The cloud still has those costs of hardware though, because Servers cost money.

Servers to support the next generation will have to provide the processing power for the millions of people or even dozens to hundreds of millions of people that will want to play on them.

Take this generation's technology, a PS4 APU costs around $100 and the GDDR5 could be $70 (random figures, but fair for launch prices), that's $170 for one user, then multiply that by say 3 million people on launch day $510,000,000, that's just the 3 million APUs and 24 million GBs of GDDR5 needed for those gamers, you also have to factor in motherboards, PSUs, HDDs and any other tech for all of those servers, you're probably looking at closer to a billion dollars for your launch server farms and then comes the issues of all of the bandwidth costs and then the issue of how how a suscription based model will work for a complete gaming solution like this.

At least with physical hardware you don't have to worry about the pure strain of a huge cloud based network on the broadband infrastructure.

You still have to make money on hardware either way, the fact that people don't see the tech or they're losing control of their system means the cloud will likely fail if it's the only option people have.

The next generation of processing technology will add even more demand to costs or just the strain on the network, because more bandwidth will be needed.

Going all cloud makes no sense, having the cloud as a part of the gaming infrastructure makes more sense, because it gives people options and a physical console also adds in reliability that most people will always be able to use most of their content unless the power goes offline at home.

A way around controlling used games better would be to go all digital based and sell every user a system with a decent sized HDD from day one or make it easy for them to put as big a HDD as they want in the system or just make sure they can plug in an external drive easily.

An initial loss is fine, because usually it's small per unit of hardware sold, the company knows most of the costs for that are covered from day one, hell PS4 basically broak even from day one, with one game sold, with a server network you have to spread it's costs across the year, not knowing if many people will default on payments, you still probably have to sell a box anyway, unless you're going to tap into existing PS4 owners, who now have to pay a subscription every month, to just play some better looking games on their existing PS4 or whatever platform Sony decides to allow access to Playstation Cloud.

If Sony goes with a PS+ type 1 payment per year type thing, then the costs of paying for the server hardware will take years to recoup, remember it's going to cost at least a billion dollars for the gamers on release date of the platform.

The cloud being the only thing gamers have access to for next gen is very unrealistic, if it's a partial thing, as a supplement to physical hardware, then the investment is much less than the costs of going all out.

You basically guarantee with physical hardware that it will be paid for on launch day, but the cloud can't really work like that, because people aren't going to all together pay out $1B on launch day for something they can't physically lay their hands on.

I know I wouldn't pay £349 to just connect to Playstation Cloud, even a £90 a year service would seem like too much, but a new console just makes sense too me.

That might be true. But financially it actually wouldn't make sense if PSNow becomes viable for them. 

It's all server based. ;)

I know PS Now isn't the "next gen", but it's the same kind of deal, just with more powerful servers and those cost money too, you're still talking about hardware, it being away from your house doesn't change that fact.

The cost of the hardware still exists with a a server farm, at least with physical hardware it's being paid for mostly, you likely break even on launch day for the units of consoles you've produced to sell on launch day and physical hardware is how it's always been done for the console games industry.

Sony doesn't have a problem competing on a console war, they've "won" 75% of the ones of they've been in & they've all made them money in the end, usually a big amount of money, which is what matters.

Cloud is a very big gamble, as I said Rolstoppable, the servers for say 3 million users on launch day could cost $1B, maybe even more, how is a cloud based, subscription based model going to recoup all of that outlay on day one of the system going to market?

You probably need more than enough hardware for 3 million users if that many people will game day one, because the stress on the servers would reach breaking point and that would  be a public relations nightmare for the company. Large numbers of people wouldn't be able to play anything.

Very few of the total number of users that's aimed at will be willing to pay $400 on launch day for something they can't physically see, by which I mean a new platform, at least if there was a new physical console they'd see the box and know that's the new system, if you tell "hey you pay $400 right now and you'll never see the console & sometimes it won't work because your internet goes down" that's a fail and it would happen.

A subscription based model, with an upfront fee, like $99 on launch day & say $28 a month may seem more reasonable, but that's only enough for the hardware, where's the cost of the games?

Sony or any platform holder can't afford to say we'll pay for the games for a year for you & no one is going to pay for each game individually on top of the 2 options I mentioned above, it would just seem like they're being rinsed for money, with mo control over their collection of games.

If people thought Microsoft always online console or 24 hour check in was bad, this would seem like an absolutely nightmare for everyone.

No company is going to do anything like this. The cloud isn't viable from an economic POV, not when it's the only option, it will be one option, in conjunction with a new physical console and the physical console will be able to interface with PS Cloud just like PS4 can access PSNow.

That just proves that they're capitalizing on backward compatibility. It proves that the service end of PSN is robust enough to offer game streaming. It does not prove, however, that they have any plans to ditch hardware.

