Every PS3 owner needs to buy 30 games for Sony to break even?
- Thread starter rickonker
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I read an article that some developer (I forget which) said they needed to sell 500k copies of whatever game it was they had published in order to break even... with only 200k systems in the U.S., and half of them not being played currently, that's a hard pill to swallow.
rickonker
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[quote name='Diiz']I read an article that some developer (I forget which) said they needed to sell 500k copies of whatever game it was they had published in order to break even... with only 200k systems in the U.S., and half of them not being played currently, that's a hard pill to swallow.[/QUOTE]
Yeah, that was Namco, there was a thread about that I think.
Anyway I found the source...
http://www.gamepro.com/news.cfm?article_id=87868
Yeah, that was Namco, there was a thread about that I think.
Anyway I found the source...
http://www.gamepro.com/news.cfm?article_id=87868
Due to poor chip yields the first generation of the PS2 in Japan had a horrifying cost per unit. This was about 150K machines. In all likelihood, most of those units nevr made their cost back for Sony. But in terms of getting the platform established in the market the normal math didn't apply. It was ship or die.
By the time of the US launch they had the yield issue in hand. Those early mondo expensive machines set back the PS2's first profits by several months but in the long term it was entirely worth it.
If the PS3 is obtainable to anyone with the cash and the desire by late spring 07, the early supply issues will quickly become a faded memory. The installed base will put profits within reach of third party publishers. Work on the 65nm Cell and RSX should be close to fruition and bring a big cost reduction to the machine. Not only on the chips themselves but also on the power and cooling sections of the PS3. Cost reductions on the BD-ROM drive should also start happening by then as well.
Another big factor left out of the mix is accessories. Sony has given up their proprietary memory cards but the remaining items have very healthy profit margins. The Xbox 360 wireless controller's cost to produce is only about 22% of its retail price. The PS3 controller is likely almost identical in cost, trading rumble motors for tilt sensors. The purchase of additional controllers is easily as profitable or more than any game purchase.
By the time of the US launch they had the yield issue in hand. Those early mondo expensive machines set back the PS2's first profits by several months but in the long term it was entirely worth it.
If the PS3 is obtainable to anyone with the cash and the desire by late spring 07, the early supply issues will quickly become a faded memory. The installed base will put profits within reach of third party publishers. Work on the 65nm Cell and RSX should be close to fruition and bring a big cost reduction to the machine. Not only on the chips themselves but also on the power and cooling sections of the PS3. Cost reductions on the BD-ROM drive should also start happening by then as well.
Another big factor left out of the mix is accessories. Sony has given up their proprietary memory cards but the remaining items have very healthy profit margins. The Xbox 360 wireless controller's cost to produce is only about 22% of its retail price. The PS3 controller is likely almost identical in cost, trading rumble motors for tilt sensors. The purchase of additional controllers is easily as profitable or more than any game purchase.
Dr Mario Kart
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Slightly off topic, but since you mentioned controllers:
It seems that there is a trend in some genres to move away from split-screen multiplayer and towards online/LAN multiplayer. Wouldnt this theoretically lead to a slight decrease in controllers sold?
And speaking of making money on accessories, the damn 8mb PS2 memory card still retails at 24.99. Ridiculous.
It seems that there is a trend in some genres to move away from split-screen multiplayer and towards online/LAN multiplayer. Wouldnt this theoretically lead to a slight decrease in controllers sold?
And speaking of making money on accessories, the damn 8mb PS2 memory card still retails at 24.99. Ridiculous.
rickonker
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[quote name='Dr Mario Kart']Slightly off topic, but since you mentioned controllers:
It seems that there is a trend in some genres to move away from split-screen multiplayer and towards online/LAN multiplayer. Wouldnt this theoretically lead to a slight decrease in controllers sold?
And speaking of making money on accessories, the damn 8mb PS2 memory card still retails at 24.99. Ridiculous.[/QUOTE]
I think Resistance doesn't support split-screen, so I definitely see what you're saying.
It seems that there is a trend in some genres to move away from split-screen multiplayer and towards online/LAN multiplayer. Wouldnt this theoretically lead to a slight decrease in controllers sold?
And speaking of making money on accessories, the damn 8mb PS2 memory card still retails at 24.99. Ridiculous.[/QUOTE]
I think Resistance doesn't support split-screen, so I definitely see what you're saying.
