Predict: Next gen console tech (10th generation edition) [2028+]

[iroboto]

My assumption is that prices for consoles should be based on what will help them grow their install base the most. Basically, higher unit sales should be paramount over biggest margins. Very low margins should be entirely acceptable if that's what it takes to get more sales.

Sony has this accounted for. They know the supply demand curve for this product, they know the logistical costs as well as the life time value of these customers until next generation.

That’s all accounted for in price points and optimized to meet demand and supply. To think otherwise would be awkward. Sony didn’t get to leadership position not understanding how to price and position their hardware.

this late into the generation the only way to gain new customers is to lower the price of entry. The will gain no new customers with this console. Existing people will upgrade and sell their ps5 on the used market at a lower price point than they can sell it at, and that’s how they acquire some new players.

If you’re talking about extracting the absolute most profit from your customers, that is getting them onboard from day 1 as life time value is the highest there. And they continue to grow the majority of their user base through the base PS5 and used markets.

There are SKUs designed for growth and there are SKUs designed as a halo product, this is the latter. Sony doesn’t seem to care that you don’t buy it, Sony wants you to know what they can do. Top of the charts of every comparison. Pushing hard against even PC comparisons. The price point is painful, but they are in the position where this product is beneficial to them.

I agree they should have added a disc drive. That was a major failure of theirs. I don’t think that was a cost decision. I think that’s signalling Sony wants more digital purchases to increase margins and getting their customers to build their “digital” library for next generation.

 

[Shifty Geezer]

My assumption is that prices for consoles should be based on what will help them grow their install base the most. Basically, higher unit sales should be paramount over biggest margins. Very low margins should be entirely acceptable if that's what it takes to get more sales.

Glossing over your criticism of our inability to see reason, why do you think Sony are choosing the course of action they are? Do you believe they cannot calculate value-over-time versus value from profit per unit? Did they not bother to calculate how much more money they would make selling at cost versus with a couple hundred dollars profit margin, or have they calculated wrong? Why is your assumption without informed data and calculations correct and Sony's (and Nintendo's, and Apple's) wrong?

 

[Seanspeed]

Glossing over your criticism of our inability to see reason, why do you think Sony are choosing the course of action they are? Do you believe they cannot calculate value-over-time versus value from profit per unit? Did they not bother to calculate how much more money they would make selling at cost versus with a couple hundred dollars profit margin, or have they calculated wrong? Why is your assumption without informed data and calculations correct and Sony's (and Nintendo's, and Apple's) wrong?

I've suggested that perhaps beancounters simply wont accept very low margins on the consoles anymore after getting so used to the more profitable margins in the XB1/PS4 era.

We already know there was a shift in this even before, where these companies decided they didn't want to take losses on consoles anymore at all, so this would just be another similar shift and definitely not anything super outlandish. And pressure from the Covid growth dying off can easily lead to decision making like this, trying to inch out more profits everywhere possible to satiate the beancounters.

This idea that companies couldn't make bad decisions for short-sighted reasons is kinda crazy, no? This happens plenty. Long term vision is harder to justify when companies need to make their balance sheets look better NOW. Even if there were people within Sony doing the math and saying it wont work out well long-term, so long as it can be made to look good short-term, that may be all it takes, with them reasoning they'll just find further ways to increase revenue/profits later on when needed.

 

[Shifty Geezer]

I've suggested that perhaps beancounters simply wont accept very low margins on the consoles anymore after getting so used to the more profitable margins in the XB1/PS4 era.

But why if there's more money to be had selling more at a cheaper price? You are suggesting that Sony are choosing to earn less money.

We already know there was a shift in this even before, where these companies decided they didn't want to take losses on consoles anymore at all, so this would just be another similar shift and definitely not anything super outlandish.

Because it makes more money in the long run. PS3 showed how catastrophic loss-leading can be as a strategy.

And pressure from the Covid growth dying off can easily lead to decision making like this, trying to inch out more profits everywhere possible to satiate the beancounters.

Which is why they do this, and if there was more money to be had selling more units at lower margins, is exactly what the beancounters would do.

This idea that companies couldn't make bad decisions for short-sighted reasons is kinda crazy, no?

No-one's said they can't make bad decisions. However, they don't tend to make illogical ones. They make choices based on what they think will maximise money. Unit pricing is a pretty straight forward economic process. This is the first time you've suggested a policy of chasing short term revenue instead of long-term revenue, previously saying such things as I'm saying companies are never greedy. Of course they are greedy which is why we'd expect them to be choosing what they believe would make most money!

 

[Seanspeed]

I'm saying they are choosing to make less money in a long-term forecast, and probably think they can come up with some other way to make up for it by then, while still reaping the rewards short-term.

