Forums - Gaming Discussion - Next gen PS5/XB1SX sales ratio will look the same as this gen's. Huge changes in console marketshare require huge changes in the industry.

Angelus said:
only777 said:

MATHS TIME!

So let's compare a made up AAA game.

Game pass has 10 Million users.  Source: https://www.theverge.com/2020/4/29/21242004/xbox-game-pass-10-million-subscribers-microsoft-q3-2020-earnings

Let's say 70% is paying full price of $10 a month.  Many users are using the service through $1 deals, etc. This is $70,000,000 per month. so $840,000,000 in a year.

Let's say this Sony sells 10 million copies in a year at $60 a copy. That's $600,000,000‬.

So it looks like Microsoft make more money right? Wrong.

Sony make another AAA game in the same year and that's ANOTHER $600,000,000‬. So now we have $1,200,000,000‬.  Microsoft however are still going to earn $840,000,000 in the year as both their AAA games are included in one price.

Ohhhh, so publishers get 100% of the money on every purchase now do they. Damn, why I didn't I think of that. And of course all those game sales occur at full price as well...nobody buys those on sale ever. Checks out.

LOL! Even if you scale back the amount of money made per game (for both), the same maths still apply.

Last edited by Hynad - on 20 May 2020


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Angelus said:
only777 said:

MATHS TIME!

So let's compare a made up AAA game.

Game pass has 10 Million users.  Source: https://www.theverge.com/2020/4/29/21242004/xbox-game-pass-10-million-subscribers-microsoft-q3-2020-earnings

Let's say 70% is paying full price of $10 a month.  Many users are using the service through $1 deals, etc. This is $70,000,000 per month. so $840,000,000 in a year.

Let's say this Sony sells 10 million copies in a year at $60 a copy. That's $600,000,000‬.

So it looks like Microsoft make more money right? Wrong.

Sony make another AAA game in the same year and that's ANOTHER $600,000,000‬. So now we have $1,200,000,000‬.  Microsoft however are still going to earn $840,000,000 in the year as both their AAA games are included in one price.

Ohhhh, so publishers get 100% of the money on every purchase now do they. Damn, why I didn't I think of that. And of course all those game sales occur at full price as well...nobody buys those on sale ever. Checks out.

He put Sony 1st party games, ones that they get 100% of the money on digital and like 75% for retail, and the bulk of sales is on the first month.

Also GP cost a lot of money that MS have to pay for all the content they offer.

But yes let ignore it to claim a win for GP.



duduspace11 "Well, since we are estimating costs, Pokemon Red/Blue did cost Nintendo about $50m to make back in 1996"

http://gamrconnect.vgchartz.com/post.php?id=8808363

Mr Puggsly: "Hehe, I said good profit. You said big profit. Frankly, not losing money is what I meant by good. Don't get hung up on semantics"

http://gamrconnect.vgchartz.com/post.php?id=9008994

only777 said:
Angelus said:

Because getting 60 bucks once or twice a year is less than getting 10-15 bucks per month every year. If you feel your service offers a heightened quality on such a level that this isn't suitable, you can always hike up the price a couple bucks. I hope you don't really expect me to explain to you in detail the math of why long term subscription models are more attractive to every branch of the entertainment industry than one time purchases here and there.

You're incredibly naive if you think GP is going away if/when MS has a stronger market position, or that Sony isn't going to be making a concerted effort to move in the same direction in the future.

MATHS TIME!

So let's compare a made up AAA game.

Game pass has 10 Million users.  Source: https://www.theverge.com/2020/4/29/21242004/xbox-game-pass-10-million-subscribers-microsoft-q3-2020-earnings

Let's say 70% is paying full price of $10 a month.  Many users are using the service through $1 deals, etc. This is $70,000,000 per month. so $840,000,000 in a year.

Let's say this Sony sells 10 million copies in a year at $60 a copy. That's $600,000,000‬.

So it looks like Microsoft make more money right? Wrong.

Sony make another AAA game in the same year and that's ANOTHER $600,000,000‬. So now we have $1,200,000,000‬.  Microsoft however are still going to earn $840,000,000 in the year as both their AAA games are included in one price.

There are five obvious problems with this math.

1. Sony doesn't get a full $60 on games sold unless they are digital. Last time I saw this sourced, Sony would profit about $35 of each $60 retail copy.

2. Sony (and MS) games don't stay full price for very long. There is no way a Sony game is going to remain at $60 for an entire year. The retail price will be slashed by 30-40%, which means Sony's cut also gets smaller.

3. Virtually all of PS4's high selling Sony games were bundled, which means zero retail revenue for Sony from that title. Uncharted 4, Spider-Man, God of War, Horizon, LoU HD, etc. So assuming 10 million sales for a PS4 title is a stretch.

4. Microsoft still sells all of their games at retail. It's not like they only get revenue from GamePass.

5. Even if you want to assume 10,000,000 sales for a PS4 title, they aren't going to come in one year. Last I remember, Sony has four or five ten million+ sellers on PS4 and they are all years old. Now they may have more now, idk.

