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abronn627 on 04 February 2019
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Hiku said:

 

abronn627 said:

 

The entirety. When they speak of revenue generated on their platform it’s the amount of $ spent on their services, not the the actual gross margin they made on each download. If a customer buy FIFA at 60$ on PSN, it’s 60$ of revenue, the cut they take as a “retailer” is part of the profit margin generated by the service.

In other words, it’s exactly the same way a retailer like GameStop operate.

I think they do count the entire $60 as their revenue. However, I would not say it's exactly the same.

You're familiar with the term "shipped units" I presume? That's what publishers/distributors have sold to retailers like Gamestop.

Generally speaking, if let's say Capcom has shipped Resident Evil 2, it's almost as good as a sale to them, and they don't necessarily care what happens after that, whether it sits on the shelf of the retailer forever, or reaches the hands of a buyer. They still got their money. Of course there are other reasons for why sold through units are more important, such as the potential extra sale of DLC and microtransactions, etc. But they don't have to wait for the game to get sold (again) for them to present those shipment figures to their investors.

That's not the case for a retailer like Gamestop though. In order for them to make money on that transaction, they're reliant on the product being sold through to the customer as well.
In other words, Capcom's "cut" for Resident Evil 2 is already taken care of during the initial transaction when the games are "shipped" to Gamestop.
It's basically the price at which Capcom chose to sell the game to Gamestop for.

So when Gamestop sell Resident Evil 2 for $60 to a customer, that's all Gamestop's revenue. Capcom don't take a piece of that sale literally speaking. They already got paid before the sale.
Then the profit for Gamestop is calculated after you take all the revenue and subtract all the expenses, such as the cost of buying the game.
So basically, because Capcom already got paid when the games were shipped, whatever Gamestop make on the transaction when selling to a customer is theirs to keep.

However, that's not the case when selling games through a service like PSN. Because they don't buy in any quantity of games, Capcom only get paid after the game has been sold to a customer. So everything Sony got from that sale, isn't theirs to keep.

The $60 that Gamestop gets is all theirs. But the $60 that Sony gets is not all theirs. Which makes me a bit unsure if they count all of it as their revenue. Since its electronic, Capcom could technically get their cut immediately upon every individual sale. Though I doubt that's the case. Rather, I think Sony hold the entire sum initially, and then pays the publisher on a regular (maybe monthly) basis based on the number of copies sold and at which price it was sold.

Yeah, I got all that. Having worked for GameStop for years and played with their P/L reports on a monthly basis I can tell that the idea you have about the way they work isn’t far from the reality, it’s still a little bit more complex, but you have the basic idea.

I used this retailer as an example to validate how revenue and profit are seen as two different thing and the revenue made from a transaction processed on PSN isn’t different than the revenue from a transaction in a retail chain even if said product is already owned by the retailer. The first one is more straightforward in it’s process while the latter is more complex since it’s more dependent on ROI and inventory.

And like you, I’m curious to know how a sale are processed and shared with publishers on services like PSN, XBL or eShop. If someone has any insight, I’ll gladly learn something new.