[quote name='Dr Mario Kart']Slightly off topic, but since you mentioned controllers:
It seems that there is a trend in some genres to move away from split-screen multiplayer and towards online/LAN multiplayer. Wouldnt this theoretically lead to a slight decrease in controllers sold?
And speaking of making money on accessories, the damn 8mb PS2 memory card still retails at 24.99. Ridiculous.[/QUOTE]
Perhaps. It all hinges on the social element. Playing online simply isn't the same experience as playing with or against another human in the room. All it takes is one really popular party game and cha-ching! Mario Party does huge business with evry edition but how well would the experience hold up with each player isolated?
I've been posting on this board for close to three years and to an extent I can feel like I 'know' several of the other longtime posters. But compared to a coworker I might interact with a few minutes a day, the relationships are quite distant. For all of the game jabbering I get here, it is still a boost to meet someone in the real world who has the same interest and I can interact with on a more human level.
Don't forget too the coming lucrative custom controllers. PS3 wireless dance pads, arcade sticks, the new EyeToy version, etc. Through licensing Sony can get a piece of the action on a lot of these items, even those that aren't Sony products
It seems that there is a trend in some genres to move away from split-screen multiplayer and towards online/LAN multiplayer. Wouldnt this theoretically lead to a slight decrease in controllers sold?
And speaking of making money on accessories, the damn 8mb PS2 memory card still retails at 24.99. Ridiculous.[/QUOTE]
Perhaps. It all hinges on the social element. Playing online simply isn't the same experience as playing with or against another human in the room. All it takes is one really popular party game and cha-ching! Mario Party does huge business with evry edition but how well would the experience hold up with each player isolated?
I've been posting on this board for close to three years and to an extent I can feel like I 'know' several of the other longtime posters. But compared to a coworker I might interact with a few minutes a day, the relationships are quite distant. For all of the game jabbering I get here, it is still a boost to meet someone in the real world who has the same interest and I can interact with on a more human level.
Don't forget too the coming lucrative custom controllers. PS3 wireless dance pads, arcade sticks, the new EyeToy version, etc. Through licensing Sony can get a piece of the action on a lot of these items, even those that aren't Sony products
I can't see the average consumer buying 30 games for the PS3; Sony, arrogant though they may be, probably doesn't see it happening either. I'm guessing they're banking on Blu-ray succeeding and using the licensing fees from it to help recoup their investment.
[quote name='Wet Ninja']I can't see the average consumer buying 30 games for the PS3; Sony, arrogant though they may be, probably doesn't see it happening either. I'm guessing they're banking on Blu-ray succeeding and using the licensing fees from it to help recoup their investment.[/QUOTE]
That will help, as will the increased sales of existing PS1/PS2 games to PS3 owners without such libraries already but the make or break is how soon they can bring the manufacturing cost near to breakeven. As it stands, for all but the most frequent game and movie purchasers the PS3s sold so far are forever in the hole financially. Much like those early PS2s I mentioned above. And even those frequent shoppers are unlikely to buy so often that they'll clear the loss in less than two years.
So Sony cannot begin to calaculate a time when the PS3 becomes profitable until the cost is cut by a good percentage. All the machine produce until then are pretty much a loss for such a long period as to be permanent.
This raises the question of whether Sony is purposely shipping far fewer units than promised. While another major launch delay could have been fatal to Sony's market position, keeping supplies limited until a cost reduction is secured could help greatly in limiting the losses. It would cost them some market share but if they truly believe in the PS3's superiority they likely also believe they can win that lost share back over time.
That will help, as will the increased sales of existing PS1/PS2 games to PS3 owners without such libraries already but the make or break is how soon they can bring the manufacturing cost near to breakeven. As it stands, for all but the most frequent game and movie purchasers the PS3s sold so far are forever in the hole financially. Much like those early PS2s I mentioned above. And even those frequent shoppers are unlikely to buy so often that they'll clear the loss in less than two years.
So Sony cannot begin to calaculate a time when the PS3 becomes profitable until the cost is cut by a good percentage. All the machine produce until then are pretty much a loss for such a long period as to be permanent.
This raises the question of whether Sony is purposely shipping far fewer units than promised. While another major launch delay could have been fatal to Sony's market position, keeping supplies limited until a cost reduction is secured could help greatly in limiting the losses. It would cost them some market share but if they truly believe in the PS3's superiority they likely also believe they can win that lost share back over time.
