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PSN Alone Generated More Revenue Than The Entirety of Nintendo, MicroSoft's Entire Gaming Division!

Forums - Sales Discussion - PSN Alone Generated More Revenue Than The Entirety of Nintendo, MicroSoft's Entire Gaming Division!

So it's almost as big as the other two combined? That's crazy! I'm not surprised this was the case before Switch but damn even now that is impressive.



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Hiku said:

 

Ljink96 said:

 

Well sure, the underlying data behind comparing Amazon itself to PSN isn't on solid ground, but I'm stating the obvious that we need to know both Revenue and Profit to make a decent comparison as revenue is only half the story. I just want to know profitability of PSN but I don't think Sony gives that kind of information out, to my knowledge they only divulge into gaming division as a whole in terms of profitability as yes, Sony only takes a cut of all transactions on PSN (i.e. digital software, movie rentals, PSNow, etc.). Either way, I'm anticipating revenue and profitability to surpass Nintendo as there's more avenues to generate revenue than Nintendo is exploring.

Yeah it was more of a reply to Biggerboat1. Basically that whenever they sell games or DLC, whatever they get from that transaction is pretty close to pure profit, aside from things like server and bandwith costs.
But the main question is if the entire $60 of a game sale is counted as their revenue here. Or if the revenue is only referring to their cut.

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.



 

Darwinianevolution said:
I'm not sure if this model is going to be sustainable. Games as service and the proliferation of suscriptions will eventually burn people out, not everyone has enough money to pay for all the subscription entertainment demands nowadays. The fact that, after years of paying for stuff you still don't own anything is just the cherry on top.

 

Who are you trying to kid? If anything, it is going to continue to grow with streaming being the main focus moving forward and digital games being the norm instead of physical. This is why Gamestop is going out of business, PSN is taking their pie. 



 

Biggerboat1 said:
An obscure football manager in Scotland once said this in a televised interview "statistics are like mini-skirts - they look good but hide the most important part"

Not saying it's the best quote ever but stuck with me for the sheer randomness factor.

I think it applies here, PSN could have more revenue than Nintendo, but how that actually translates to profit is unknown and is really the only thing that matters. Revenue for show, profit for dough!

That's not true at all.  Revenue is important for growth, which in turn can lead to increased market share and a stronger position in the marketplace.  Look at Amazon share price and tell me that it's not a viable path.  



 

abronn627 said:

 

Hiku said:

 

Yeah it was more of a reply to Biggerboat1. Basically that whenever they sell games or DLC, whatever they get from that transaction is pretty close to pure profit, aside from things like server and bandwith costs.
But the main question is if the entire $60 of a game sale is counted as their revenue here. Or if the revenue is only referring to their cut.

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.

Last edited by Hiku - on 01 February 2019

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Faelco said:

 

Biggerboat1 said:

 

Yeah, those are the figures that matter. Having a revenue-measuring contest is kind of pointless imo...

In 2012 Amazon had a revenue of 61 billion & a profit of... -39 million...

No, revenue is far from a unimportant figure.

Sure, Amazon loses money regularly. Netflix maybe too. But their revenue keep growing, showing that they lose money but expand their business, their customer base, their reach. It's a strategy for some companies to sacrifice the profit for the growth.

Profit is important, of course, but revenue allows you to see the "size" of the company. Surely some small online shopping companies have a better profit than Amazon, but does that mean that Amazon is losing to them? No. 

Both are important and go together, you can't say "this one doesn't matter, give me the other one".

It's an unimportant figure as far as us, on this forum, comparing it between console manufacturers. Of course, in the board rooms of companies around the globe they'll have projections/strategies/goals etc. that will include revenue but saying PSN generates more revenue than Nintendo is kind of a pointless observation, especially when we're comparing a store front, which will be passing on a large chunk of it's income onto 3rd party developers...



 

Hiku said:

 

Ljink96 said:

 

What you're saying makes complete sense, what we need to know is profit of the entirety of PSN for this to even mean much.

