[quote name='cancerman1120']
The article you linked us to actually explains WHY they need to raise the price. They barely make anything on hardware and need Live to make their game division worth-while. I guess they could charge $450 for 360 and make games $80 instead and give us all free Gold Memberships. I am not a 360 fanboy but I do understand you have to make a profit or else the division has no reason to exist.
Also, 600 million is from subscription sales to only about 1/2 of the customer base. The other 600 million was to movies, TV shows, arcade games and DLC. There are plenty of people spending money on Live who only have silver memberships.
The 1.2 billion is revenue and NOT profit. The gross margin estimated would indicate that Live made a profit of about 780 million and there was an average markup of 185% of the products on Live. Now that sounds like a lot and it is but its the first year they have had a huge profit. Considering they made no profit from 2002 to 2007 and only saw small profits in 2008 and 2009 I don't think we have been ripped off that bad. Sony may be free but they are losing money like mad. This can only go on for so long before the company has to do something to raise revenue. Its either a bigger front end price or charge more to keep using the service after purchase. Either way we are spending that money.[/QUOTE]
Last time I checked Nintendo was much more profitable without subscription fees and Sony has done well considering the gamble they made, their missteps, and the economy. Companies have thrived without making profit on their hardware by giving gamers the best thing they could ask for... great games. It's why Sony is doing well right now. I would rather have MS profit by making great games instead of them charging me for stuff that is free everywhere else.
Yes it is revenue not profit, but that number is huge and the profit margin for Live is extremely high. Since the profit margin is so high, they're effectively milking you hardcore now since they already were before... The no profit you bring up from 2002-2007 is for their entire division NOT for Live. Without Live that would've been much worse. They rely on a business model of charging you for something that you should not be charged for and that is their mistake. You shouldn't have to pay because they developed an unfair model. There is a problem when consumers say, "I don't think we have been ripped off that bad", as you just have.
Sony wasn't losing money because of PSN as they make publishers pay not consumers. I'd rather have a corporation make other rich companies pay than tell me to foot the bill... The larger front end price of PS3 is entirely based on the hardware components. They're not using it to make a huge profit margin.
The email I just got from MS is very telling. "This holiday, Xbox LIVE is adding new Gold features, including ESPN and Video Kinect, with Hulu Plus coming on Xbox LIVE in 2011." According to them those features are supposed to justify the increased cost as they make this point numerous times in the email sent to announce the increased fee. But I've been able to do video chat for a while now on PS3 and they will have had Hulu Plus 6-12 months before Live, and it was all free because it is an open-based format.
[quote name='cancerman1120']We all want Sony and Microsoft to make great systems and provide awesome content but when they actually charge us what is costs them to run such a business we are outraged. Neither Sony (PS3 only) nor Microsoft have made much money if any with their games division. Sony was losing money when the PS3 was $600 and may still be losing money on every sale. Plus they are losing money on PSN right now. You can only lose for so long before you either charge more OR you stop supporting the system. Either way, we will all complain about it.[/QUOTE]
PS3 is profitable now. How do you know PSN is losing money? Publishers pay a share of it.
[quote name='cancerman1120']
http://www.shacknews.com/laryn.x?story=50957
It is an old article but it states MS lost about 7.2 billion dollars getting Xbox and Xbox 360 and Live off the ground from 2002-2007. During that entire time Live was $50 and even with profits over the last 3 years they are still in the red when it come to the xbox consoles. The extra $10 represents about 125 million in revenue each year which would take 60 years to recoup the 7.2 billion lost. I know MS is the big bad meanie but no one here would run a division/company that was losing money.[/QUOTE]
Their plan was to lose money in order to get into the industry. They knew they would not profit for a long time because they chose that route to begin with.