Sony's Jim Ryan Claims That Consoles Will Make A Profit.

[Novalee]

https://www.videogameschronicle.com...n-5-standard-edition-will-break-even-in-june/


"Speaking during an investor relations event on Thursday, SIE president and CEO Jim Ryan said the PS5 cost of goods will match the average wholesale price in June, before the hardware becomes profitable in the following months."

What i found interesting is this though:
" Ryan also said that the importance of consoles in PlayStation’s business model is declining as software, services and peripherals now account for the vast majority of SIE’s sales. Consoles brought in just 20 percent of the company’s revenue in FY20, compared to 48% in FY13."


I found this other article interesting also and maybe it ties into Sony focusing on other products other than consoles .

"Sony said in a corporate report that it "will explore expanding our first-party titles to the PC platform, in order to promote further growth in our profitability." And PlayStation boss Jim Ryan told GQ in February that more games would be coming to PC "to expose those great games to a wider audience and recognize the economics of game development... also, our ease of making [games] available to non-console owners has grown. So it’s a fairly straightforward decision for us to make."

https://arstechnica.com/gaming/2021/05/sony-lists-pc-version-of-uncharted-4-in-investor-report/

Gt game being ported to pc seems like a real possibility .

 

[Daz555]

Of all of Sony's first party titles I'd rank Gran Turismo as the least likely to ever make it to another platform. Not impossible though.

 

[warp9engage]

Of all of Sony's first party titles I'd rank Gran Turismo as the least likely to ever make it to another platform. Not impossible though.

Why? As a game aiming to be a racing simulator, it's the most fitting for the PC, which is the platform with the most interest in simulators of all kinds. It's also worth noting that GT is not Playstation's most popular franchise, in this day and age, with Uncharted, God of War, The Last of Us, Spider-Man, all shipping more copies in recent years.

 

[daan]

Yes, consoles pretty much always make a loss on launch. Yes, they become profitable later in life as they get simplified and/or find cheaper ways to put them together. Yes, the console manufacturer makes money from games/services.

And Sony exclusives coming to PC is so last year.

 

[NLxAROSA]

Seeing that the formerly-PS-exclusive games released on Steam so far did really well it's obvious they'll expand this model. Console gets the timed exclusive. Make upgraded version, release on PC (and mid-life update or new gen console if one of those happens to be available), more money for development of new titles. Everybody wins.

 

[Novalee]

Yes, consoles pretty much always make a loss on launch. Yes, they become profitable later in life as they get simplified and/or find cheaper ways to put them together. Yes, the console manufacturer makes money from games/services.

And Sony exclusives coming to PC is so last year.

And yes consoles are declining in importance for Sony .

 

[Silver Arrows]

And yes consoles are declining in importance for Sony .

I'd like proof of that, that isn't them simply following Microsoft's lead on offering select exclusives on PC.

 

[NLxAROSA]

I'd like proof of that, that isn't them simply following Microsoft's lead on offering select exclusives on PC.

It's a quote from Jim Ryan in the article posted by Novalee. Though if I read the rest of the article it just implies that percentage wise, less part of the revenue came from consoles and more from software, etc. Which can also mean that folks buy more games and peripherals. And I don't think folks will buy those without the consoles.

 

[warp9engage]

I'd like proof of that, that isn't them simply following Microsoft's lead on offering select exclusives on PC.

Well, according to the report made for Sony's Investor Relations Day, which can be found in the ArsTechnica article, the difference is clear between the PS3 era (FY13) and the PS4 era (FY20). Despite moving 32% more systems in the latter era, the revenue share for consoles still dropped by 28%. It shows that they sell these systems at a loss, and that the real margins are made elsewhere in the Playstation ecosystem. Following Microsoft is become the move that makes the most sense, and they're late to the party.

Which can also mean that folks buy more games and peripherals. And I don't think folks will buy those without the consoles.

With regards to games, Sony will get a percentage of any sale, for any game of which they are the publisher, no matter the platform where it's sold.

As for peripherals, while there are a few that are specific to the Playstation, things like controllers, controller charging stations and headsets are compatible with PC. So if someone were to be a PC player that enjoys the feeling of the Dualsense/Dualshock, they may just buy a controller separately, as an example.