Biggest question, I think, is will there be a demand for a $600 game machine? MS would be wise to go on the offense with a $100 price drop after Christmas. Another consideration is if the 360 keeps coming out with GoW caibre games, and it takes Sony a year to catch up, people will find it even more difficult to spend the extra on the PS3.
[quote name='Wet Ninja']I'm guessing they're banking on Blu-ray succeeding and using the licensing fees from it to help recoup their investment.[/quote]
don't know how profitable that will be
don't know how profitable that will be
Indiana
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[quote name='gaelan']don't know how profitable that will be[/QUOTE]
Oh it will be profitable IF they win the HD dvd war. So much for the new encryption technology in Blu-Ray movies if that is true. It looks like there is no encryption what so ever.
Oh it will be profitable IF they win the HD dvd war. So much for the new encryption technology in Blu-Ray movies if that is true. It looks like there is no encryption what so ever.
[quote name='gaelan']don't know how profitable that will be[/QUOTE]
That'll last all of three seconds. As a PSP owner, Sony rapes you with firmware updates.
That'll last all of three seconds. As a PSP owner, Sony rapes you with firmware updates.
The whole PS3 model seems nutty to me. They are losing money on the consoles and 30 games is a lot to sell just to make a profit. I would assume that there are people who don't even buy 30 games in a console's lifetime. I can't imagine a 65nm chipset would be easily attainable being that the cell chip's production has been pretty unreliable from the get go. Blu-Ray costs will go down but what if the format as a whole fails? Is there really room for HD-DVD and Blu-Ray? Is the public really ready for either? I haven't seen any sales numbers but I can't imagine they are flying off the shelves.
I think you are going to lose some people at the $500-$600 price point as well. I don't mean gamers like us but the casual crowd who could take it or leave it. Brand recognition does help but I would be shocked if they walk away with as big a piece of the pie this generation. If they can't put a date on when they will be profitable how does that fit into their buisness plan? Microsoft has been pretty on the ball with their efforts and will be turning a profit very soon if they aren't already. They didn't go as far out with the technology but the plan looks a hell of a lot more sound than Sony's at this point.
I think you are going to lose some people at the $500-$600 price point as well. I don't mean gamers like us but the casual crowd who could take it or leave it. Brand recognition does help but I would be shocked if they walk away with as big a piece of the pie this generation. If they can't put a date on when they will be profitable how does that fit into their buisness plan? Microsoft has been pretty on the ball with their efforts and will be turning a profit very soon if they aren't already. They didn't go as far out with the technology but the plan looks a hell of a lot more sound than Sony's at this point.
[quote name='rickonker']I think Resistance doesn't support split-screen, so I definitely see what you're saying.[/QUOTE]
yes it does
[quote name='whoknows']I wonder how long it'll take for Sony to start pulling a profit on the PS3...[/QUOTE]
they have set a goal @ 5 years.
yes it does
[quote name='whoknows']I wonder how long it'll take for Sony to start pulling a profit on the PS3...[/QUOTE]
they have set a goal @ 5 years.
I don't understand what this really means. 30 games for which Playstation 3s? Those sold in the first year? Two? Forever? It doesn't seem to take into account the fact that manufacturing costs come down over time, and logically it should also be dependent on the number of consoles that Sony ships. If they sell X number of systems they might need to sell 30 games, but if they sold twice as many, they would only need to sell 15, and so on.
rickonker
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[quote name='icruise']If they sell X number of systems they might need to sell 30 games, but if they sold twice as many, they would only need to sell 15, and so on.[/quote]
This part of your post doesn't make much sense to me. If Sony is losing a certain amount on each console sold, why does selling twice as many consoles reduce the number of games for each one that need to be sold?
This part of your post doesn't make much sense to me. If Sony is losing a certain amount on each console sold, why does selling twice as many consoles reduce the number of games for each one that need to be sold?
[quote name='icruise']I don't understand what this really means. 30 games for which Playstation 3s? Those sold in the first year? Two? Forever? It doesn't seem to take into account the fact that manufacturing costs come down over time, and logically it should also be dependent on the number of consoles that Sony ships. If they sell X number of systems they might need to sell 30 games, but if they sold twice as many, they would only need to sell 15, and so on.[/quote]
You're right on the manufacturing cost going down and subsequently they'll have to sell less games to break even as it goes along, but you're wrong on the second part. Since they lose so much money on every console it doesn't matter if they sell 500 or 5 million, it will still require selling an average of 30 games per system to pull a profit.
