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Forums - Sales - Why reports of the decline of the PS3 have been grossly exaggerated.

Oyvoyvoyv on 29 November 2008
shanbcn said:
Oyvoyvoyv said:
shanbcn said:

Just 10-12 million between thes games by Jan 2010? With GT5 releasing WW even 15 million is on lower side.

 

Do you mean for GT5 alone, or in total for the 4 (with MAG and the MMO not being very important).

If GT5 alone, I believe you are overshooting it by 50%, if for all, I think you are pretty much correct.

 

He said between these games, Killzone 2, Uncharted 2, MAG, Gran Turismo 5, God of War III, the agency.

Now 6 games just need to sell 2 million each to reach his highest figure of 12 million. Remember list include GT5, GOWIII and KZ2.

 

Yeah, GT5 + GoW3 + Uncharted 2 alone should be guaranteed above 12M by January 10.

 



http://www.vgchartz.com/games/userreviewdisp.php?id=261

That is VGChartz LONGEST review. And it's NOT Cute Kitten DS

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Bitmap Frogs on 29 November 2008
whatever said:
As a software developer, I've seen how bad it is when M$ drives competitors out of a market. Borland used to sell compilers for $100 or less, then M$ came in and under cut them, effectively killing Borland. Once that happened, Visual Studio suddenly cost more than $1000 bucks. Same happened with the Word Processer as they under cut Word Perfect (which was a FAR superior product).

 

OpenOffice, AbiWord, etc... dunno about compilers tho. Not my trade.

 





Current-gen game collection uploaded on the profile, full of win and good games; also most of my PC games. Lucasfilm Games/LucasArts 1982-2008 (Requiescat In Pace).

Squilliam on 29 November 2008
NJ5 said:
shanbcn said:
NJ5 said:
shanbcn said:
Do PS3 need a price cut? Hell yes! And its already almost confirmed to come in march. 360 was way cheaper then PS3 in EU before but now its dirt cheap. And last couple of weeks have shown Sony that they can't afford to have bigger difference in price between PS3 and 360. Anyway 360 still will be cheaper but the difference will be smaller.

Almost confirmed?

Earlier this year, when Sony kept telling their investors they were focusing on profitability in the games division, some people kept saying a Christmas price cut was guaranteed. I doubted it back then, and I doubt it now too.

 

 

Back then 360 didn't outsell PS3 in Spain and Italy.

That still doesn't convince me that they're willing to throw hundreds of millions (or billions) at the gaming division when Sony as a whole is in hard times.

 

Next year compared to last year:

The RSX would have been shrunk to 65nm and that means lower cost on the chip itself as well as cheaper motherboard, powersupply and heatsink componentry.

The industry which produces silicon chips is having a tougher time keeping things running at capacity so that means cheaper silicon components in general. TSMC recently stated that they were having 4 day weeks and doing other cost cutting measures as an example.

Commodity and transportation costs will be lower as fuel prices drop, so should plastic prices for the chassis and metal prices for the heatsinks and general components such as capacitors.

The sales of the PS3 will drop compared to the start of last year, theres no question of this. If Christmas is down, Q1 will be down even further.

----------------------------------------------------------------------------------------------------

I don't expect the SCE division to make a huge profit, they could very easily target the break even point so they provide neither a net loss or a net profit for Sony as a whole. The losses from last year and the year previous are already written off. Theres no rule which states that they must start making a profit to offset previous losses next year. So therefore the losses incurred by the massive development times are pretty much a moot point at this juncture.

A pricecut in Q1 of $50 will probably keep the gap between 8-12 million by the end of 2009 depending on the response and Microsofts actions. A price cut first in Q3/Q4 will leave them probably between 12-20 million behind the Xbox 360 and dead in the water. Im ignoring the possibility of a 2nd price cut as well. But remember every PS3 sold is potentially a few copies of a first party game sold as well, and they need those sales as they don't have a revenue stream like Live to fall back on.

 



Tease.

makingmusic476 on 29 November 2008
Kantor said:
You know, if they just took out WLAN, they could easily cut the price by $100 with minimal losses. Then they could go the 360 path and release a separate WLAN adapter.

And a $100 price cut would be massive.

 

Don't let Microsoft's exorbitant adapter prices fool you into thinking WLAN costs $100.



gebx on 29 November 2008
Squilliam said:
Oyvoyvoyv said:

Good point.

 

I have one quite big question  though, that has been asked incredibly many times.

Do publishers really get 38 dollars?

If the game costs 59 dollars (which I am assuming will be the average price for the games sold, rather than the launch price 69 dollars), that means that there are about 8 dollars tax in most countries (14%), lower in some, higher in some.

I can therefore not see the publisher really getting more than 30 dollars pr game.

 

Okay, and a 2nd question.

 

You are talking solely by total sales.