There is a reason these companies are embracing services. I know your sig says MS wants to make money but the fact is they all do. There's a reason Sony made PS+ required for online. There's a reason they offered downloads on PS Now after GamePass and there's a reason they've been adding bigger games and lowering the price. Like MS, they know this is a big revenue possibility.

Also, MS really hopes PS Now takes off because since Sony came to MS for Azure, MS will be making money there too.

Last edited by LudicrousSpeed - on 20 May 2020

Subscription for unlimited availability of games only makes sense when the annual subscription per person is over the average money spending buying

The prime example in music subscription. USA music yearly spending in 2005 (year of iTunes launch) was 47 dollars per person. A Spotify yearly premium membership is 120 USD, of course these numbers are inflated because many people uses student subscriptions or family subscriptions, but even a half of the full price still over 47 USD/year. That's how USA music market is starting to recover after over a decade of steady devaluation

I don't know how much money an average american pays for console gaming, not gaming in general including subscription and hardwares, I meant only retail market. If it's over 120 USD a year then Microsoft is either losing money or mitigating their bad software sales because their consumers don't even meet the average spending threshold

Edit: I found this and it's for console marketing only, not including PC or mobile. Using 91 million as the USA console user base (source) it means ~393 USD on average, even it's counting both subscriptions and purchases still way over 120 USD 

Last edited by IcaroRibeiro - on 20 May 2020

Hynad said:
Angelus said:

Ohhhh, so publishers get 100% of the money on every purchase now do they. Damn, why I didn't I think of that. And of course all those game sales occur at full price as well...nobody buys those on sale ever. Checks out.

LOL! Even if you scale back the amount of money made per game, the same maths still apply, genius.

Ah yes, again, I forgot....changing the numbers in a math equation leads to the same results. Stupid me. Getting somewhere between 50-70% on retail games is pretty much the same as 100 percent....and we can obviously just go ahead and dismiss that probably around 40% or so of units moved on these 10 million sellers will come from console bundles and various discounts that occur over time. Yep, all the math still adds up to the same outcome.

Guess we won't see Sony transition towards Microsoft's business model throughout this upcoming gen after all. Clearly they'd just lose all kinds of money as a result, so it just doesn't make sense.



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Angelus said:
only777 said:

MATHS TIME!

So let's compare a made up AAA game.

Game pass has 10 Million users.  Source: https://www.theverge.com/2020/4/29/21242004/xbox-game-pass-10-million-subscribers-microsoft-q3-2020-earnings

Let's say 70% is paying full price of $10 a month.  Many users are using the service through $1 deals, etc. This is $70,000,000 per month. so $840,000,000 in a year.

Let's say this Sony sells 10 million copies in a year at $60 a copy. That's $600,000,000‬.

So it looks like Microsoft make more money right? Wrong.

Sony make another AAA game in the same year and that's ANOTHER $600,000,000‬. So now we have $1,200,000,000‬.  Microsoft however are still going to earn $840,000,000 in the year as both their AAA games are included in one price.

Ohhhh, so publishers get 100% of the money on every purchase now do they. Damn, why I didn't I think of that. And of course all those game sales occur at full price as well...nobody buys those on sale ever. Checks out.

Oh... s MS is getting all that money off game pass as profit? Have any idea how much they have to pay publishers of the games on the platform to have the games on there? can you even begin to imagine how much MS would need to pay to say rockstar to have their game on the platform on day 1?

Lets not be talking nonsense here.

Game pass is good, no knock on that, but its a complimentary service and should/would never be a primary service. Games just don't work that way, there is to much money to be made n games primary distribution model for publishers to just piss all that away. Eg. COD on average sells like 15M copies almost every year. Even if using an average price of $40/game, that's $600M in revenue. Every year. How much do you think it would cost MS to have a game like that available on day 1? Now do the same for Maden, Fifa, Cyberpunk, AC... or any other major AAA third-party seller you can imagine. 

MS would be paying as much as $200M in deals per game for some of those AAA games. Does that even remotely sound like a viable business model to you to be the primary form of distribution on any platform???

I'll say it again if MS had the market share or IPs to be pushing games that can on their own sell 10M copies a piece, gamepass wouldn't be being pushed as hard as they are pushing it now.



LudicrousSpeed said:

1. Sony doesn't get a full $60 on games sold unless they are digital. Last time I saw this sourced, Sony would profit about $35 of each $60 retail copy.

Good point. Even if the the revenue from retail market is bigger than subscription, indeed the net margin for subscription is wider. But with digital retail market booming and physical marketing shrinking it won't be for very long

The problem with premium pass market is generally other: royalties, that's how Spotify never made money and why Netflix is so eager creating its own content. I'm not familiar with GP library, are they all MS games or include some 3rd party?



IcaroRibeiro said:
LudicrousSpeed said:

1. Sony doesn't get a full $60 on games sold unless they are digital. Last time I saw this sourced, Sony would profit about $35 of each $60 retail copy.