You're right on the manufacturing cost going down and subsequently they'll have to sell less games to break even as it goes along, but you're wrong on the second part. Since they lose so much money on every console it doesn't matter if they sell 500 or 5 million, it will still require selling an average of 30 games per system to pull a profit.
Yeah, that's true as long as the amount they are losing remains constant. But the point I'm trying to make is that it won't remain constant. The number of systems does affect this (although not quite in the way I said) because the more systems out there, the more developers they attract and the more games are sold. As has already been said, though, I think Sony is banking on the PS3 being a trojan horse for Blu-ray and they may not care if it ever makes money by itself as long as it makes Blu-ray the next standard instead of HD-DVD.
rickonker
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[quote name='icruise']I think Sony is banking on the PS3 being a trojan horse for Blu-ray[/quote]
I agree, but of course this strategy assumes the PS3 is a guaranteed success. Everything seems to point towards Sony getting
ed this round. Is it just me or does everything about the PS3 scream arrogance.
I agree, but of course this strategy assumes the PS3 is a guaranteed success. Everything seems to point towards Sony getting
ed this round. Is it just me or does everything about the PS3 scream arrogance.
Indiana
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[quote name='Zoglog']yes it does
they have set a goal @ 5 years.[/QUOTE]
Wow 5 years. Isn't that the life of the console? I know that Sony has dreams of a longer lifespan but let's face it in 5 years the Xbox 720 will be out and then Sony will have to deliver a PS4 to compete.
they have set a goal @ 5 years.[/QUOTE]
Wow 5 years. Isn't that the life of the console? I know that Sony has dreams of a longer lifespan but let's face it in 5 years the Xbox 720 will be out and then Sony will have to deliver a PS4 to compete.
solidusjoe
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Although I am mostly a lurker on these forums I figure I should just say one thing really quick: Sony (and most Japanese entertainment companies for that matter) is willing to suffer huge losses to try to gain ground in the game war. If they are able to produce a higher quality I don't really see it as hard to believe that they will break even, but (and I'm sure they know this already) it will probably be a couple of years for them to do that. I forget which company but one big corporate investment company esitmated that PS3 "should" be selling for about $900 USD in order for the company to break even with production costs and therefore that is the reason why gamers would have to buy 30 games for them to break even because they get a small royalty fee per game sold and it just so happens that it takes that many to get up to what many corporations believe they should be sold for. I think Sony is trying to avoid what happened with BetaMax by making it a reasonable purchase instead of being so pricey. I mean you are getting a Blu-Ray player which is becoming increasingly popular with movie studios and will very likely replace DVD and overcome HDDVD and right now a low end BR player is around $1000.
They lost alot of money with the original playstation but gained it all back and alot more thanks to the great software. It won't be too long for Sony to see some profits again if PS3 continues to be so popular.
/end rant
They lost alot of money with the original playstation but gained it all back and alot more thanks to the great software. It won't be too long for Sony to see some profits again if PS3 continues to be so popular.
/end rant
The Mana Knight
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Well, I bought 64 PS1 games, 199 PS2 games, and 33 PSP games. So, Sony will definitely get 30+ new games for me, on PS3.
[quote name='The Mana Knight']Well, I bought 64 PS1 games, 199 PS2 games, and 33 PSP games. So, Sony will definitely get 30+ new games for me, on PS3.[/QUOTE]
That depends on whether or not you are devil customer-ing it up when you get said games.
'Cuz that's what I do, and I imagine no one likes it when I get games at 1/3-1/4 their original price.
That depends on whether or not you are devil customer-ing it up when you get said games.
'Cuz that's what I do, and I imagine no one likes it when I get games at 1/3-1/4 their original price.
[quote name='The Mana Knight']Well, I bought 64 PS1 games, 199 PS2 games, and 33 PSP games. So, Sony will definitely get 30+ new games for me, on PS3.[/QUOTE]
this would only apply to you if you bought ALL of those brand spanking new. Which I doubt unless you are one rich SOB...if so why the are you on these forums?
Im willin to bet you bought most of those preowned or after a few price drops. They are saying 30+ games bought for full price. I honestly cannot see this happening for a significant amount of people.
this would only apply to you if you bought ALL of those brand spanking new. Which I doubt unless you are one rich SOB...if so why the
are you on these forums?Im willin to bet you bought most of those preowned or after a few price drops. They are saying 30+ games bought for full price. I honestly cannot see this happening for a significant amount of people.