Does anybody know if we ever get net profit or operating profit for PSN specifically in Sony's Financial Reports? The Feb. 13th is when we should get that info if it's included. 

Though, my guess is it was still more profitable, but I don't mind being proven wrong. 

Well, that aside I want to point out that comparing a fairly straight forward online service platform to a company like Amazon is not a good comparison to make. @Biggerboat1
Amazon often invest their own money into the products they sell. New games and consoles for example, they buy them in bulk for a certain price, and then sell them to consumers at a higher price.
They're reliant on how much they sell, after they've invested money into the product. And if it doesn't meet sales expectations, they may lower the price, etc.

Very different from how Sony sell games on PSN. Sony don't buy in any quantities of the games they sell through PSN. They just host the digital data. Whenever someone downloads a game from their store, they simply take a cut of the sale. Whether it's millions or thousands of copies, they didn't invest an amount of money corresponding to that number.

The costs are instead things like servers, maintenance, bandwidth, R&D, etc. And paying for the games that are offered Free through PS Plus.

So it stands to reason that their profit margins are generally a lot closer to their net profit when it comes to sales, due to the nature of PSN. Unlike Amazon where that can vary a lot depending on what is sold, and who is selling it.

As subsequently established after your post, it will likely be the case that Sony has to pay the developers out of their revenue which in all likelihood is a big old chunk.

I wasn't comparing Sony to Amazon, I was simply using a well known company as an example of revenue not being an indicator of profit.

What is not a good comparison is the revenue of a digital store front to a console/software company.



 

pokoko said:

 

Biggerboat1 said:
An obscure football manager in Scotland once said this in a televised interview "statistics are like mini-skirts - they look good but hide the most important part"

Not saying it's the best quote ever but stuck with me for the sheer randomness factor.

I think it applies here, PSN could have more revenue than Nintendo, but how that actually translates to profit is unknown and is really the only thing that matters. Revenue for show, profit for dough!

That's not true at all.  Revenue is important for growth, which in turn can lead to increased market share and a stronger position in the marketplace.  Look at Amazon share price and tell me that it's not a viable path.  

As I mentioned in my other replies, revenue is kinda pointless to look at in the context of a gaming forum - especially when comparing a digital store front with a console/software company - what we need to know is profit!



 

Barozi said:
For comparison:

Sony's gaming division (2018): $20 billion
Microsoft's gaming division (2018): $11.5 billion
Nintendo (2018): $10.9 billion

This is just insane. Sony's division is almost equal to the others combined. 

 

The_Liquid_Laser said:

1.  This shows why Sony's gaming division just had it's most profitable year.  Digital has much higher profit margins than physical.  

2.  This also shows why Gamestop has been in trouble.  Their alleged allies are competing against them.  Normally a console maker and retailer are partners in sales.  Not anymore, because Sony and Microsoft have their own online stores (and to a lesser extent Nintendo).  If Gamestop were smart, then would look for ways to gradually focus more on Nintendo and less on Sony and Microsoft.  The latter two are just throwing Gamestop under the bus anyway.

I disagree. Sony basically kept gamestop afloat by not following MS and killing second hand sales. Not only that but they even forced MS to change. That was a serious lifeline from Sony. Plus the big games from them often get better deals at retail. 



ArchangelMadzz said:
Ka-pi96 said:

 

I don't get how that's "obvious". The rest of the money could still be considered revenue by Sony, them having to pay it over to the publishers of the content doesn't change that.

It's from their financial reports. They can only report the revenue they receive. The can't include money that Activision made to their own investors.

But they would have received it. When somebody buys say COD on PSN it doesn't matter that Sony only keep what 30%? of the amount, the full price would still be paid to Sony and go through their bank before being paid onto Activision.



Bet Shiken that COD would outsell Battlefield in 2018. http://gamrconnect.vgchartz.com/post.php?id=8749702