This is to say Playstation, as a brand, can get profit from those who are not users of their consoles. There are even services of theirs, that you can access and pay for, without owning one of their consoles, like PS Now.

 

[Novalee]

Well, according to the report made for Sony's Investor Relations Day, which can be found in the ArsTechnica article, the difference is clear between the PS3 era (FY13) and the PS4 era (FY20). Despite moving 32% more systems in the latter era, the revenue share for consoles still dropped by 28%. It shows that they sell these systems at a loss, and that the real margins are made elsewhere in the Playstation ecosystem. Following Microsoft is become the move that makes the most sense, and they're late to the party.



With regards to games, Sony will get a percentage of any sale, for any game of which they are the publisher, no matter the platform where it's sold.

As for peripherals, while there are a few that are specific to the Playstation, things like controllers, controller charging stations and headsets are compatible with PC. So if someone were to be a PC player that enjoys the feeling of the Dualsense/Dualshock, they may just buy a controller separately, as an example.

This is to say Playstation, as a brand, can get profit from those who are not users of their consoles. There are even services of theirs, that you can access and pay for, without owning one of their consoles, like PS Now.

Yes , well said . It happens all the time , everything changes .

 

[FPV MIC]

Well, according to the report made for Sony's Investor Relations Day, which can be found in the ArsTechnica article, the difference is clear between the PS3 era (FY13) and the PS4 era (FY20). Despite moving 32% more systems in the latter era, the revenue share for consoles still dropped by 28%. It shows that they sell these systems at a loss, and that the real margins are made elsewhere in the Playstation ecosystem. Following Microsoft is become the move that makes the most sense, and they're late to the party.

I'm a long way off being a financial expert but wouldn't that same article directly contradict Sony selling consoles at a loss? Especially when it seems that only around 9 months after the PS 5 release it's going to start turning a profit?

I would have thought that it's more to do with vast increase in profits from subscriptions and digital game sales when compared as a percentage to console sale profits.
According to that same article this was the increase in only the last two years ''PlayStation Plus had 47.6 million subscribers in the 2020 fiscal year, up from 36.4 million two years ago. And PlayStation Now had 3.2 million subscribers in the 2020 fiscal year, up from 700,000 just two years prior''.

And if you go back to 2014 there was only 7.9 PS Plus subscribers: https://www.gamespot.com/articles/playstation-plus-reaches-7-9-million-subscribers/1100-6423306/

Also, back in 2013 when this comparison starts from there was virtually no need for PS Plus and digital sales were also very low back then.

As I said, I'm no expert but this seems more feasible to me.

 

[sirjim73]

I'm a long way off being a financial expert but wouldn't that same article directly contradict Sony selling consoles at a loss? Especially when it seems that only around 9 months after the PS 5 release it's going to start turning a profit?

I would have thought that it's more to do with vast increase in profits from subscriptions and digital game sales when compared as a percentage to console sale profits.
According to that same article this was the increase in only the last two years ''PlayStation Plus had 47.6 million subscribers in the 2020 fiscal year, up from 36.4 million two years ago. And PlayStation Now had 3.2 million subscribers in the 2020 fiscal year, up from 700,000 just two years prior''.

And if you go back to 2014 there was only 7.9 PS Plus subscribers: https://www.gamespot.com/articles/playstation-plus-reaches-7-9-million-subscribers/1100-6423306/

Also, back in 2013 when this comparison starts from there was virtually no need for PS Plus and digital sales were also very low back then.

As I said, I'm no expert but this seems more feasible to me.

There's one huge difference between 2013 and 2020 that's not been mentioned yet and that's the pandemic.

Much of the world has been stuck at home for most of 2020, which has resulted in increases in game sales and also increases in subscriptions to PS Plus and PS Now, because people weren't allowed to do much else. It also resulted in increases in console sales, but seemingly not in the same proportions.

This also applies to Microsoft obviously, as well as subscription services like Netflix etc.

What no one yet knows is whether those numbers will tail off in 2021 as people venture back outside.

A lot of people will continue with their new subscriptions of course. But some will spend their money elsewhere on other things.

Even if subscription numbers don't decrease, I personally doubt 2021 will see anywhere near the increases we saw in 2020.