[quote name='MarkMark']this would only apply to you if you bought ALL of those brand spanking new. Which I doubt unless you are one rich SOB...if so why the are you on these forums?
Im willin to bet you bought most of those preowned or after a few price drops. They are saying 30+ games bought for full price. I honestly cannot see this happening for a significant amount of people.[/quote]
Would it matter if they were full price or not? The developers get the cash and sony gets the royalties when the store buys them, not the customer.
Of course if they were used then it matters since they only got paid once for those.
are you on these forums?Im willin to bet you bought most of those preowned or after a few price drops. They are saying 30+ games bought for full price. I honestly cannot see this happening for a significant amount of people.[/quote]
Would it matter if they were full price or not? The developers get the cash and sony gets the royalties when the store buys them, not the customer.
Of course if they were used then it matters since they only got paid once for those.
DarkNessBear
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Umm...
You guys think they wont ship more the 500k eventually?
You guys think they wont ship more the 500k eventually?
Quackzilla
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I hate when people use algebra to find an answer to a problem that can only be solved with calculus.
Everything is variable, from the expense of the console to the profit on games.
hese sorts of projections and sales models are BS.
Everything is variable, from the expense of the console to the profit on games.
hese sorts of projections and sales models are BS.
Michaellvortega
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Why do people care about this shit?
White-Wolf
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[quote name='Michaellvortega']Why do people care about this shit?[/quote]
its all about the console war. The winner will get the support of the best and most excusive games. The winner is usaly the one that sells the most units becuse the game devs sell more prospective copies of the game if its on a system with the most sales. So this is really speculation on weather sony will beable to keep up thier game division at such a high loss. *If* sony fails to sell blue ray, the ps3 *will* (not if) sink like a heavy brick. and sony may quit the race.
Why is this importent to us? well we dont want to buy a 600$ system that has no games, so being informed is a good thing. Its like guy who bought a dreamcast the day they quit makeing games for it. I bet he was pissed, and yes i bet that guy was real, i just couldent tell you who he was. but i bet thier was someone that did it.
[quote name='Zoglog']you guys also have to remember that with the PS3's out there, Bluray will probably see a spike in sales. And with Every Bluray Disk sold, Sony takes a nice chunk.[/quote]
your so right that we have to remember blue ray, becuse if blue ray fails, the ps3 fails, as the net loss on the ps3 is directly tied to the blue ray medium. They are hopeing for lots of people to remake thier video collection on blue ray. 20$ a movie with about 30 or so movies... yeah thats about right. So you see blue ray is what the ps3 is resting on. They never would have sold the system at a loss of 300$ per a console if blue ray wasent a key issue. If sony wins the format as the new hd format, the 300$ loss per ps3 is chump change.
I would rather have a game system that plays movies but i think the ps3 is the otherway around as blue ray is more importent to sony. sony is the greeks, The ps3 is a torjan horse and blue ray is odysius men.
its all about the console war. The winner will get the support of the best and most excusive games. The winner is usaly the one that sells the most units becuse the game devs sell more prospective copies of the game if its on a system with the most sales. So this is really speculation on weather sony will beable to keep up thier game division at such a high loss. *If* sony fails to sell blue ray, the ps3 *will* (not if) sink like a heavy brick. and sony may quit the race.
Why is this importent to us? well we dont want to buy a 600$ system that has no games, so being informed is a good thing. Its like guy who bought a dreamcast the day they quit makeing games for it. I bet he was pissed, and yes i bet that guy was real, i just couldent tell you who he was. but i bet thier was someone that did it.
[quote name='Zoglog']you guys also have to remember that with the PS3's out there, Bluray will probably see a spike in sales. And with Every Bluray Disk sold, Sony takes a nice chunk.[/quote]
your so right that we have to remember blue ray, becuse if blue ray fails, the ps3 fails, as the net loss on the ps3 is directly tied to the blue ray medium. They are hopeing for lots of people to remake thier video collection on blue ray. 20$ a movie with about 30 or so movies... yeah thats about right. So you see blue ray is what the ps3 is resting on. They never would have sold the system at a loss of 300$ per a console if blue ray wasent a key issue. If sony wins the format as the new hd format, the 300$ loss per ps3 is chump change.
I would rather have a game system that plays movies but i think the ps3 is the otherway around as blue ray is more importent to sony. sony is the greeks, The ps3 is a torjan horse and blue ray is odysius men.
DarkNessBear
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You guys are dumb.
PS3 isnt going to fail because it didnt sell 5 million units the first month. It sold as much as the 360 in the first month. AND the 360 is fine now.
