NPD September 2004

[wco81]

means that PS2 users save money for something ahead and that PS2 is entering its final stage of life unlike finally gearing-up Xbox.

Are there big Xbox titles planned after this Xmas?

Even if there are, will gamers care if MS announces the Xenon in early 2005 for a launch by Xmas 2005?

Who's going to buy Xbox games in the fall of 2005 and later? Especially if Xenon isn't backwards-compatible? For MS' sake, Xbox games released within a 2-3 month window of the Xenon launch better not appear more attractive than the Xenon launch lineup.

 

[Entropy]

Isn't the GCN still in 2nd worldwide?

What? You mean there's actually a world outside the US?

 

[Johnny Awesome]

Very good points Readykilowatt.

 

[Spidermate]

The PS2 sales might be slow right not, but a pricedrop to $99 is an easy fix and a good way to make sales surge once again. And I'm sure the PSTwo will be able to sell double of what PSOne did.

There's a shortage of PS2 on the US (and the world) the last two months, because Sony are getting a rid of their stock of old PS2, since the new one will replace the old model completely.
That explains the numbers for the PS2 sales.

I thought no one would never mention this. I normally give credit where it belongs, but seriously, if you thought the PS2 lost its spot clearly by everyone out there just having one, then you are flat out wrong. There were several articals reporting that there were a lack of PS2 consoles on the US shelves, long before any of this came about, due to Sony preparing for new stock. That was the only reason their numbers stagnated.

 

[Johnny Awesome]

That's true. There has been a two month shortage on PS2s. I think it will be interesting this holiday. I'm still expecting the PSTwo to outsell Xbox, but not by a huge margin.

 

[DEO3]

I found this on another forum earlier today and it surprised me (assuming these numbers are on spot), people often talk about how Microsoft loses money on every console they sell, but apparently Sony and Nintendo both do as well. I never realized that they make all thier money off of game royalties.

The most recent "installed base" and "tie ratio" numbers are:

Cumulative Installed Base
PS2: 24,433,000
Xbox: 9,367,000
GCN: 7,672,000
GBA: 22,579,000

LTD Tie Ratios (Avg number of games bought per each console unit sold)
PS2: 8.52
Xbox: 7.01
GCN: 6.68
GBA: 3.67

On a modern console game, the hardware maker earns about $10 from royalties. I think the GBA earns less than that, and "greatest hits" titles also earn less, but $10 is just a convenient ballpark number.

So looking at the tie ratios, Sony has made $85 on every PS2. But Sony typically sells their hardware (both PSone and PS2) at roughly a $50 loss (Sony will never give us an exact number on that, but it's "heavily rumored"). So Sony has essentially only made $35 on every PS2.

Microsoft has made $70 per-XBox in royalties, but they're said to lose $100 on the hardware, so they're down $30 for every XBox.

Nintendo has said that at the time of price drops, they lose "single digit" (less that $10) money on the hardware. The rest of the time, they're making small amounts of money on it, so lets just say they're breaking even. So Nintendo makes $67 on each GameCube.

The GBA (like the Cube and the N64) isn't sold at a loss, so it gets $37.

So, multiplied by the "installed base" numbers, the PS2 has earned $855 million in America. The XBox has lost $281 million. The GameCube has earned $514 million. And the GBA has earned $835 million.

After reading this I can kind of understand why Nintendo has been so reluctant to reach out to 3rd party developers, as a developer themselves Nintendo makes a lot more profit off thier own titles than those of 3rd party developers. And with something like seven out of the ten best selling games for the Gamecube developed by Nintendo themselves, they must be doing pretty well.

If some popular 3rd party games came and pushed Nintendo's out of the limelight, Nintendo would acctualy be making less money unless those games sold a ton of units.

 

[one]

I found this on another forum earlier today and it surprised me (assuming these numbers are on spot), people often talk about how Microsoft loses money on every console they sell, but apparently Sony and Nintendo both do as well. I never realized that they make all thier money off of game royalties.