What you should really be looking at, is the increase in sales due to those next millions. Will those sell 15M more because of them? Maybe, but it is no longer conservative, rather the realistic or slightly optimistic.

 

Edit:

 

To add a bit to my point.

 

I see GT5 selling in the 8-10M range (I've looked a bit at this, and it seems the most probable).

If the Ps3 ended at 25M, and sold no more, I would still expect it to sell 6M.

I really expect the Ps3 to sell 45-65M. That means I expect the 30 next million to buy only ~ 3M of GT5, and your OPs 10 million to only move a single extra million.

So, those 15M seems very optimistic as a matter of fact.

* 25% (aka $15) goes to pay the art and design guys.
* 20% ($12) goes to pay the programmers and the engineers.
* 20% (also $12) goes to your friendly neighborhood retailer. EB / GameStop, whoever.
* 11.5% ($7) goes to a "Console Owner Fee" - ie. whichever one of the Big Boys made your hardware (Sony, MS, Nintendo.)
* 7% ($4) goes to marketing, and puts Mad World and Marcus Fenix on MTV.
* 5% ($3) goes to "market development" -- paying for cardboard Standees of the Gears Crew and elbowing other games out of the way for shelf space at your local retailer.
* 5% ($3) goes to actually manufacturing and packaging the disc.
* 5% ($3) is spent paying the Man for IP licenses or maybe hiring some big name voice actors. If your game isn't an original IP, here's where you get dinged by Marvel, Disney, or Ray Liotta's agent.
* 1.5% (just $1) goes into the publisher's pocket.
* 1.5% (also $1) goes into the distributor's pocket.
* 0.3% (about 20 cents) goes into corporate costs. Management, overhead, lawyers, etc.
* 0.05% (less than 3 cents) go into the cost of paying for the Developer's Hardware. Who knew an SDKs can cost tens of thousands of dollars?

$12 + 3 + 3 + 3 = $21 + 1 (distribution costs) nets $22 out of a $60 price tag, the rest goes to Sony themselves.

Source: http://www.garagegames.com/blogs/37536/11924

As far as being optimistic or not I was also conservative in other areas, I didn't mention cost reductions (65nm RSX just been released), Continued sales of a few titles from last year such as LBP. Much of the cost of these games has been accounted for, and the only way they are going to make the platform viable in the long term is to cut the prices and increase sales so I applied revenue from the games in the same year as the games are going to be released and the sales of the consoles are going to be done.

As NJ5 said, the sales of the first parties aren't enough to justify the number of first party studios. The one thing I absolutely know will kill SCE dead is their large first party studio portfolio and stalling console sales.

 

 

Those numbers where based on Gears of Wars, and they don't make any sense since Gears of War sold 5,000,000 copies and that would mean $75,000,000  was used to pay the art and design guys and $60,000,000 to pay the programmers and engineers...

see the problem? Those are fixed costs, not sure why they're shown as variable (or "per copy") costs...



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NJ5 on 29 November 2008

@Squilliam: I highly doubt that those potential cost savings in hardware production will compensate for the 15-30% drop in American/European currencies and drops in PS2 hardware and software sales.



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makingmusic476 on 29 November 2008

@Squill:

Let's not forget that we still have a 45nm Cell to look forward to.

http://arstechnica.com/news.ars/post/20080207-ibm-shrinks-cell-to-45nm-cheaper-ps3s-will-follow.html

It still hasn't made it's way into the ps3 yet.



makingmusic476 on 29 November 2008
gebx said:
Squilliam said:
Oyvoyvoyv said:

Good point.

 

I have one quite big question  though, that has been asked incredibly many times.

Do publishers really get 38 dollars?

If the game costs 59 dollars (which I am assuming will be the average price for the games sold, rather than the launch price 69 dollars), that means that there are about 8 dollars tax in most countries (14%), lower in some, higher in some.

I can therefore not see the publisher really getting more than 30 dollars pr game.

 

Okay, and a 2nd question.

 

You are talking solely by total sales.

What you should really be looking at, is the increase in sales due to those next millions. Will those sell 15M more because of them? Maybe, but it is no longer conservative, rather the realistic or slightly optimistic.

 

Edit:

 

To add a bit to my point.

 

I see GT5 selling in the 8-10M range (I've looked a bit at this, and it seems the most probable).

If the Ps3 ended at 25M, and sold no more, I would still expect it to sell 6M.

I really expect the Ps3 to sell 45-65M. That means I expect the 30 next million to buy only ~ 3M of GT5, and your OPs 10 million to only move a single extra million.

So, those 15M seems very optimistic as a matter of fact.

