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Forums - Sales Discussion - NTDOY analyst article with interesting historical data

The article is at http://ce.seekingalpha.com/article/40770

This article has a lot of interesting history, and a LOT of numbers, but as soon as the author strays from reporting history into making the most basic value judgements, it falls apart.  Many of the conclusions drawn are, frankly, ridiculous.  The only saving grace this guy has is that when he seems to have a much stronger grasp on the future than the past. 

I don't know how plausible his predictions are, but they certainly aren't as silly as his apparent belief in a handheld console called "Super GameBoy".  (I suppose he's thinking of the Game Boy to SNES adapter cartridge that went by that name.)  And he certainly makes the right call as far as the future of NTDOY stock goes, which is the important part of an article on stocks.  ('Buy, you fools! BUY!')

Example A:  "Sales of these systems suggest that a successful new video game system should be expected to sell about 120 million hardware units and 600 million software units within five years of such introduction."

Why is this ludicrous?  Because the best-selling game console of all time failed to reach this benchmark.  The PlayStation 2 just recently clawed its way past the 120 million mark in May 2007, a full seven years after its introduction.  And it achieved this by outselling each of its two competitors by a ratio of more than four to one.  The Wii may well reach 120 million in five years, but if it only gets 100 or (the horror!) 80 million, it certainly won't have failed to succeed. 

Example B:  The utter disregard of the Sega/Nintendo wars.  The closest the article comes is in admitting that Nintendo had only 70% American market share in 1992.  (Which, by the way, apparently includes both NES and SNES numbers teamed up against Genesis (a.k.a. Mega Drive) numbers, since Wikipedia reports that the SNES only had 45-50% of the 16-bit market at that time.  That, or the 70% number is pure crap.)

Why is this ludicrous?  Because the fact that Sega went down in disgrace in the mid-90s, recovering later only to be given the coup de grace by PS2 HYPE alone, shouldn't eclipse the fact that earlier in the decade it was a force to be reckoned with, its Genesis battling the SNES in a bloody see-saw war of attrition -- a war it won in Europe.  The article talks as if the SNES was the uncontested heir to the empire its predecessor built from Atari's rotting corpse.  On the other hand, the article later -- paradoxically -- claims that Sega once was the #1 video game console company, which is quite the compliment, although the author gives no clue as to how Sega achieved this feat in between Nintendo's rule and Sony's dominance. 

P.S.  I hope this is in the right section. 



Tag (courtesy of fkusumot): "Please feel free -- nay, I encourage you -- to offer rebuttal."
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My advice to fanboys: Brag about stuff that's true, not about stuff that's false. Predict stuff that's likely, not stuff that's unlikely. You will be happier, and we will be happier.

"Everyone is entitled to his own opinion, but not his own facts." - Sen. Pat Moynihan
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The old smileys: ; - ) : - ) : - ( : - P : - D : - # ( c ) ( k ) ( y ) If anyone knows the shortcut for , let me know!
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I have the most epic death scene ever in VGChartz Mafia.  Thanks WordsofWisdom! 

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Nice find. Here was my favorite section of the numbers...

Sony’s most profitable video game years were 1998 and 1999 when it reported profits of $950 million and $1.1 billion, respectively. On a relative basis, the video game segment of Sony’s business reached its zenith in 1999 when it accounted for 40.3% of Sony’s profit. For the last eight fiscal years ending in March 2007, however, the income earned by Sony on its video game business has been less than stellar. In fact, from 2000 through 2007 Sony’s video game business combined profit was only $920 million on combined sales of $57.3 billion, a gross margin of only 1.6%.

In other words, Sony had its most profitable years back during the Playstation days, when their product was not being sold at a loss. Even at its zenith, the PS2 - which sold far more consoles and software - still didn't make as much profit. And a gross margin of under 2 percent for the last eight years combined - ouch. That is not a lot in the business world. Granted, those numbers looked a lot better before the release of the PS3, but still.

Do we need any more proof that selling consoles at a loss is a poor strategy... I'm more convinced than ever that this is simply a losing business practice.



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End of 2008 totals: Wii 42m, 360 24m, PS3 18.5m (made Jan. 4, 2008)

Well said. It's a good point that only two companies ever really subscribed to that stategy in this industry -- as far as I know -- and Sony is regretting it, and Microsoft simply doesn't care how much it spends on its quest for market dominance.

The funny thing is that while everyone mocked Sony for how they lost ridiculous amounts of money per unit despite the high price point, Microsoft may actually end up losing more money per console because of their insanely high failure rate.



Tag (courtesy of fkusumot): "Please feel free -- nay, I encourage you -- to offer rebuttal."
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
My advice to fanboys: Brag about stuff that's true, not about stuff that's false. Predict stuff that's likely, not stuff that's unlikely. You will be happier, and we will be happier.

"Everyone is entitled to his own opinion, but not his own facts." - Sen. Pat Moynihan
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The old smileys: ; - ) : - ) : - ( : - P : - D : - # ( c ) ( k ) ( y ) If anyone knows the shortcut for , let me know!
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
I have the most epic death scene ever in VGChartz Mafia.  Thanks WordsofWisdom!