I think it's a big deal to have a physical presence in the homes of consumers. The moment they become an online only service is the moment they lose a shit ton of relevency. Think of all the most popular or most profitable electronic services in the modern age - iTunes. Amazon. Google Play. All these multimedia storefronts yet they all have hardware to help drive/maintain brand awareness. I think ditching the home media center space would be as suicidal as creating a vita phone, physical buttons and all. It just won't work. Of all people why is amazon gradually dipping their toes into hardware when they started as an online only store? They're expanding their presence. Even if sonys gaming division isn't uber profitable, the name itself helps to sell other devices they have to offer because PlayStation as a brand is synonymous worldwide for Sony. Wanna know what would be a real indicator they wanted to be service only? Other brands start to do the same.

Instead we're seeing more fierce competition then ever among set top boxes. Why is vita TV recently released? 

Even PSVue tells me they have no plans to leave. Here's the buy in - purchase a ps4 and you have the ultimate smart device for your home that can stream games movies and music, has a la carte TV services, plays physical media with a simple to navigate interface. Unless the next step is to merge the TV branch with PS to create some freak of nature smart TV I just can't see any good reason to not maintain a physical presence especially when they're the dominant force in that particular industry.

Yes, servers cost money. That's why there is a subscription or rental agreement. 

It makes no difference what the PS4 APU costs, nor the DDR 5 specifically. You are thinking about this far too one dimensionally. They will not need exact PS4 replicas to run the games from the servers. 

After reading all of what you wrote, again you are thinking too linear with almost all of this. 

A console not only looses money per console sold, but it also looses money, and a whole shit ton of money, to R&D among the costs of production, distribution and marketing. 

The reason that PSNow is viable right now is because it's upgradable over time and it has a growing support infrastructure, but it's still in its infancy. So there is not direct initial cost like you seem to be thinking there is, at least not the way you are painting the picure of it. I'm also not saying all of this will take place tomorrow, but it could be very viable in the not so distant future. Think about how much has changed in the last 5 years. Now decade. So how much farther will we be in 5 years? 

If the profit margin from PSNow trumps the profit margin from the consoles, it will likely mean no more consoles, OR a very cost effective (for the manufacturer) console that will ACTUALLY be profitable from day one, or at least directly paying out of the hold dug to research and develop the thing.  

That's why Block Buster is dominating Netflix right? 

The set top boxes, phones, computers, TV's, Disc Players are just conduits to the likes of iTunes, Netflix, Amazon, Google Play ect. The reason that an Android phone sells is because of the Google Play store, not because it's an Android phone, if you were to remove Google Play from an Android phone, nobody would buy it, at least not without a competative replacement. 

Why wouldn't Sony put all of that into a TV? They have been working on that kind of stuff (along with almost every other manufacturer) for many many years. Every piece of equipment keeps trying to trump the other so more and more are being added into each. 

Your cost estimates are horribly off. Servers use something called virtualization. You have one huge beast of a machine and split the system into virtual machines. PS4 is x86 which means you can literally use traditional servers instead of the customs used for ps3 emulation on PS Now.

That said you'd implement server farms in all the big metro areas to reduce ping.

I can see you still don't quite understand what PSNow is all about. It's not your fault though, it's because PSNow is still only seen as an alternative BC and is actively being promoted through PS4/PS3/Vita. Now we have TVs and Blu-rays with it perhaps the bigger picture will emerge and people will start understanding WHO it's for ... and it 'aint' people who frequent forums.

Thank you. I couldn't seem to explaing that like you were so eloquently able to do. I was just so baffled.

You clearly didn't read my post thoroughly enough, I mentioned the subsciption factor, it's needed to pay for everything to do with the hardware and maybe the games.

My thoughts weren't one dimentional at all, they relate the only point that matters for a business, which effects every decision (hence why it's multi-dimentional thing), that is how do I make money.

Too high a price for the customer, the more likely you lose customers and that means you lose overall income. The only reason to do a cloud only system is if it was more cost effective, but it's not!

With physical hardware people know what the deal is, they buy the box, connect it at home and get their next gen console experience (compared to the last), with the cloud they have to pay out the same amount of cash (in one way or another), they get a lag filled experience, no new physical box, a worse experience because of said lag and the new box experience is lost, they also have to now pay a monthly fee comparable to the price of their mobile phone bill, for the rest of the generation, along with buying games, with no physical ownership.

The reason PS Now is viable is because it's made for PS3 level gaming, it's not aiming to provide the current, let alone next gen experience. PS3's Cell & RSX, along with RAM is very cheap compared to PS4 or whatever PS5 will have.

A gradual upgrade doesn't work for the fully fledged implementation of the next gen platform. PS Now isn't providing PS3 gaming for all the people that want to play PS3 games, it's only being used by a few PS Now customers and isn't aiming to replace everything.

The math is quite simple really, for each user you need a processor, RAM and everything you needed for each console, plus bandwidth to connect to that person, the subscription model doesn't recoup all of the costs until at the least a year down the line from launch, which means Sony or whoever has incurred that cost for all of that time, with the physical hardware they've been paid for all of those consoles on launch day and now they're making money off of the software months before they'll make a dent in their debt from the cloud only system.

Another factor to think about is that people fear what they don't understand, most people won't get how this works, because it's way too complicated for the lay person.

The profit margin for PS Now doesn't relate to the profit margin for a next gen cloud based console, because Playstation Cloud uses far more expensive hardware from day one.