SWORDF1SH said:
ICStats said:
SWORDF1SH said:
True but you have to also balance it out.
They know how many games the average consumer buys, they the percentage of consumer that sign up to PS Plus. They know what he average consumer spend on movies from their store and PS Now. Basically they know how much profit they can gain after they sell a PS4.
They then have to weigh up if dropping the price to make less profit per unit will bring in enough profit with the increased install base to make it worth it.
eg.
PS4 sells 1M at $400 for the year (small number to keep it simple). Sony make $50 profit per console, average consumer spends x amount to profit Sony $50 a year= So they will make $100M for that year.
PS4 sell 2M at $350 but make no profit per unit. Average consumer spends x amount to profit Sony $50 a year= $100
That extra install base will also continue to profit Sony $50 a year per unit sold. That 1M extra gained from price cut will give Sony $250M profit over 5 years for the sake of losing $50M on price cut.
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Yes, your example shows that it CAN be a good idea to cut the price, if the numbers add up.
However your example is a bit contrived, in particular a console that's already selling so well would not get 100% bump from a $50 price cut.
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It's a loose example. I don't even know what the average consumer spends and how much profit they make. The $50 a year per person could be way to low. If the PS Plus subs numbers are to be believed then I can see it being a lot higher. If the software ratio is also to be believe on VGC the we are looking at 5 games sold to 1 console. What do they make off of software, 10%, 15% 20%? Then you have sales of DLC and movie rentals and sales. You will sell more of this the more consoles you sell and more people you have spending money year on year. The sooner you increase your install the sooner you have people spending money. Not quick enough to get them and you loose the valuable consumers to your rivals.
The numbers were did in the way I did it to make it simple and not to complicated.
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PS Plus is not going to be all profit, and not everyone subscribes. Average console attach rates are 10:1 for lifetime, so on average people buy ~2 games a year. Peripherals are where they can make high margins.
