pulls their PS3 support entirely, yes, it's in deep shit but that's not going to happen. You won't see this because Sony has shown it's willing to absorb losses to compete, gain marketshare and avoid market rejection.

What you're seeing is a market correction. Sony went from simply dominating the market with the PS2 to what now seems like a 3 way battle with them at the trailing end. Clearly, not many saw this coming thus the big shock followed by doom and gloom scenarios.

Sony is also a multifaceted company like MS that does not solely rely on their gaming arm for revenue. As long as other parts of the company are doing great (their Bravia sets selling like crazy) they can let the PS3 bleed them to a point. It's not desireable but they only have so much control over such.

Folding the PS3 project would certainly hurt their shares and would lead to a lack of investor confidences since they'd be admitting failure on a market that they have dominated for so long. When Sony electronics were doing bad, it's not like they stopped making TV's! These things happen in business. Not everything turns into a meal ticket. The company as a whole is actually doing better from a historical perspective thus the investors seem to be lenient on the gaming division losses. Now if the other divisions were in the red and gaming bled them even more, you would see a lot of pressure from investors.

At somepoint though, alarm bells will go off. The PS3 has cost Sony quite a few dollars. Next quarter financials will be interesting. If they keep losing money in the gaming division throughout 2008, yes, I expect some frowns but nothing short of a collapse in other aspects of the company will have Sony folding the PS3.

To sum it up:
1. If other parts of the company are losing money, the losses by the gaming division caused by the PS3 will be more in the spotlight and will get a lot more attention from the investors.

2. If major publishers like EA and activision pull their support, that would be a death sentence and I could see Sony having kill off the PS3. I don't see this happeneing though.

 

[Archgamer]

2. If major publishers like EA and activision pull their support, that would be a death sentence and I could see Sony having kill off the PS3. I don't see this happeneing though.

How well are the EA games selling on PS3? Is EA able to turn a profit for the PS3 titles? If not, then the PS3 is in trouble.

 

[AlphaWolf]

How well are the EA games selling on PS3? Is EA able to turn a profit for the PS3 titles? If not, then the PS3 is in trouble.

Better than the exclusives, which is kind of mind boggling.

 

[Zassk]

Sony recently stated they expect PS3 profitability no sooner than 2009. I would assume that this limits their ability to further cut prices, but perhaps I'm getting ahead of myself with that statement.

The two big factors are total software volume and total platform growth.

That's why the following graphic was such a great contribution to this thread (back on page 4). It shows the vast differences in overall software volume, without clouding the issue with things like attach rate.

 

[PARANOiA]

What you're seeing is a market correction. Sony went from simply dominating the market with the PS2 to what now seems like a 3 way battle with them at the trailing end. Clearly, not many saw this coming thus the big shock followed by doom and gloom scenarios.

A great post, and I'm selecting this part to highlight one additional point. Publishers from last generation (and to a lesser extent the PS1/N64/Saturn era) have had a great time since they were able to fairly comfortably pick a single console to target with the knowledge that there was a bright, shining market leader. The rumbings from companies like Activision and Midway moaning about the PS3's comparative lack of success are in my mind outputs of wanting a single platform to comfortably target.

Realistically, I cannot imagine we'll have another PS2-level of success out of this generation, and I'd be surprised if we see it again unless there's a significant market shift. Remember, the last time we were in a similar situation, MS jumped into the party at the very last minute, and Sega were in the game too with the DC.

Overall the "balance" we're seeing today is something of a negative for me, since there's a general wide selection of great exclusive first-party (and third-party in some cases) games now. I'm going to be picking up a PS3 and a Wii before too long, which I'll have to sacrifice a few games for (girlfriend logic states $700 AUD on a PS3 plus one game = 7 360 games I will have to go without). Overall though I can see why the competition is a very good thing, since all three are trying very hard to win our gaming dollar. Nintendo's new direction, Sony's aggressive price drops and continually improving firmware, and MS's great library of cheap games and extended warranty police to cover their hardware issues are all good things for gamers. And isn't that what we all want in the end?

 

[Nesh]

Sony recently stated they expect PS3 profitability no sooner than 2009. I would assume that this limits their ability to further cut prices, but perhaps I'm getting ahead of myself with that statement.



That's why the following graphic was such a great contribution to this thread (back on page 4). It shows the vast differences in overall software volume, without clouding the issue with things like attach rate.

There is one problem with the graph though if you want to measure the attach rate because it doesnt show units. You can have a huge red bar that is made out of few units and a smaller bar filled with a ton of units because the hardware was sold cheaper.

The graph is best at comparing software contribution sale revenues between platforms and less for the attach rate

 

[Skrying]

He didn't say it was good for attach rate, and we've come to the conclusion that attach rate means really very little.

 

[Zassk]

The graph shows where each company makes its profit.

MS makes profit off of software and breaks even on hardware -> huge software bar.

Nintendo makes profit off of hardware and software -> huge hardware bar.

Sony makes no profit until 2009 -> small software bar and huge losses in hardware.

 

[mrcorbo]

The graph shows where each company makes its profit.

MS makes profit off of software and breaks even on hardware -> huge software bar.

Nintendo makes profit off of hardware and software -> huge hardware bar.

Sony makes no profit until 2009 -> small software bar and huge losses in hardware.

That graph shows revenue, not profit. You would need to subtract manufacturing cost from those hardware numbers to be able to support the conclusions you outlined above. I agree with them, but they aren't supported by the graph alone.

 

[liuelson]

That's why the following graphic was such a great contribution to this thread (back on page 4). It shows the vast differences in overall software volume, without clouding the issue with things like attach rate.

http://i32.photobucket.com/albums/d25/miketuck3r/nov_npd.jpg

We (and publishers) are actually trying to examine 2 things: profitability now, and profitability in the future. Software revenue, install base, attach ratios, million-sellers all help us understand the picture of profitability now.

Launch-aligned comparisons (million-sellers in the first year, attach ratio in the first year), historical comparisons (attach ratio compared to PS2 in first year), and possibly even comparisons to the handheld software market (growth in DS software) may help us understand the picture of profitability in the future.

Clearly, software publishers are making more on XBox360 (in the US) than any other platform right now.

Can anyone help with the launch-aligned, historical, and possibly DS comparison to guesstimate the future picture?

 

[Cheezdoodles]

What you're seeing is a market correction. Sony went from simply dominating the market with the PS2 to what now seems like a 3 way battle with them at the trailing end. Clearly, not many saw this coming thus the big shock followed by doom and gloom scenarios.

This has nothing to do with a market correction. A market correction would happend if suddenly people where significantly less or more keen on buying a PS3 at a given price, suddenly its valued differently than it was, and there is an increase\decrease in demand. In order for it to be significant it has to drop\increas more than 10% in a short period of time (a day).

 

[scooby_dooby]

Wow, according to that graph publishers made more money on 360 than PS2, PS3 and Wii combined.

 

[Laa-Yosh]

So is the Wii the new PS2 in hardware, and the X360 the new PS2 in software?

 

[Nesh]

It is also very indicative to the possibility that MS makes a considerable amount of profits