PS3 isnt going to fail because it didnt sell 5 million units the first month. It sold as much as the 360 in the first month. AND the 360 is fine now.
White-Wolf
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Almost true. Sony sold about 200k and xbox sold 400k, but Sony is loosing more money per unit and having a harder time producing more units. So they may fail, they may not. But we all know that being on the top for too long, and being too high above the competition is when the greatest of us fall. Take Nintendo. After the super Nintendo they were cocky pricks. They had the market in the palm of their hand but because of that they lost it all. They squeezed too tightly. (Actually its because they didn’t pay Sony for the cd add on they mad and then Sony said… hay we can make full game systems too.) But you get the point (Oedipus).
If we do not learn from history we are doomed to repeat it. The Greats are destined to be victims of the most tragic failures. They fall the farthest and the hardest. Sony isn’t immortal. I don’t know if they will fail this time, but I have a feeling they will.
If we do not learn from history we are doomed to repeat it. The Greats are destined to be victims of the most tragic failures. They fall the farthest and the hardest. Sony isn’t immortal. I don’t know if they will fail this time, but I have a feeling they will.
[quote name='SpazX']Would it matter if they were full price or not? The developers get the cash and sony gets the royalties when the store buys them, not the customer.
Of course if they were used then it matters since they only got paid once for those.[/QUOTE]
Incorrect. Sony gets the royalties from third party game publishers at the time of production. Before a single unit has been delivered to the retailers Sony has already collected their cut. This is the beauty of the third party publishing model originated by Nintendo. The House always wins. The publisher could order a million units of a compelte turkey that is completely resistant to sales. Sony still gets chunk of cash for each one.
The problem is that no sane publisher is going to order in number that greatly exceed the installed base. It was Sony's big selling point for optical media when they pitched the original Playstation in Japan: they could fill new game production orders very quickly, allowing both publishers and retailers to keep their inventory closely managed. With ROM carts there were a lot of guessing games. Order too many and you lost a bundle. Order too few and your game's popularity might fade before more stock can be produced and delivered months later.
Sony likely scammed publishers into ordering based on their original promised delivery number of PS3s for the launch. Even so, the royalties collected are a drop in the bucket compared to the losses incurred per machine thus far.
Now that everyone is sharply aware of how few machines are in the market, cautious publishers will likely take their time lacing additional orders unto they see some real proof of demand beyond what they already shipped to retailers. Some of the lesser rated games like Gundam may never see a reorder and become a rarity, albeit not a coveted one.
Of course if they were used then it matters since they only got paid once for those.[/QUOTE]
Incorrect. Sony gets the royalties from third party game publishers at the time of production. Before a single unit has been delivered to the retailers Sony has already collected their cut. This is the beauty of the third party publishing model originated by Nintendo. The House always wins. The publisher could order a million units of a compelte turkey that is completely resistant to sales. Sony still gets chunk of cash for each one.
The problem is that no sane publisher is going to order in number that greatly exceed the installed base. It was Sony's big selling point for optical media when they pitched the original Playstation in Japan: they could fill new game production orders very quickly, allowing both publishers and retailers to keep their inventory closely managed. With ROM carts there were a lot of guessing games. Order too many and you lost a bundle. Order too few and your game's popularity might fade before more stock can be produced and delivered months later.
Sony likely scammed publishers into ordering based on their original promised delivery number of PS3s for the launch. Even so, the royalties collected are a drop in the bucket compared to the losses incurred per machine thus far.
Now that everyone is sharply aware of how few machines are in the market, cautious publishers will likely take their time lacing additional orders unto they see some real proof of demand beyond what they already shipped to retailers. Some of the lesser rated games like Gundam may never see a reorder and become a rarity, albeit not a coveted one.
[quote name='icruise']I don't understand what this really means. 30 games for which Playstation 3s? Those sold in the first year? Two? Forever? It doesn't seem to take into account the fact that manufacturing costs come down over time, and logically it should also be dependent on the number of consoles that Sony ships. If they sell X number of systems they might need to sell 30 games, but if they sold twice as many, they would only need to sell 15, and so on.[/QUOTE]
The problem for Sony is a sort of Original Sin. The debt of the early machines carries forward to the ones that follow.
You see, the average PS3 owner, even a very enthused early adopter, is very unlikely to purchase 30 games for a very long time. Never in some cases. So lets say Sony ships 3 million machines at that loss level but then makes strides in their cost reductions and the loss for each machine thereafter is $100 less, requiring just 20 games sold to have profits start kicking in from one of those units.