Nintendo has said that at the time of price drops, they lose "single digit" (less that $10) money on the hardware.

If you believe these Nintendo words, you have to believe SCEI's official words that they never sell hardware at loss

 

[PC-Engine]

And when did SCEI officially say they never sell hardware at a loss?

Fanboi logic?

 

[StefanS]

Well, according to an IGN interview from way back (with Perrin Kaplan, if I remember correctly), Nintendo was still breaking even, when the GCN's price dropped to 150 $. Sine then they probably have been cutting costs even further, so the 99$ dollar price point won't hurt them much or not at all.

 

[PiNkY]

loses for MS's xbox division have declined considerably this quarter while revenue is steadily increasing (in spite of the hw price cut)

http://www.microsoft.com/presspass/press/2004/oct04/10-21fy05q1earnings.asp

Seems they are on a good way


Edited: They also claim 1.5 Mio Preorders for Halo 2 here

 

[one]

And when did SCEI officially say they never sell hardware at a loss?

Fanboi logic?

Huh? Then please quote what loss they have in selling hardware from official source, with your long-standing troll passion.

Here's an interview with Ken Kutaragi about PSX (home server) (machine translation).

From this interview, (the paragraph with the title "- A loyalty is what changed KATACHI of IP" in the machine translation)

* Royalty is another form of IP *

Question: It seems that the difference between the business models of consumer electronics and game console gets problematic when you can play PS2 games on PSX.

Kutaragi: As we correct someone almost angrily everytime, at least for our company the business model where you get a loss on hardware can't be adopted. But, there are certain people who intentionally broadcast strange misunderstanding that game hardwares are sold even in deficit. Then there is a company that put such idea (selling a game console at a loss) into practice and fell in disaster. Like having no choice but to go with a loss every year...

Even if you can break even, you can't afford to do next investment. It's not by getting ample funds from Sony Group that we invest in PS1 or PS2 or PS3. We do it with the money we earned by ourselves. To fulfill it, it's impossible to take the business model with a loss in hardware.

Question: You take the royalty model.

Kutaragi: Maybe you have misunderstanding also about royalty, but in the case of us, it's cheaper than printing magazines at the least. Moreover, for SCE Group at least, the royalty is linked to a price of a game title and not uniform.

Royalty, too, has some reason. Currently we pay much money to the MPEG2 patent pool. In other words, you can think it as another form of IP just like money you have to pay other companies. Even though a technology can be used (royalty-free) by a cross-license of Sony Group, for such technology we as Sony Group do certain R&D for that (cross-license). We have to redeem (that R&D).

SCEI is the only division in Sony Group that is not in deficit. It compensates other divisions blunder while building semiconductor plants and throwing huge R&D cost onto Cell.

 

[Magnum PI]

Seems they are on a good way

on a good way to what ?

 

[one]

Found an interesting (but somewhat exaggerated) story via a post in another thread...

Everyone was in awe. Sony was bringing the super console known as the PlayStation to America for almost half the price it was selling for in Japan.

This brought force claims of dumping by Atari. Atari swore that they would have the PlayStation stopped before it came out at that price "because it was being sold below cost and that's dumping!"

The myth was born.

...

By the time the PlayStation came out in North America 4 months later, a lot had changed during the year. RAM had gone from $50US a megabyte to $20. The Yen had gone from 80 yen per US dollar to 110. And Sega had dropped the price of the Saturn to $299. At this point the PlayStation was indeed profitable, and the Saturn was a minor money pit for Sega.

Sega was not only losing money on the Saturn, but asked retailers to expect the same. A "modest $15 per console" loss to help Sega. Well, you can imagine what many retailers said...

The Saturn was the first console that was actively being marketed and the
company was losing money. While Sony was building the PlayStation from parts they made themselves, Sega was paying a higher price and buying parts from others.

