Activision threatens to "stop supporting" Sony consoles.

[NJ5]

Reasonable said:

amp316 said:
So basically he's saying that it costs too much to develop games for a company that's not making him much money? How dare he?

That isn't a sound business strategy at all. This is why Activision isn't a very strong 3rd party developer.

That's what he's saying, but it's not his true stance.  Activision clearly makes plenty on the PS3.  If it didn't then what difference would a cheaper PS3 make?  None.  If he's unprofitable now on PS3 he'd be unprofitable on more PS3s - his unit sales would simply be higher.

 

The thrust of his argument - I want a cheaper PS3 so it sells more - reveals something different IMHO : that he believes PS3 sales would rise a lot on the back of a price drop, giving him and even bigger install base to make a profit out of.  That means he is making a profit on PS3 right now, and he wants more volume sales (and associated profits).

 

If he really felt that development costs, etc. prevented making profit on PS3 title's he'd pull support no matter what price the PS3 was - after all why sell 5M unprofitable SKUs vs 3M unprofitable SKUs?

 

So unless I'm missing something his own statements make it clear he's really trying to push Sony to eat margin to allow him to make more.

 

I think you are missing something. The profit from making a PS3 game is the profit from shipping all the copies to retailers, minus development costs, minus marketing costs.

Of course Activision (and every developer) makes profit from shipping a copy of a game, as the disc, box and manual cost next to nothing... but the real costs are in developing the games, not making and shipping the Blu-Ray disc and the instruction manual.

The question is whether the added profit from all the copies is greater than the development and marketing costs, and how much greater. That's what determines the profitability of making PS3 games for Activision.