If things are calculated on a purely per unit basis you now have machines that have a decent shot of making some net revenue for the company. But collectively it isn't so easy. The debt from all of those previous machines is still there and unlikely to ever be covered by those machines. This is where the sins of the elders are vistied upon their descendents.
Those less costly PS3s have only covered their own debt when their owner purchases 20 games. Sony still needs to see 30 game sales from those earlier machines, so game 21 on the newer machine isn't a profit maker. It just helps make up that earlier loss from the early units.
It like being held responsible for your dead parent's student loans. The bank lent out some money to a member of your family befor eyou ere even born and the bank is going to be paid back, no matter who in the family actually coughs up the dough.
If you've ever wondered how Microsoft managed to have so much red ink from the original Xbox, this is a big part of the problem they faced.
This is also why I suspect Sony may be in no hurry to grow the installed base until they got the costs under control. At the current loss level, having the PS3 rapidly grow to become the new console champ would make it impossible for it to ever produce profits.
The problem for Sony is a sort of Original Sin. The debt of the early machines carries forward to the ones that follow.
You see, the average PS3 owner, even a very enthused early adopter, is very unlikely to purchase 30 games for a very long time. Never in some cases. So lets say Sony ships 3 million machines at that loss level but then makes strides in their cost reductions and the loss for each machine thereafter is $100 less, requiring just 20 games sold to have profits start kicking in from one of those units.
If things are calculated on a purely per unit basis you now have machines that have a decent shot of making some net revenue for the company. But collectively it isn't so easy. The debt from all of those previous machines is still there and unlikely to ever be covered by those machines. This is where the sins of the elders are vistied upon their descendents.
Those less costly PS3s have only covered their own debt when their owner purchases 20 games. Sony still needs to see 30 game sales from those earlier machines, so game 21 on the newer machine isn't a profit maker. It just helps make up that earlier loss from the early units.
It like being held responsible for your dead parent's student loans. The bank lent out some money to a member of your family befor eyou ere even born and the bank is going to be paid back, no matter who in the family actually coughs up the dough.
If you've ever wondered how Microsoft managed to have so much red ink from the original Xbox, this is a big part of the problem they faced.
This is also why I suspect Sony may be in no hurry to grow the installed base until they got the costs under control. At the current loss level, having the PS3 rapidly grow to become the new console champ would make it impossible for it to ever produce profits.
[quote name='epobirs']The problem for Sony is a sort of Original Sin. The debt of the early machines carries forward to the ones that follow.
You see, the average PS3 owner, even a very enthused early adopter, is very unlikely to purchase 30 games for a very long time. Never in some cases. So lets say Sony ships 3 million machines at that loss level but then makes strides in their cost reductions and the loss for each machine thereafter is $100 less, requiring just 20 games sold to have profits start kicking in from one of those units.
If things are calculated on a purely per unit basis you now have machines that have a decent shot of making some net revenue for the company. But collectively it isn't so easy. The debt from all of those previous machines is still there and unlikely to ever be covered by those machines. This is where the sins of the elders are vistied upon their descendents.
Those less costly PS3s have only covered their own debt when their owner purchases 20 games. Sony still needs to see 30 game sales from those earlier machines, so game 21 on the newer machine isn't a profit maker. It just helps make up that earlier loss from the early units.
It like being held responsible for your dead parent's student loans. The bank lent out some money to a member of your family befor eyou ere even born and the bank is going to be paid back, no matter who in the family actually coughs up the dough.
If you've ever wondered how Microsoft managed to have so much red ink from the original Xbox, this is a big part of the problem they faced.
This is also why I suspect Sony may be in no hurry to grow the installed base until they got the costs under control. At the current loss level, having the PS3 rapidly grow to become the new console champ would make it impossible for it to ever produce profits.[/QUOTE]
VERY well said.
You see, the average PS3 owner, even a very enthused early adopter, is very unlikely to purchase 30 games for a very long time. Never in some cases. So lets say Sony ships 3 million machines at that loss level but then makes strides in their cost reductions and the loss for each machine thereafter is $100 less, requiring just 20 games sold to have profits start kicking in from one of those units.
If things are calculated on a purely per unit basis you now have machines that have a decent shot of making some net revenue for the company. But collectively it isn't so easy. The debt from all of those previous machines is still there and unlikely to ever be covered by those machines. This is where the sins of the elders are vistied upon their descendents.