It's not that nobody at Sony wouldn't be so short-sighted, but the pressure for results NOW, especially in light of the Covid boom being dead, from beancounters can outweigh the more practical/sensible people within a company.

PS3 showed how catastrophic loss-leading can be as a strategy.

PS3 was overengineered. Very different problem. They built it way too expensive trying to cover everything, and it's simply not what gamers wanted.

 

[RobertR1]

PS3 showed how catastrophic loss-leading can be as a strategy.

It’s not a strategy. No company has a strategy that takes on catastrophic losses. It’s always a results of multiple failures. For the PS3, It was a product of cell not being about to deliver on the graphics front and having to run to nvidia at the last min for a RSX they paid a premium for and sky rocketed their BoM. Cost of BR player was also higher than anticipated due to optical yields. Given how widely this was discussed on here it’s a confusing comment from you.

You might want to go back and look at Sony’s financial reports and stock performance during the era on how good of a strategy it was.

Also the added failure of cell not being able to replace soc’s in their A/V stack.

 

[Shifty Geezer]

It was a loss-leading strategy same as PS1 and PS2, but it went horribly wrong and wiped out their earnings from the previous generations, showing the inherent risks of that strategy. Had they not sold PS3 at a loss, they'd have sold very few but also lost far less money.

Loss leading is a gamble. You run the risk of losing more money than the R&D to make a product. That is, had Sony spent all that R&D on PS3 and then canned it without making any units, they'd have been better off to the tune of several billion dollars. In the early days of consoles when you couldn't rely on people spending $500+ on hardware it made sense, but now consumers are happy to drop $1000 on a piece of tech, it's less important. The market-size-versus-loss ratio has likely shifted (although cost of living may be pushing back against pre-Covid attitudes to electronics value).

If not, I expect Sony and Nintendo would be selling at a loss to maximise their long-term income. Sony clearly feels that double their PS5 install base is not going to net them more than they'd lose pricing PS5 at whatever it needs to be to double its install base. They've had four generations of seeing how consumers at different entry price levels spend and probably know those only spending $200 on hardware don't spend more than $100 or whatever amount over the course of their use of that machine, versus those who spend $400 on a machine spending $1000 or whatever in ongoing purchases. That's likely true of Nintendo as well who have not cared to get 50% more consumers by selling their hardware cheaper. Those extra consumers aren't believed to be worth their acquisition cost.

 

[Charlietus]

https://www.reuters.com/technology/how-intel-lost-sony-playstation-business-2024-09-16

Intel what is you doin

That amd could offer a better contract than Intel even at it's third console generation means that it's still priced really competedly. Assuming this is all true.

 

[cheapchips]

I'm very confused as to why Broadcom are also listed in that article.

 

[Charlietus]

I'm very confused as to why Broadcom are also listed in that article.

Yeah like what? Don't they make networking chips?

 

[cheapchips]

Yeah like what? Don't they make networking chips?

That's their bread and butter. They do offer custom ARM and PowerPC chips, but I assume they're generally networking/data centre related too.

 

[Charlietus]

That's their bread and butter. They do offer custom ARM and PowerPC chips, but I assume they're generally networking/data centre related too.

So the discussion went like this:

Broadcom: we want to make the ps6 chip
Sony: can you do it?
Broadcom: no
Sony: alright goodbye

 

[Proelite]

So the discussion went like this:

Broadcom: we want to make the ps6 chip
Sony: can you do it?
Broadcom: no
Sony: alright goodbye

Intel: we want to make the PS6 chip
Sony: can you guarantee backwards compatibility?
Intel: no
Sony: alright goodbye.

 

[Proelite]

Console chip designs typically try to ensure compatibility with earlier versions of the system, to allow users to run older games on the new hardware. Moving from AMD, which made the PlayStation 5 chip, to Intel would have risked backwards compatibility, which was a subject of discussion between Intel and Sony engineers and executives, the sources said

 

[Tkumpathenurpahl]

I wonder if it indicates an end to APU's?

Going to Intel for the CPU makes sense, but I didn't think their GPU department was up to snuff yet?

 

[Charlietus]

I wonder if it indicates an end to APU's?

Going to Intel for the CPU makes sense, but I didn't think their GPU department was up to snuff yet?

Sony would have seriously considered not going with AMD if someone offered a contract so cheap that they had to take it. The main objective was to keep AMD on their toes on pricing, and they probably achieved it.

 

[Lurkmass]

Intel: we want to make the PS6 chip
Sony: can you guarantee backwards compatibility?
Intel: no
Sony: alright goodbye.

You and the others make these posts in jest but even when we're talking about x86 implementations (let alone the GPU), neither AMD nor Intel are truly cross-compatible due to console games using the most minute of features/details like the SSE4A extension ...