Whereas console sales may increase as more next gen games are released later in the year.

 

[warp9engage]

I'm a long way off being a financial expert but wouldn't that same article directly contradict Sony selling consoles at a loss? Especially when it seems that only around 9 months after the PS 5 release it's going to start turning a profit?

I don't think it does. After all, it does confirm they only expect to start turning a profit, in June of this year. This is expected, as components age and become cheaper over time, and manufacturing is optimized. It's also worth pointing out that they expect the console to "start selling at a profit", but how long will it be until that profit reaches meaningful levels? If you sell a system for 499$, and it cost you 498$ to put in on the shelf, you've technically made a profit, a 1$ profit. However, I'm sure that's not satisfactory. It's worth asking how much longer will it take from when they "start selling at a profit" to when they "start selling at a decent profit".

I would have thought that it's more to do with vast increase in profits from subscriptions and digital game sales when compared as a percentage to console sale profits.
According to that same article this was the increase in only the last two years ''PlayStation Plus had 47.6 million subscribers in the 2020 fiscal year, up from 36.4 million two years ago. And PlayStation Now had 3.2 million subscribers in the 2020 fiscal year, up from 700,000 just two years prior''.

And if you go back to 2014 there was only 7.9 PS Plus subscribers: https://www.gamespot.com/articles/playstation-plus-reaches-7-9-million-subscribers/1100-6423306/

Also, back in 2013 when this comparison starts from there was virtually no need for PS Plus and digital sales were also very low back then.

As I said, I'm no expert but this seems more feasible to me.

The creation of things like game streaming services, and the adoption of digital games are the greatest shifts in the market that threaten consoles, reducing their importance. These offer larger profit margins and are rapidly becoming the greatest sources of income for the Playstation and Xbox brands. Even when consoles are turning a profit, if they only bring in something like a 20% profit, instead of say a 50% profit for services and games, they're going to focus more and more on what will get them the income.

 

[FPV MIC]

I don't think it does. After all, it does confirm they only expect to start turning a profit, in June of this year. This is expected, as components age and become cheaper over time, and manufacturing is optimized. It's also worth pointing out that they expect the console to "start selling at a profit", but how long will it be until that profit reaches meaningful levels? If you sell a system for 499$, and it cost you 498$ to put in on the shelf, you've technically made a profit, a 1$ profit. However, I'm sure that's not satisfactory. It's worth asking how much longer will it take from when they "start selling at a profit" to when they "start selling at a decent profit".

You stated the article showed Sony sell systems at a loss and I was asking how it shows they sell systems at a loss. Even your answer above points to Sony turning a profit on console sales... just slowly.

My main point about what that article showed was the increase in profits elsewhere than consoles, and that nowhere it showed consoles selling at a loss like you suggested. See below:

I would have thought that it's more to do with vast increase in profits from subscriptions and digital game sales when compared as a percentage to console sale profits.

Every system is sold at a loss at first but from what I've read Sony has always eventually turned a profit on their consoles so I can't see why there'd be a difference here, especially when the PS 5 is said to becoming profitable in such a short period ''something that's relatively unheard of this soon after a major console launch.''. https://screenrant.com/ps5-sales-profit-sony-break-even-june-2021/

Also you are missing that PS4 sales would be counted in that report too, which with well over 100 million sold should well and truly be in the black.

The creation of things like game streaming services, and the adoption of digital games are the greatest shifts in the market that threaten consoles, reducing their importance. These offer larger profit margins and are rapidly becoming the greatest sources of income for the Playstation and Xbox brands. .

I agree that the importance of consoles is slowly going down to a certain extent and I didn't refute that. We're just not anywhere close to them being obsolete.

Even when consoles are turning a profit, if they only bring in something like a 20% profit, instead of say a 50% profit for services and games, they're going to focus more and more on what will get them the income.

I don't disagree here. This would be why Sony is starting to allow their previously PS only games go to other platforms.

 

[warp9engage]

You stated the article showed Sony sell systems at a loss and I was asking how it shows they sell systems at a loss. Even your answer above points to Sony turning a profit on console sales... just slowly.