Those less costly PS3s have only covered their own debt when their owner purchases 20 games. Sony still needs to see 30 game sales from those earlier machines, so game 21 on the newer machine isn't a profit maker. It just helps make up that earlier loss from the early units.
It like being held responsible for your dead parent's student loans. The bank lent out some money to a member of your family befor eyou ere even born and the bank is going to be paid back, no matter who in the family actually coughs up the dough.
If you've ever wondered how Microsoft managed to have so much red ink from the original Xbox, this is a big part of the problem they faced.
This is also why I suspect Sony may be in no hurry to grow the installed base until they got the costs under control. At the current loss level, having the PS3 rapidly grow to become the new console champ would make it impossible for it to ever produce profits.[/QUOTE]
VERY well said.
Grave_Addiction
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[quote name='Strell']Wtf.
Can't I just buy 30 PS3s instead?[/quote]
I think Sony HQ would blow up.
Can't I just buy 30 PS3s instead?[/quote]
I think Sony HQ would blow up.
Well when the PS2 was originally released, it cost like $500 something, so they were taking a lost of $200 something. Here, the ratio is about the same, $200 something unless you buy a 20 gb unit and than they're losing about $300. And that's only if people buy third party games would they need to get like 20-25 sold to break even.
[quote name='Thongsy']Well when the PS2 was originally released, it cost like $500 something, so they were taking a lost of $200 something. Here, the ratio is about the same, $200 something unless you buy a 20 gb unit and than they're losing about $300. And that's only if people buy third party games would they need to get like 20-25 sold to break even.[/QUOTE]
The PS2 cost $299 at launch. But it does indeed seem that the amount they lose on each PS3 sold is similar to the PS2.
The PS2 cost $299 at launch. But it does indeed seem that the amount they lose on each PS3 sold is similar to the PS2.
[quote name='icruise']The PS2 cost $299 at launch. But it does indeed seem that the amount they lose on each PS3 sold is similar to the PS2.[/QUOTE]
That would be the US launch. The first Japanes PS2s sold carried a considerably higher price.
One big difference on the PS2 loss per unit at launch: The range of items in the system driving the loss were fewer. DVD drives, for instance, were already well established products well down the prie curve from their first generation. Also, the PS2 didn't bundle a hard drive. This is a problem for the PS3 for the same reason it troubled the original Xbox, in that it was a fixed cost item with no major discounts ahead. Hard drives haven't seen a notable reduction in base cost for several years. The capacity grows but the minimum cost of having the drive remains the same. Thus the console maker can improve the value proposition by installing a higher caacity drive as that becomes the entry level, but it can never reduce the amount of that line in the bill of materials.
Much as more savvy Xbox owners loved having the hard drive, making it a standard part of the Xbox when it had to compete with more economical designs, was a major mistake. So long as Microsoft didn't dupliate Sony's mishandling of the PS2 HDD add-on, it could have been left an optional item that would have avoided a big chunk of the losses on the Xbox.
Sony is facing the same issue. They may feel they absolutely have to have the functionality the drive brings, especially in mitigating the slow BD-ROM load speeds, but it also sets limits on how far the price of the PS3 can ever be cut.
That would be the US launch. The first Japanes PS2s sold carried a considerably higher price.
One big difference on the PS2 loss per unit at launch: The range of items in the system driving the loss were fewer. DVD drives, for instance, were already well established products well down the prie curve from their first generation. Also, the PS2 didn't bundle a hard drive. This is a problem for the PS3 for the same reason it troubled the original Xbox, in that it was a fixed cost item with no major discounts ahead. Hard drives haven't seen a notable reduction in base cost for several years. The capacity grows but the minimum cost of having the drive remains the same. Thus the console maker can improve the value proposition by installing a higher caacity drive as that becomes the entry level, but it can never reduce the amount of that line in the bill of materials.
Much as more savvy Xbox owners loved having the hard drive, making it a standard part of the Xbox when it had to compete with more economical designs, was a major mistake. So long as Microsoft didn't dupliate Sony's mishandling of the PS2 HDD add-on, it could have been left an optional item that would have avoided a big chunk of the losses on the Xbox.
Sony is facing the same issue. They may feel they absolutely have to have the functionality the drive brings, especially in mitigating the slow BD-ROM load speeds, but it also sets limits on how far the price of the PS3 can ever be cut.
bread's done