Is the PS4 Sony's Most Successful Console to Date?

[The_Liquid_Laser]

VAMatt said:

The_Liquid_Laser said:

I can't tell you're having trouble with this concept, so let me try to say it again more simply.  The purpose of a business is to serve customers, and the more customers it serves the better.  However, a business that is not making profits is not sustainable in the long term.

On top of that you can measure the Internal Rate of Return (IRR) for any business venture.  Lots of business ventures last more than 1 year, so you have to look at it as a whole.  For example you can look at the PS1 profits over it's total lifetime.  It might have lost money in it's first year, but you can look at the IRR over the console's whole life to see how it has done.  The PS1 was profitable overall.  The PS3 was not.  There are lots of ventures, over a variety of industries, that need to be examined over a time interval greater than 1 year.

VAMatt said:

That is a total nonsense statement about the purpose of a business.  Businesses exist to maximize the total return to shareholders (or whatever term you want to use for rhe owners)  That means maximizing profit, generally in the long term.  Getting customers is an important part of that, but a customer is of no value if you do not profit from them.  

That "nonsense statement" comes from the leading business expert of the 20th century.  However, I can understand your confusion.  Some people think a business is there to serve customers.  Others think the business is there to serve themselves.  I am like Mr. Drucker.  I think a healthy business has a purpose in serving customers.  I am not a fan of businesses that make profits such a priority that they do things that are clearly not in their customers' best interest.

I know who he is.

I don't think you understand what a business is.  To all businesses that are bigger than small family firms, and even to most of those, the only thing that matters is return to the owners. Everything a business does it does for the purpose of maximizing that return.  When it gives employees above market wages and a great work environment, it isn't out of the goodness of its heart. A company isn't a human with emotions, it doesn't have a heart. It is done because that is what (they believe) maximizes total return to owners.  The same is true of a company that treats employees poorly.  

In other words, there are no (sizeable) businesses that prioritize profits more than others.  A business, by its nature, does nothing else. 

With all of that said, of course a business needs to create customers.  And it does thay by providing them value.  But, it doesn't provide value for fun, or as an act of charity (even the companies that donate a portion of every sale, or a pair of socks or shoes or whatever aren't doing it as an act of charity in the way that we generally think about that).  A company does this because that's what (it believes) generates the maximum return for owners.

Investing more, cutting investment, hiring, firing, providing good customer service, bad customer service, making cheap crappy widgets, making the highest quality widgets possible, all of it is done for the same reason.

Your view on the purpose of business is not uncommon, but it is most definitely incorrect.  

If your view were true, then most industries would not exist.  There are some industries, like finance or real estate, that consistently give a high return for a relatively low amount of risk.  Some industries are simply more profitable.  If the point were to make profits, then every business in a low profit sector, like food service, should close down and start a company in the finance industry instead.  In practice, this sort of thing is the exception rather than the rule.  Most businesses instead try to succeed in their chosen industry, regardless of whether it is one of the more profitable industries or not.

The Entertainment Industry (which includes the Game Industry) just happens to be one the worst industries to be in for any business that cares only about profits.  The risk for any business in the Entertainment Industry is incredibly high.  Even the companies that seem to be at the top of the Game Industry, like Sony and Nintendo, do not get financial results that are remotely consistent.  Sony's losses during the PS3 era were greater than their profits during the PS2 era, and Nintendo's fortunes can obviously change greatly from one console to the next. 

And these are the best companies.  All of the other companies have a harder time succeeding than either Sony or Nintendo, and there are many established companies that have gone out of business in the Game Industry.  If these companies were really in it solely for the profits, then they should have left the Game Industry long ago and started a business in a more profitable industry.  The truth is that Sony and Nintendo and every other company in the Game Industry are there by choice.  They are choosing to serve customers by making games.  It isn't about profits alone.

Steve Jobs didn't become a successful entrepreneur by being greedier than everyone else.  He was successful, because he had a vision of every person in the world using a computer.  He had a vision of how his business would serve people.  He chose to serve people by selling them home computers, laptops, smart phones, etc....  He definitely didn't think there was anything wrong with making profits.  (I don't either.)  However, profits are not the end, not the real purpose of a business.  The profits are the means to an end.  The end is to create new customers and to keep them by serving them with the business's goods and services.