I think we have a language problem here, likely stemming from how I phrased my original post. For the first 9 months, Sony was/is indeed selling their systems at a loss and, apparently, they're surprised they're going to able to start turning that around so soon. Consoles are no longer a profitable endeavor from the outset, as they used to be, with manufacturers now needing to play the "lose now to win later" game, with them. That's ultimately what I want to get across. Like you say further below in the same post.

Also you are missing that PS4 sales would be counted in that report too, which with well over 100 million sold should well and truly be in the black.

Indeed, it is unrealistic for the PS4 to always have sold in the negative. If 7 years of hardware getting cheaper and manufacturing optimization weren't enough to get it into the positive, they'd have done something massively wrong. Again, I wanted to say that the console business (for MS and PS) is a "lose now to win later" situation, nowadays.

I agree that the importance of consoles is slowly going down to a certain extent and I didn't refute that. We're just not anywhere close to them being obsolete.

It's us, the consumers, that are keeping consoles alive, with our love for offline play and physical media. If the manufacturers were to have their way, they'd sell you a streaming box for 150$, that is much cheaper to build, and then stream all your games to you, through a paid subscription of course.

I don't disagree here. This would be why Sony is starting to allow their previously PS only games go to other platforms.

Exactly. If you get most of your money from your software, you'd want to sell that software to the largest audience possible, no? You can't do that by sticking to one platform alone. And, fortunately for them, with x86 architecture being adopted across machines, cross-platform development has never been easier/cheaper.

 

[FPV MIC]

I think we have a language problem here, likely stemming from how I phrased my original post. For the first 9 months, Sony was/is indeed selling their systems at a loss and, apparently, they're surprised they're going to able to start turning that around so soon. Consoles are no longer a profitable endeavor from the outset, as they used to be, with manufacturers now needing to play the "lose now to win later" game, with them. That's ultimately what I want to get across. Like you say further below in the same post.

I thought it was only Nintendo that made a profit from the outset and selling for a loss at the start of a console lifespan was the norm for Sony but they mostly became profitable? Microsoft is supposedly different in this respect but I'm a bit sceptical about their ''never made a profit from consoles'' claim and suspect it could be more like revenue shifting.

About your original post:

Despite moving 32% more systems in the latter era, the revenue share for consoles still dropped by 28%. It shows that they sell these systems at a loss,

Perhaps it was a language problem but this seemed pretty clear that you were saying that consoles are sold at loss, and that you were using the fact that despite selling more their revenue was less to back that claim up. This isn't necessarily the case and that's what I tried to point out.

The next part of that first post:

and that the real margins are made elsewhere in the Playstation ecosystem.

This is spot on 👍

And the last part:

Following Microsoft is become the move that makes the most sense, and they're late to the party.

I'm neither here nor there about this bit.

I also agree with pretty much everything else but would like to add that where I live (Australia) streaming games is still a long, long way off. We can barely stream a 1080 movie here and the prices for fast internet are insane. Our new NBN service will offer me slower speeds than I currently have for the same price I pay now or the same speed I have now at a far greater expense.

 

[Wolfe]

I agree that the importance of consoles is slowly going down to a certain extent and I didn't refute that. We're just not anywhere close to them being obsolete.

I'm sorry to play my broken record again on this clearly Sony-centric site, but I consider Nintendo to be the #1 reason why consoles are nowhere near being obsolete. Personally, I consider the Switch to be way, way more in line with the traditional notions of a console than the pseudo-PCs that Sony and Microsoft now sell; but that's just semantic. The solid-state carts and minimal installations/updates are a refreshing throwback after my XB360 and especially my PS4.

Nintendo knows what they've got, they know their audience, they have their priorities (eg. getting people together on the couch to enjoy games together, playing games anytime or anywhere), and although they are now more "fluid" than before, they are still stubborn.

It's us, the consumers, that are keeping consoles alive, with our love for offline play and physical media. If the manufacturers were to have their way, they'd sell you a streaming box for 150$, that is much cheaper to build, and then stream all your games to you, through a paid subscription of course.

Us consumers are why that is never going to happen all across the board. 👍 Not to mention all the developers who will keep making games you can play offline on consoles (or PC), because their priorities are not Sony's/Microsoft's/whoever's priorities.