Good point. Even if the the revenue from retail market is bigger than subscription, indeed the net margin for subscription is wider. But with digital retail market booming and physical marketing shrinking it won't be for very long

The problem with premium pass market is generally other: royalties, that's how Spotify never made money and why Netflix is so eager creating its own content. I'm not familiar with GP library, are they all MS games or include some 3rd party?

They're mostly third party titles. Smaller titles get on GamePass day one usually. Bigger titles come a few months + after release.



Intrinsic said:
Angelus said:

Ohhhh, so publishers get 100% of the money on every purchase now do they. Damn, why I didn't I think of that. And of course all those game sales occur at full price as well...nobody buys those on sale ever. Checks out.

Oh... s MS is getting all that money off game pass as profit? Have any idea how much they have to pay publishers of the games on the platform to have the games on there? can you even begin to imagine how much MS would need to pay to say rockstar to have their game on the platform on day 1?

Lets not be talking nonsense here.

Game pass is good, no knock on that, but its a complimentary service and should/would never be a primary service. Games just don't work that way, there is to much money to be made n games primary distribution model for publishers to just piss all that away. Eg. COD on average sells like 15M copies almost every year. Even if using an average price of $40/game, that's $600M in revenue. Every year. How much do you think it would cost MS to have a game like that available on day 1? Now do the same for Maden, Fifa, Cyberpunk, AC... or any other major AAA third-party seller you can imagine. 

MS would be paying as much as $200M in deals per game for some of those AAA games. Does that even remotely sound like a viable business model to you to be the primary form of distribution on any platform???

I'll say it again if MS had the market share or IPs to be pushing games that can on their own sell 10M copies a piece, gamepass wouldn't be being pushed as hard as they are pushing it now.

My understanding of GP is that MS keeps all the money from subscriptions, yes. They do obviously make deals with various parties to get their games on the service, in exchange for a lump payment, and depending on the dev/game, there are likely provisions in the deal that sees said people getting bonuses if their game meets certain milestones on the service. Are those real expenses? Of course, but they wouldn't continue to be made if they weren't profitable.

There are a lot of factors you're not taking into account. First off, nobody ever said anything about MS making deals to get all the biggest third party games in the world on their service day one. Obviously, that wouldn't be good business. Naturally, that's why it's important for MS to make strides in providing more top tier titles from their in house studios. Now on to the benefits you're ignoring....

1) Yes, offering up big games day 1, without a full purchase entry is a short term loss on a person by person basis on the face of things. However, you are potentially reaching more players through the service than you would have gotten otherwise. 

2) That expanded userbase has saved money on entry, and may be more likely to spend money on in game purchases, and DLC expansions as result, provided they like your game.

3) The service provides something of a shield for smaller, and more experimental titles. The big games may draw the crowds, but they'll try some random stuff because hey...they can, and they might find that they enjoy these titles a great deal. Every game onto itself doesn't have to justify itself to some corporate overlord as a system selling property. It encourages more freedom on the part of developers.

4) Even the people that don't start out paying full value on the service, because they got access to it initially through various deals, are ultimately going to be very likely to stick around, even at full price, if you show them that there's continued value to be had in the service. Even if they scoop up long periods of membership on discount, that at least means you're locking them into your ecosystem for said period, which is incredibly valuable on it's own.

I could go on, but I'll leave it at that. At any rate, I'll just say again, if you think Sony won't move in the same direction here soon enough, you're vastly mistaken in my opinion. I'll just leave it at that.



IcaroRibeiro said:
LudicrousSpeed said:

1. Sony doesn't get a full $60 on games sold unless they are digital. Last time I saw this sourced, Sony would profit about $35 of each $60 retail copy.

Good point. Even if the the revenue from retail market is bigger than subscription, indeed the net margin for subscription is wider. But with digital retail market booming and physical marketing shrinking it won't be for very long

The problem with premium pass market is generally other: royalties, that's how Spotify never made money and why Netflix is so eager creating its own content. I'm not familiar with GP library, are they all MS games or include some 3rd party?

Its actually a very bad point. Because it's not taking all the associated costs of a subscription model into consideration.

Lets be generous here. Let's say Gamepass has a sub-base of 40M people today. And let's say those people are paying $9.99/month. Thats Thats a whopping $4.8B!!!

But here's the catch. How much of that is spent to just keep the service active worldwide? Lets be nice again and say MS spends $800M on operational costs every year. So they have $4B left.

Now let's start talking about deals. The only way that service gets that good is if people see and know they get all AAA games day 1 on the service. So sets take one such game for instance. GTA6. Now rockstar knows their game can sell as much as 50M copies. At full price and that's $3B in revenue. BUt they also know that making that game available on gamepass on day 1 would cripple those sales. How much do you think they would be willing to deal with MS to get the game on there on day 1? $500M? $1B? $1.5B? 

Now do the same for every other major AAA game released for every calendar year. Granted, not all of them would command the kinda deal GTA6 could, but they would all be asking for well over $200M each. And any game that can or could have sold more would be asking for more. Why do you think Netflix spends so much on making Netflix original content, and mind you, Netflix business model has them putting up content from third parties long after their TV rotation or theatrical release. And even then its not viable for them.