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Forums - Sony - SCEA Responds to Activision (Not the "no response" from SCEE) Pimp slap !

Squilliam on 22 June 2009

I just had a thought. Perhaps the reason why they have concerns about the royalties now is due to the recession. When game prices drop the retail, royalty and production costs remain stagnant so the publishers take 100% of the hit when the game price falls. So say for example the royalties are $10 and the Retailer, market developmet and production costs are $20 which leaves $30 for them. If they cut the price of the game to $40 their cut may only be $15 (assuming lower marketing costs) so a reduction of even $2 in royalties may be significant for them because the average sale price of the titles have been falling recently because the recession has made people more price concious and relative to their take on the cut price titles $2 is significant in that context.



Tease.

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Squilliam on 22 June 2009
kaneada said:
Squilliam said:

This game is a little more complicated than what it appears to be on the surface. Activision are the largest 3rd party publisher in existance right now. They have games which hold a lot of sway with consumers -> Diablo, Call of Duty/Modern Warfare and Guitar Hero are the main ones. They also hold a lot of sway with other publishers as well, when they jump one way they will definately send ripples amongst the others. Since we don't know precisely whats going on behind the scenes to motivate them to make such statements its hard to determine exactly what they want to happen behind the scenes. Its further complicated because we don't exactly know what conversations they are having with Nintendo and Microsoft regarding their games as well.

Long term, I would say perhaps they may consider themselves better off with a two horse race than a three horse race, especially if the other console manufacturers make it worth the trouble. This is considering that perhaps Sony is unwilling to cut the price significantly enough for their liking and because of that they feel that the future profitability from the PS3 platform is being hurt so they would wish to act now and aquire a positition which is in their own best interest with platforms which are selling much better in their key western markets.

I sniff fear all over Activisions statments. I think its more likely that Activision bought way too much property and its not profitable for them to remain as large as they are. In order to do so they need to drive up game attach rates across the board. Threatening Sony is a bad idea for them and shows their desperation. 

We know that M$ will buy their way through any situation and make it beyond profitable for them to develop for their console and Nintendo is in excellent standings, so they are bullying the underdog to keep from eating the costs of too much investing in a unstable market. I wouldn't take Activisons threats lightly, but at the same time I don't think they carry much weight. If I'm right and there sales are low, they may follow through  thinking that less development cost will offset the loss of sales on the actual product.

Sony made the smart move by blasting numbers all over the place to let them know, they can survive without them. If Sony remains strong on this, Activison is going to have to consider their numbers and make choices internally rather than externally.

My point: Activision's motives for this are not what they appear to be. I'd be willing to bet that their profit reports will reflect a better idea of what their situation and reasons actually are.

I don't think fear is appropriate description when describing a large multinational company. They are playing the game to their advantage and Sony are just the easiest target to try to play. The costs of the royalties may be quite significant, see my other post above and that may be one of their primary motivators.

http://vgchartz.com/games/index.php?&results=50&name=&console=PS3&keyword=&publisher=14&genre=&order=Sales&boxart=Both&showdeleted=&region=All&alphasort=

If you follow the above link you'll see that besides Call of Duty and Guitar Hero they don't have significant success outside of these main franchises and they could easily drop PS3 development and likely save money in the process. So their threat is fairly credible, and can be carried out without too much pain on their end. The significance isn't in the actual games but the message sent to the market and other publishers who may consider doing the same, as well as the message to consumers when they see fewer game releases for the PS3.



Tease.

RVDondaPC on 22 June 2009
HappySqurriel said:
RVDondaPC said:

Are you trying to give me a lecture on finance or are you adressing the situation? It doesn't matter what you call it, we don't know the numbers all we know is that it is a giant revenue stream. And yes revenue streams are very important, not just profits. Revenue streams are an indication of long term profitability while profit is just a short term indicator. But that is all besides the point. The potential profitability that Activision would have without supporting Sony is much lower than with it supporting Sony.

As for your second point, it doesn't really matter because Activision doesn't own those licensed games IP's. So they wont get to make the games if they don't support Sony because it would be lost revenue for the licensees so they would just look for THQ or EA or Take-Two to license their games instead of Activision. Even if activision still published the games for the 360/Wii they would probably just get Sony to publish the games for the sony platforms and that would just be increased revenue for Sony.

The revenue streams from the American automobile manufacturers have always been massive, and yet they are all desperately trying not to go bankrupt; in contrast Toyota and Honda were smaller companies that focused on profit (and not just revenue) and as a result they now produce more cars at lower costs and sell them for more money with a larger margin. If a company is unprofitable on a quarterly basis (or is unprofitable for one year) this isn't necessarily a bad thing, but if there is structural unprofitability the long term prospects for the company are not good; because the company can not sell enough products at a high enough margin to make a profit this year and builds up debt, which means they have to sell more products next year at a higher margin to service that debt which is unlikely if you're already struggling.

Now, as for licenced games, do you remember how many licenced games the Gamecube or XBox received last generation? It was (somewhere) in the range of 10% to 25% as many licenced games as were released for the PS2. The reason for this is simple, while most licences give a publisher the rights to create games based on the IP for all platforms very few IPs have the expectation that every game is released for every platform. Even if refusing to publish a game on a platform meant that you lost rights to that licence on that platform, you don't lose rights to the game that you funded the development of, which would mean that anyone who took up the licence on that platform would have to build a new game from scratch; and how excited do you think a large publisher would be about funding the development of a licenced game for one platform when the sales of that platform are less than amazing?

 

 

The PS2 had about a 70% marketshareat the time. The Wii doesn't even hold a 50% marketshare yet. Of course you could get away with releasing games on just the PS2 as the return would be more than 3 fold compared to any other console. And just look at the sales of PS3 games compared to on the Wii/360. The first Licensed game for Activision I found was Wolverine Origins. It sold 320,000 on the 360, 290,000 on the PS3, and just 80,000 on the Wii. The Ps3 sales are not that far behind the 360 sales. I don't know how anyone in their right mind would consider not doing a PS3 version for future titles. The PS2 version sold 50,000 as did the PSP version. 

I don't get where you're going in the second paragraph, I mean you are right, but it's not a situation ever to happen. Obviously you are not going to develop a game you don't have the rights to. However before you are given the rights to develop a specific game it is in the contract which consoles you are going to develop it for. Marvel will not let Activision develop another Wolverine game if it does not make one for the PS3. And if Activision does make a new Wolverine game they will most likely be contractually obligated to make a PS3 version of the game. Marvel does not incure any development costs, they just get a license fee and in their eyes Sony makes up almost 50% of their generated revenue(profit/license fee). 

Now even if Activision were to be making the biggest return on THEIR investment on the 360, they would be forced to encure the "cost/smaller return" on the PS3 and other Sony platforms because that is where Marvel is making their biggest return and they have the controlling stake in the licensed IP. 

As for your autmobile analogy it is misguided. The issue here is Activision, they are not making cars/consoles they are producing games to sell on the console. That would be like not wanting to sell speakers to Ford because Ford doesn't make a profit. You still make a profit from them regardless. Also the automobile industry did not start 3 years ago. Ford and GM were much more profitable than Toyota and Honda were in previous years. The industry changed and the American car companies didn't. Simple as that. Not a matter of one company wanting revenue while another wanted profit. 



Lostplanet22 on 22 June 2009

So they want that Sony drop the price so they can sell more software? If I was Sony I just would have responded with 'If you want to sell more software then drop the price of your games'.

Serious COD MW is still 65-70€ and the Guitar Hero guitar bundle games are EXPENSIVE.