* 25% (aka $15) goes to pay the art and design guys.
* 20% ($12) goes to pay the programmers and the engineers.
* 20% (also $12) goes to your friendly neighborhood retailer. EB / GameStop, whoever.
* 11.5% ($7) goes to a "Console Owner Fee" - ie. whichever one of the Big Boys made your hardware (Sony, MS, Nintendo.)
* 7% ($4) goes to marketing, and puts Mad World and Marcus Fenix on MTV.
* 5% ($3) goes to "market development" -- paying for cardboard Standees of the Gears Crew and elbowing other games out of the way for shelf space at your local retailer.
* 5% ($3) goes to actually manufacturing and packaging the disc.
* 5% ($3) is spent paying the Man for IP licenses or maybe hiring some big name voice actors. If your game isn't an original IP, here's where you get dinged by Marvel, Disney, or Ray Liotta's agent.
* 1.5% (just $1) goes into the publisher's pocket.
* 1.5% (also $1) goes into the distributor's pocket.
* 0.3% (about 20 cents) goes into corporate costs. Management, overhead, lawyers, etc.
* 0.05% (less than 3 cents) go into the cost of paying for the Developer's Hardware. Who knew an SDKs can cost tens of thousands of dollars?

$12 + 3 + 3 + 3 = $21 + 1 (distribution costs) nets $22 out of a $60 price tag, the rest goes to Sony themselves.

Source: http://www.garagegames.com/blogs/37536/11924

As far as being optimistic or not I was also conservative in other areas, I didn't mention cost reductions (65nm RSX just been released), Continued sales of a few titles from last year such as LBP. Much of the cost of these games has been accounted for, and the only way they are going to make the platform viable in the long term is to cut the prices and increase sales so I applied revenue from the games in the same year as the games are going to be released and the sales of the consoles are going to be done.

As NJ5 said, the sales of the first parties aren't enough to justify the number of first party studios. The one thing I absolutely know will kill SCE dead is their large first party studio portfolio and stalling console sales.

 

 

Those numbers where based on Gears of Wars, and they don't make any sense since Gears of War sold 5,000,000 copies and that would mean $75,000,000  was used to pay the art and design guys and $60,000,000 to pay the programmers and engineers...

see the problem? Those are fixed costs, not sure why they're shown as variable (or "per copy") costs...

 

The portions that go towards paying graphics designers, etc. are certainly variables, but the percentages that go towards licensing fees and retailer markups are fixed, and those are the only figures that matter in this scenario, since Sony is both the developer and publisher of the games in question.



Kantor on 29 November 2008
makingmusic476 said:
Kantor said:
You know, if they just took out WLAN, they could easily cut the price by $100 with minimal losses. Then they could go the 360 path and release a separate WLAN adapter.

And a $100 price cut would be massive.

 

Don't let Microsoft's exorbitant adapter prices fool you into thinking WLAN costs $100.

Well 65nm Cell + taking out WLAN should let them cut the price by $100, right? There wouldn't be much loss at all.

 



(Former) Lead Moderator and (Eternal) VGC Detective

Smashchu2 on 29 November 2008

But how can SCE afford such outlanding expenses such as a price cut in these harsh times?

If we assume everythings in U.S dollars for a moment, and that Sony sells 10,000,000 PS3s with a price cut. At $400, they would have recieved $4,000,000,000 of revenue whilst at $350 it would be $3,500,000,000. A shortfall of about $500,000,000 (Im assuming the same number sold because I don't want to complicate things)

Note that says revenue. Not profit. Profit is cost-revenue. The PS3 obviously had a high cost (especially in the begining), so the profits will be lower. This does not include the cost of labor and running a facility. Since it is selling at a slow rate, these cost will be more of a hurt on the company.

One reason  to lower the price is to move them. Labor and facility cost will be less of a strain if money is coming in faster. It's a matter of movving consoles they can, then not selling enough.

Killzone 2, Uncharted 2, MAG, Gran Turismo 5, God of War III, the agency.

If you could think of a reason these games will sell fewer than 15,000,000 combined on a userbase approaching the 30,000,000 mark please raise your hand and tell me. Now thats out of the way, if you assume a publisher cut of $38 per game that gives you a total revenue of: $570,000,000 minimum.

http://vgchartz.com/worldtotals.php?name=&console=PS3&publisher=&sort=Total

Look at the sales of those games. Now look at the sales of the games you mentioned. Besides Resistance, most of those games will only make ~1million. It might break 15million on two games a lone, but the truth is that the games may very well not. The games must sell 2.5 million each, and many might not make that, while the ones that sell over might not be enough to over pass the number. It might not make it. Plus, remeber that is only 15million in sales. These are all games with HIGH cost. Killzone has been in development for up to 4 years. These games may just cconver their development cost.

So the PS3 needs a price cut to stimulate sales, fact. The PS3 can afford a pricecut because this is likely to be the biggest year for sales for SCE on the PS3 for a while and even with a crappy exchange rate one can easily subsidise the other.

With Grand Theft Auto and Metal Gear Solid out of the way, I doubt Sony will have a strong year for a while.