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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!

 

Biggerboat1 said: 
Hiku said: 

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.

Right. I think that's probably the case with the revenue.

Though I'm not sure why you're saying 'I wasn't comparing'. It's not like I misunderstood why you mentioned it.
So I thought it's worth pointing out that PSN's business model has very little to do with investment capital/risk. And many of the large expenses that a company like Amazon have to shell out for on top of the cost of purchasing the products they sell (factory, packaging, storage, shipping and wages to an amount of workers that probably eclipse the staff working on PSN) are mainly non existent for a store that's entirely digital.
Though they could coincidentally have similar profit margins, but it would be for very different reasons.

And I mentioned Capcom to highlight the difference between the $60 that Gamestop makes, vs the $60 that PSN makes.
That in Gamestop's case, there's no question if the entire sum is their revenue, since they already paid for the game. In PSN's case, they didn't pay for the game, so that $60 is split up after the fact, making it a bit more unclear as to how it potentially could function. But I think they most likely count the entire $60 as their revenue as well.
If for no other reasons, it just sounds a lot better to be able to boast high revenue numbers.

Last edited by Hiku - on 01 February 2019

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Biggerboat1 said:

 

pokoko said:

 

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!

It's not pointless in any measure of the word.  Revenue is very important--that's why it gets reported and why it gets talked about so much.  If Sony called it a day and just closed up shop after giving a quarterly report, then you'd be right, but that's not what's going to happen.  Revenue is the ability to keep moving forward, which is why it often means more to observers than margins.  Many of the most prominent companies in the world got that way by prioritizing revenue.  It's a measure of scope and a window on potential.  



Hiku said:

 

Biggerboat1 said: 

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.

Right. I think that's probably the case with the revenue.

Though I'm not sure why you're saying 'I wasn't comparing'. It's not like I misunderstood why you threw that figure in there.
So I thought it's good to point out that PSN's business model has very little to do with investment capital/risk. And many of the large expenses that a company like Amazon have to shell out for on top of the cost of purchasing the products they sell (factory, packaging, storage, shipping and wages to an amount of workers that probably eclipse the staff working on PSN) are mainly non existent for a store that's entirely digital.

And I mentioned Capcom to highlight the difference between the $60 that Gamestop makes, vs the $60 that PSN makes.

 

Well, you said "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"

 

That's why I thought it prudent to point out that I wasn't comparing those 2 companies, but simply pointing out that revenue is not a predictor of profit. Hell, I could have picked KFC or Adidas.

 

Pointing out that it was not a good comparison, to me isn't a valid point, as I wasn't comparing them in the first place...

 

No biggie though!



pokoko said:

 

Biggerboat1 said:

 

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!

It's not pointless in any measure of the word.  Revenue is very important--that's why it gets reported and why it gets talked about so much.  If Sony called it a day and just closed up shop after giving a quarterly report, then you'd be right, but that's not what's going to happen.  Revenue is the ability to keep moving forward, which is why it often means more to observers than margins.  Many of the most prominent companies in the world got that way by prioritizing revenue.  It's a measure of scope and a window on potential.  

Revenue, on it's own doesn't tell us anywhere near enough to draw a meaningful conclusion - within the context of this forum anyway.

I'm sure on the forums of The Economist where people have a deep understanding of particular companies / trends / business models, they could draw meaningful conclusions, though they'd still want to see how that translated to profit - but this forum is not that. I mean it's evident that a lot here don't even understand the distinction between revenue & profit...

You can have companies with large revenues that are healthy & other's that are haemorrhaging money...

Bottom line, I think it's asinine to compare revenue of a digital store front to a hardware/software company - don't you? And if you don't agree, can you explain why?



Kerotan said:

 

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. 

Nope, he's right when he's saying that their alleged allies are competing against them. You're glorifying Sony for something that would have never happened in any case. The backlash Microsoft suffered started after the unveiling of the console, not at E3 and if Sony had made the same decision, the market would look different. Do I have to remind you that Sony was part of a small group of publishers which imposed a fee for online play on used games ?

If GameSpot is still afloat today, it's because they took the right decisions at the right time to postpone their downfall.



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abronn627 said:
Kerotan said:

 

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

 

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. 

Nope, he's right when he's saying that their alleged allies are competing against them. You're glorifying Sony for something that would have never happened in any case. The backlash Microsoft suffered started after the unveiling of the console, not at E3 and if Sony had made the same decision, the market would look different. Do I have to remind you that Sony was part of a small group of publishers which imposed a fee for online play on used games ?

If GameSpot is still afloat today, it's because they took the right decisions at the right time to postpone their downfall.

Great point about the online pass. IIRC Sony started that nonsense on PSP. That directly affected the price GameStop could sell used games for, as it made no sense for them to charge their usual $5 off MSRP on used titles when you’d then have to spend $10-20 for an online pass.

Plus he’s mistaken about Microsoft’s original intent. They weren’t killing second hand sales. They had it set up to where you could trade in games at select retailers. No way GameStop wasn’t one of those. And with only select retailers being able to take Xbox One games for trade, it would have allowed them much more leeway on controlling trade in prices and amount of credit given. In the end Microsoft’s original vision was garbage for gamers but would have likely been good for a place like GameStop.



Amazing how does things change.
Massive profits, massive profits, massive losses, now back to even bigger massive profits again.
PSN is such a cash cow for Sony.



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.  

Unfortunately it is a viable path. Not a very consumer and employee friendly path, but still very very viable.

That being said, Sony's gaming divison runs close to a 20% profit. That is awesome for everyone. The company as a whole runs under 10% which is bad business if you are not a publically traded company.



Sony is killing it in the gaming industry. I love it.



Biggerboat1 said:

 

Well, you said "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"

 

That's why I thought it prudent to point out that I wasn't comparing those 2 companies, but simply pointing out that revenue is not a predictor of profit. Hell, I could have picked KFC or Adidas.

 

Pointing out that it was not a good comparison, to me isn't a valid point, as I wasn't comparing them in the first place...

 

No biggie though!

Well like I said, I didn't misunderstand why you posted that figure. And my point wasn't related to whether you want to call it a comparison or not, so that's just arguing semantics.
You could have picked another example, sure, but you chose one where the profit was not even 0,1% of the revenue. 

That's not an example relevant to PSN today, because it's not the kind of business model that takes risks with their investments like that.
Their entire gaming sector does, but not 'PSN alone', which is the subject.

Last edited by Hiku - on 01 February 2019