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mrstickball on 25 June 2007
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RolStoppable said:
mrstickball said:
1) They aren't the only company based on simple economics. Microsoft and Sony are in the video game markets for reasons far bigger than just videogames, therefor just using "they are losing money" as an excuse is dumb.

2) For Sony, they've almost always made a profit until they decided to push more online functions and Blu-Ray technology. As I've said, and will say again, Sony is pushing a machine to push Blu-Ray, therefore the actual benefit of the PS3 to Sony (as a corporation) isn't entirely in gaming. Therefore, their true profits off of videogames isn't entirely disclosed in mere P&L statements for the PS3, nor console losses. So what if the PS3 looses $200? The PS2 lost $120 per system @ launch (give or take), and ended up making Sony billions of dollars.

3) For Microsoft, they are taking the route of pushing alot of DLC, addons, content upgrades, and such. Consoles aren't their bread and butter, which is why they lose so much. However, their bread and butter are from vista/office sales, and software. Secondarily, they make lots off of servers, to which MS is using their servers for XBL content. For all we know, profits for the H&E division are less because sales of MS Points and XBL Gold subscripts. aren't included.

4) Nintendo is the only game company because thats all they are. For them, if Nintendo ever lost money, they'd go bankrupt. Sony and MS have the advantage of being able to lose money, and being able to recoup it.

5) You can extrapolate "oh, if Sony/MS were just videogame companies, they'd be bankrupt" thats just faulty logic. Your assuming that if both companies just made videogame systems, they'd pursue the same stratagies, but they wouldn't. They wouldn't have the massive bits of cash to invest in things that Nintendo can't even invest in. Theres a reason the Wii uses rehashed GC technology - it's cheap. Theres a reason Nintendo can't invest in a fully functioning online network - it costs money Nintendo is unwilling to pony up for quickly, as its alot of money. This is a plus and minus.

6) For consumers though, the Sony/MS is better in the fact that we gain where they lose. We get systems that are far more powerful for the dollar than the Wii. Which might mean, or not mean anything to various gamers (to me it does though).

7) Ultimately, your trying to make a hypothetical point thats totally invalid. MS and Sony aren't video game companies. Thats why they sell systems, and what they do works for them.

1) Yes, Sony and Microsoft are in the videogame business for more reasons than just making money from videogames, but they have to understand that the primarly selling point for a console are videogames. It doesn't look like that they will be making money from videogames this generation and they will probably also fail to make profits off of the other things they offer for their consoles (Bluray, DLC), because first and foremost you have to sell your machine as videogame system to reach massmarket penetration.

2) The PS2 made a cumulative profit of $2.3 billion for Sony's game division. The PS3 lost close to $2 billion in its first year and Sony projects another $500 million loss for this fiscal year. Everything the PS2 made in profits is already lost. The PS3 is a huge gamble, if Bluray doesn't become the successor of the DVD, Sony will not only have lost their reputation in the videogames business, they will also lose money on yet another failed new format they wanted to push in people's homes (Betamax, MiniDisc, UMD).

3) As of now, Microsoft's H&E division hasn't made a single cent of profit. In fact, they lost about $5.5 billion on the Xbox line. The Xbox exists to stop the Playstation line from becoming a convergence box for the living room which would cut into Microsoft's main business, Windows.

4) Nintendo has about $5-7 billion cash reserves, they could afford to make an Xbox like failure and would still be in the business. The Wii clearly shows that it isn't necessary to sell hardware at a loss in this business if you have a great product. Lossleading is a risky business, if you don't become dominant, you will lose billions (see Xbox, 360, PS3). Nintendo knows how to make money in this business, Sony and Microsoft obviously don't know.

5) Whether a company can or cannot afford to lose money isn't relevant. The strategies of Sony and Microsoft are stupid, they are betting the farm on their current consoles and therefore become desperate to have a huge hit. There's a reason why Nintendo invested in rehashed (but clearly improved) GC technology - graphics are perceived as good enough already by the majority of consumers. There's a reason why Nintendo didn't invest in an online network like Live - it simply can't be a profitable business (Microsoft is charging a fee and still losing money on it).

6) Stop believing that Microsoft and Sony are running their videogames divisions at a loss because they care for their customers. They are not charity companies. In fact they care far less about the videogame market as Nintendo. Nintendo has to care, because it's their only business. Microsoft and Sony give a rats ass.

7) If Sony won't be able to make money in this business anymore (which is likely seeing how the PS3 and PSP are doing) and doesn't see a possibility to make money in the future they will leave the market. If Sony leaves, Microsoft's primary reason to enter the market has gone. If the Xbox line hasn't become a profitable business (which was their secondary reason to enter the market) by then, Microsoft will leave to. Business is about money.

 

1. I agree, and thats exactly why the X360 and PS3 are failing. I've stated, and advocated a X360 pricedrop since November last year for Gears of War, because the X360 is failing vs. the Wii due to mass market pricing. For the PS3, it's the same thing as the 360, but at a much higher level, as it's pricetag keeps only the most hardcore and wealthiest gamers to buy the systems. However, to maintain profitability, MS/Sony have realized that in order to continue being loss leaders @ launch, they need ways to get more cash via DLC and other online ventures.

2. Again, I agree that Sony has made just about the biggest gamble in gaming history. I never said what they've done was smart or right, as like you've said, they've nearly lost their entire PS2 profits by blundering the PS3 design. IMO, Sony would be FAR better off of they'd of lowered Cell/RSX specs and launched the PS3 at $500 w/o such a huge cost for the mobo (the mobo alone is $300 as of isuppli's estimations, whereas the BR-DVD is less than half of that, and has rapidly reduced in price). Again, Sony could make billions via BR licensing, and justify the PS3 strategy, but for me, that was too risky with the uber-specs of the PS3.

3. H&E is still in the red, but they have actually made profits before. When H2 launched, H&E posted a $100m profit. I agree that the H&E is a stop-gap to prevent PS3 from dominating a set-top box (which is what Sony is trying to do, as MS forsaw). Eventually though, H&E will become profitable.

4. During the PS1/2 dominance, Nintendo did end up doing very poorly vs. their current and former years. During GC launch and such, profits were only around $200m yearly (versus around 500+ now). Nintendo knows how to make money, because games are their business - just like Sony knows how to make cash on TVs, and MS on OSes.

5. Prove to me that MS is actually losing cash on just XBL. If Nintendo was all about the gaming experience, why not give a better online system?

6. I know that they aren't being loss leaders for any reason outside of selling more units. But as a consumer, I don't mind getting better systems for cheaper :)

7. If Sony left (which I doubt they will), then MS will force their gaming division to become profitable, and fight head to head with Nintendo. Even if they aren't in the market still to fight Sony, they will find another viable reason to fight.

 



Back from the dead, I'm afraid.