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silicon on 22 June 2010
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Smashchu2 said:
padib said:

Smashchu2 said:

Margins have nothing to do with a business model. A margin is just your sales minus Cost of Goods Sold. What I was arguing is that just because you can have a lower margin by percentage of sales, it may not be better because the selling price is lower. If you sell a game for $5 and it cost you $2 per unit. That's a 60% margin. Now, let's say you sell one for $50 and it cost $45 per game. Well, that's a 10% margin. That's not as good as a 60% one. But in fact, it is better. Because you sold the game for more, you made more money. Precents are very easy to abuse. If you want to discuss the math, make sure you try to use absolute numbers rather then precents. Industry analyst abuse precents all the time. Again, the table has nothing to do with business models.

But what do you challenge in "[...] iPhone is now responsible for 19% of all revenue generated by handheld games (as of 2009), compared to the PSP’s 11%. Obviously, the DS still reigns supreme with 70%." Revenue is total money accumulated in sales, right? Are you saying that, because the margin is smaller on average for the iphone, the profit percentage will also be smaller in comparison? By how much will it be smaller, and is it so little so as to dismiss it altogether. What is actually your opinion?

The precentage thing you bolded more so refers to "19% of what?" The thing I argue about the information is that 2009, the year that information was for, was the 5th year of both the PSp and the DS. Systems tend to peak in their 3rd year, so they are naturally going to have lower revenue for that year (and Nintendo has not released any big software for the system since Pokemon back in 2007). So, it's easier to claim a bigger peice of the pie in a slower year. The question is how much revenue was made in 2009 and how does it compair to previous years. Our source doesn't give the number. A better measure is to see how Apple's revenue for games holds up in the year when the 3DS launches.

As for your question, precents are relative. 1 is 50% of 2 but also 1% of 100. So, a precent by itself means nothing. It's the numbers attached to it that are useful. So, to answer your question, let me say this. The ways to increase your profit (which is what is the most importaint here) you either lower your cost, raise your price, or sell more. What I have been arguing (amoung other things) is that just that the iPhone/Touch isn't nessisarily more profitable as it has lower prices and the games don't sell as much on average (19% with well more then twice the games on the DS vs 70%?). Naturally, they are going to make less money on them even if their cost are lower because they charge so little for the software. You mentioned precents, but I'd rather ignore them. I'd rather talk about absolute number.

By the way, I'm an accounting major. So, I looking at this like an Income Statement.


I'm not sure what it's referring to but "margins have nothing to do with a business model"?  I may be taking it out of context or missing something but that's just bad business.

Anothing thing to figure out is the % Apple gets vs the % Nintendo gets vs the % PSP gets, and the total revenue generated from the sale of third and first parties.

This is where business model comes in... does Nintendo / SONY need to focus on selling more games or consoles?
The Iphone won't die if the app store suddenly stops selling games, but would the PSP die if developers stopped making games for it?