Treating a competitor as dumping and imploring help of government is one of common ways of American companies against Japanese players, as Cray against this-'PC-Engine'-guy's favorite NEC in late '90s

And another quote for PC-engine:

Apparently this article was just a little too much reading for some people who would rather conclude nothing was said than actually bother to learn how this industry works. Fine, here's the short version:

It's not I saying that Sony has always made a unit profit on each PS2 sold, but Sony themselves claiming that. In both the press conferences for follow-up questions pertaining to the 2000 and 2001 stock report for investors, which were available online in audio files on Sony's website for months after the publication of their annual report, Sony openly discussed how the PS2 is profitable on each unit sold.

End of short version. Everything else beyond that is the how and why everything works the way it does. Is Sony going to go out and make a press release about it? "Hey! We're making $100 profit per console sold while MS loses $100 on each Xbox!" Of course not.

 

[cthellis42]

I believe the key word he's alighting upon is "never sell" and we certainly know they HAVE sold at a loss. (Since they mentioned the point at which their hardware becomes profitable.)

Of course arguing semantics is silly. If you understand it to be "never (ultimately) sell..." then you understand it differently as well. IMHO, it's the long term follow-up that counts, and that's something that is never easily quantified, though people constantly quip one thing or another. (Usually with no backup or examination of figures.)

 

[Geeforcer]

I think it's just a misunderstanding of what was really said - considering the fixed costs of development, you'll never sell any electronics is you don't sell first batch of units at the loss.

 

[cthellis42]

But that's the point. Things being talked about now are CURRENT costs, not initial ones. DEO's quote is saying Sony "typically sells" (which is either saying "now" or "overall average") the PSOne and PS2 at a $50 loss, that Xbox loses $100, and that Nintendo loses $10. one was bringing up that if one accepted Nintendo's official statement on it, you would also have to accept Sony's comments at face value. (That they do not aim for or ride on a hardware loss, that the PS2 has been profitable since late 2001, etc.)

one's comment may have been simplistic and/or incomplete, but the thrust of it was to counter what DEO's quote contained, which by the way, doesn't bring up squat on the validity of Microsoft's loss per Xbox either.

I basically wouldn't treat any "secondary, unnamed sources" with any real seriousness--certainly not more than an examination of financial figures might show. And I would give most company press releases relatively equal credence. Which is why much of that, and much of the following gets rated as "bunk."

Point is, we shouldn't be leaping on technicalities, but instead examine what's underlying it all. Smart-ass comments and invective about matters of actual debate gets pretty F-ing tiresome.




P.S. one, I certainly wish you had a name that wasn't also a pronoun I frequently use.

 

[one]

I believe the key word he's alighting upon is "never sell" and we certainly know they HAVE sold at a loss. (Since they mentioned the point at which their hardware becomes profitable.)

If you mean SCEI by "they", mind pointing out where they mention "the point at which their hardware becomes profitable"? I haven't seen such thing at least in the linked article above. You know, there's much difference between breaking even and selling at a loss.

one's comment may have been simplistic and/or incomplete, but the thrust of it was to counter what DEO's quote contained, which by the way, doesn't bring up squat on the validity of Microsoft's loss per Xbox either.

I don't see which piece of my argument is incomplete, either. As for Xbox, no one will question the validity of MS's loss, for it's very clear from the annual corporate financial reports of MS's entertainment division officialy available from MS. It's large in the red. No royalty revenue could extinguish the accumulated loss. If they lie in those reports, they are punished by the law. You don't think it's due to abundant stock of Xbox, or due to huge investment in Xenon R&D, or managing loss in Xbox Live, do you? It's a too big figure to explain by these possible reasons. Then there should be a loss in selling Xbox hardware. Their dispute with Nvidia and failure that they couldn't buy GPU cheaper in its later stage verifies it. It's even simpler and not incomplete.

Sony's case is not simple, because from its financial report you can't tell the profit by software royalties from the profit by selling hardware and software. Thus the question about the 'royalty model' occurs in the interview I quoted. SCE is no Nintendo as a software house and doesn't have so many game hits. Therefore they should get profit in selling hardware.

