Sony plunged $10 billion after its PS5 sales cut. But a bigger issue is its near decade low games margin

[winb83]

Same reason Sony is now putting games on PC and xbox too

Again console warrior narratives.

The xbox business has never been healthier or more successful than right now.

What they did bad was lose the console war. As a business they evolved and positioned themselves very favorably.

Why weren't Microsoft putting their first party fair outside Minecraft on the PS4? What changed between then and now to drive them to do something that was unthinkable back then?

 

[MeachTheMonster]

Why weren't Microsoft putting their first party fair outside Minecraft on the PS4? What changed between then and now to drive them to do something that was unthinkable back then?

Why is sony now doing the unthinkable

At some point over the last decade or so the economics changed.

Sony was “winning” so they were able to hold on a bit longer before needing to make changes, but they both ended up coming to the same conclusion.

 

[winb83]

How are they losing money if they are selling hardware? Since people are buying Sony systems that means they are spending money on product

The price of making a PS5 hasn't really changed much. The components they use aren't going down in cost. I don't think them selling hardware is extremely profitable for them. The real problem is the console market has run out of runway. Sony isn't selling more consoles than they have in the past and their development cost for new games is rising. That puts the squeeze on profits. They either need to sell more hardware (which the numbers they posted suggest isn't happening) or reach new customers on different platforms. The last solution is to just raise prices on the current customers.

 

[winb83]

Why is sony now doing the unthinkable

At some point over the last decade or so the economics changed.

Sony was “winning” so they were able to hold on a bit longer before needing to make changes, but they both ended up coming to the same conclusion.

Sony is doing it as a concession that their current model isn't enough. Realistically this clearly wasn't something they wanted to do its a concession.

What I'm asking you is if putting these games on rival platforms was such a smart idea how come Xbox refused to even consider it back then? Instead of answering the question you deflect to what Sony is doing.

PlayStation outside the forced MLB game by the MLB isn't making Xbox games. They didn't come to the same conclusion. If Xbox was more competitive we wouldn't even be having this discussion because this strategy was born from their struggles not some future savvy business strategy.

 

[Fatboi1]

So what do we have to do?

 

[MeachTheMonster]

Sony is doing it as a concession that their current model isn't enough. Realistically this clearly wasn't something they wanted to do its a concession.

What I'm asking you is if putting these games on rival platforms was such a smart idea how come Xbox refused to even consider it back then? Instead of answering the question you deflect to what Sony is doing.

I told you it’s because the economics changed. At some point the scales tipped from the old Console and boxed game sales strategy, to the digital, software and services reality of today. The scales just tipped later for sony as they were the console market leader.

PlayStation outside the forced MLB game by the MLB isn't making Xbox games. They didn't come to the same conclusion.

Sonys biggest gaming acquisition was to acquire a 3rd party studio so they can release games on all platforms.

If Xbox was more competitive we wouldn't even be having this discussion because this strategy was born from their struggles not some future savvy business strategy.

This is the stan in you talking. Sony is “winning” and still scrambling to follow what xbox has been doing for over a decade now. Make it make sense

 

[Instant Classic]

How are they losing money if they are selling hardware? Since people are buying Sony systems that means they are spending money on product

I think a major area of concern in why their numbers is looking funny is wage cost and how long their AAA games take to make. If you look at most of Sony studios they're mainly located in California and that's an expensive state to set up shop. I assume the average salary is at least 100k/year in that state and most. Then I assume these games have like 300 developers working on it and games take 5 years to make. If you do quick napkin math you $100k*300*5 = $150m just on employee wages for game development in that state. Then you have to factor in stuff like marketing, licensing, building expenses, and the BS dealing with setting up shop in California = messy situation.

Also, we have to look at Sony games are front loaded in sales, so bulk of their sales are within the first 3 months, and not making much money after due to no MTX, but I assume they get decent sales when games are marked down.

I feel all of the stuff above is why AAA development is in an awful state it is today and why a bunch of layoffs are happening. Also, I don't think video game companies are not like other industry where they're moving out of California because I feel in this industry most of the talent in America are located in California and Washington.

 

[MeachTheMonster]

So what do we have to do?

Keep stanning even tho exclusive content will be very sparse going forward

 

[Leasy]

Sell the stock while you can. This company is leading toward a major financial collapse if it doesn’t change its business practices within the year.

They tried treating the gaming industry like the movie industry

 

[Gizmo_Duck]

Low margins = financial collapse

What margins do you think the xbox division is dealing with not selling games or hardware

But wait, they are also making the most powerful hardware imaginable (again)

 

[winb83]

I told you it’s because the economics changed. At some point the scales tipped from the old Console and boxed game sales strategy, to the digital, software and services reality of today.



Sonys biggest gaming acquisition was to acquire a 3rd party studio so they can release games on all platforms.


This is the stan in you talking. Sony is “winning” and still scrambling to follow what xbox has been doing for over a decade now. Make it make sense

When Xbox leader has to have a rush meeting on a podcast as brand ambassadors and fans rage that's the stan in me talking right? There is no strategic value in Sony or even Nintendo putting their games on Xbox so no they aren't rushing to put games on all platforms. They just added a single platform, PC.

The reality is this Xbox's business faltered first so they added games to PC and are now adding games to Switch and PlayStation. This wasn't a genius move they made at the best of times these moves came at lower and lower points and they were concessions.

This is like two bothers and one is obese. He goes to the doctor and the doctor says you gotta lose weight or you will die. Years later the second brother becomes obese and the doctor says the same thing. The second brother isn't copying the first. They both ran into the same problem and the solution was obvious each time. It just happened to one before the other.

 

[MeachTheMonster]

Low margins = financial collapse

What margins do you think the xbox division is dealing with not selling games or hardware

But wait, they are also making the most powerful hardware imaginable (again)

Better margins than sony

 

[Gizmo_Duck]

Better margins than sony

Proof?

You think xbox is porting games to other gaming consoles because their business is doing fine as it is?

 

[Fatboi1]

Keep stanning even tho exclusive content will be very sparse going forward

 

[winb83]

Low margins = financial collapse

What margins do you think the xbox division is dealing with not selling games or hardware

But wait, they are also making the most powerful hardware imaginable (again)

When margins are headed in the wrong direction for a business over time what does that usually say about the way they do business?

Changes are coming. Probably layoffs, cancelled and rescoped projects, and a focus on a more profitable direction. That likely means the things they focused on in the past the things that a lot of the posters here love that company for aren't going to be the priority they once were at the company because they're making them less and less money.

Ultimately as you've over and over again suggested Microsoft has a path as a third party developer if none of what they're doing works out. Does Sony have that path if things don't change?