As a sidenote, though I pointed it in the previous comment, currently the only profitable division among Sony is SCE. As Kutaragi's comment and 'Sony Shock' in the last year suggest, Sony's financial situation can't permit cash flow from Sony Group to SCE, though the reverse can be true. On the contrary, Microsoft has huge revenue especially in the emerging server market these days and the Xbox business is nothing more than an instrument to reduce the tax payment. For that matter MS doesn't care shit about the 'tiny' loss in Xbox.

P.S. one, I certainly wish you had a name that wasn't also a pronoun I frequently use.

Originally when I registered in this forum I didn't intend to post as much comments in here, but somehow failed

 

[cthellis42]

If you mean SCEI by "they", mind pointing out where they mention "the point at which their hardware becomes profitable"? I haven't seen such thing at least in the linked article above. You know, there's much difference between breaking even and selling at a loss.

They don't in that, no. But they certainly have in financial reports ("Our success in reducing production costs has enabled PS2 hardware to become profitable in the latter half of the year under review" -- don't tell me you think they were solidly even for the first year plus. ), and they've certainly talked about the possibility of selling at loss in regards to the PSP as well. (It's also a point that's been brought up many times on B3D before.) At any rate, it's not like it's an unheard-of concept for Sony.

As for Xbox, no one will question the validity of MS's loss, for it's very clear from the annual corporate financial reports of MS's entertainment division officialy available from MS.

I don't question the validity, simply the amount without any other explanation, detail, or reliable reference. There's a difference between losing $50 and $100 and $150 and what was being lost when, just as every point becomes debatable to varying degrees without solid facts.

 

[one]

If you mean SCEI by "they", mind pointing out where they mention "the point at which their hardware becomes profitable"? I haven't seen such thing at least in the linked article above. You know, there's much difference between breaking even and selling at a loss.

They don't in that, no. But they certainly have in financial reports ("Our success in reducing production costs has enabled PS2 hardware to become profitable in the latter half of the year under review" -- don't tell me you think they were solidly even for the first year plus. ), and they've certainly talked about the possibility of selling at loss in regards to the PSP as well. (It's also a point that's been brought up many times on B3D before.) At any rate, it's not like it's an unheard-of concept for Sony.

You are kidding, right? Sure, Kutaragi tells this in the report:

Question: To start with, would you give us your thoughts on the performance of the Game business in the year ended March 31, 2002?

Kutaragi CEO, SCE During the year under review, the PlayStation 2 (PS2) business finally entered a harvest stage with sales topping the 1 trillion yen mark forthe first time ever and operating income reaching approximately 83 billion yen.
This performance can be attributed to the positive growth cycle generated by the release of a steady stream of captivating software in Japan, the U.S. and Europe, which in turn, propelled sales of the PS2 console even higher in the console’s second year on the market. The backward compatibility of PlayStation (PS) software on the PS2 platform fueled strong growth in sales of PS software as well. Our success in reducing production costs has enabled PS2 hardware to become profitable in the latter half of the year under review, which has contributed to an overall increase in profit.

This means plus in the entire PS2 business, not primitive way of losing money like selling hardware at loss in the launch days. He talks about preceding capital investment into the semiconductor fabs and R&D with Toshiba (even the article what I quoted mentioned it). Until it's fully repaid, the PS2 business is not considered as success. If there's no profit in selling hardware, how can they get back those capital investment? If you learn economics, there's a theory about the U.S. economy called 'twin deficits', where th U.S. always borrows money from all over the world and deficits just getting bigger and bigger even when the economy looks like flourishing. In PS2's case, it could get actual profit from the business, then repaid all capital investments for PS2, and then could invest it into the next project. It's known as the Intel model in the semiconductor area, as Kutaragi himself told in some interview IIRC.

 

[Johnny Awesome]