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Forums - Sales Discussion - Does the Wii prove that the HD razor/blade model is flawed?

Grimes said:
theprof00 said:

Sony owns nearly a 30% stake, so I'd say they make 2-3 pennies per disc.

Additionally you're forgetting that every BR drive has a charge of $9.50 and every BR recordable drive will run 14$.

In America alone, there were 11M BR players in July 2009, including ps3s.

From July, there have been another 2.8M ps3s sold, but I don't know how many standalones were sold in that period.

This also does not include PC drives.

Also, in the last week, 79M$ worth of movies were sold. 84% of BR movies are 29.99 and under, with 50% being 20-29.99. As an estimate I will say the average price is 25$. Dividing 79M by 25= three point something, or, 3.16M discs sold. At 3 cents per movie, Sony made 95,000$ in royalties last week.

Additionally, they've made say 3$ per player in existence, which, in America, excluding holiday standalone sales, equals 42M$ in royalties.

 

Those pennies add up. I'm astounded that they can actually make 100,000 a week doing nothing.

 

You are forgetting that the BDA is a business entity in of itself, which has its own operating expenses. They have to pay for managerial staff, R&D, marketing, licensing, collections, legal, expenses for partner meetings, etc. They probably take a big chunk of that royalty just to maintain operations.

Also, I'd like to see an source for that 30% Sony stake as I haven't seen any hard data to back that number.

The only thing you can find is that "sony doesn't even have 30% stake", which implies that it is very near 30%. 

Also, I would like to know exactly how much you think BDA requires to maintain operations. If they take, say 5 pennies from every movie sales, they made 150k last week. Average 100k a week and you're looking at 5.2M a year just on movie sales, not including blank discs, players, drives, writers, etc etc etc

Also, BDA makes about 2M$ a year just on membership fees, and the entire BDA is a consortium made up of member companies.

In my condo association, there is a yearly fee, and we all chip in to pay for extra renovations. It would seem logical that the member companies pay for a lot of the overhead already. So, I'd really like to know what kind of numbers we're talking about because, at this point that whole area of discussion is very cloudy to me.

 

UPDATE:

I've been doing some checking and found out that there are additional fees on top of per disc licensing. Totaling all costs, logo fee, AACS+formats, keys, certification, duplication, etc etc, you pay about 15k-30k$ per BR title that is released. There are about 1500 titles in existence as of Jan 2009. At 15k, that's another 22.5M in fees paid on top of per disc licensing costs.

 



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theprof00 said:
johnlucas said:
 

However, both the PS1 & PS2 were the best-selling systems of all-time with libraries to match (well PS1 was only in home console terms before PS2 beat it).

And Nintendo had much less marketshare in every region though it was about a 60/40% split favoring Sony in Japan.

100 million consoles in the PS1, 120 million consoles in the PS2 (back then—now 140 million).
And they could barely outprofit Nintendo which was most likely propped up by its handhelds?
With that weak marketshare Gamecube had?

Like I said...Gamecube proved that the razor/blades model is flawed.

John Lucas

Are you really trying to downplay the success of the gameboy? I'm not discrediting your point, but the DS by itself has about as much sales as the ps2.

"Propped up by its handhelds"....

Not downplaying it but just telling it like it is.

Nintendo lost control of the markets in the N64 era & its saving grace was the handhelds powered in large part to Pokémon.

I mean check this out (only talking about home consoles):
Atari 2600/VCS era (2nd gen) = 30 million+
NES era (3rd gen) = 61 million+
SNES era (4th gen) = 49 million+
N64 era (5th gen) = 32 million+ ~VS.~ PS1 era (5th gen) = 100 million+
GC era (6th gen) = 21 million+ ~VS.~ PS2 era (6th gen) = 140 million+ (currently)

So when Atari ran wild in the 70's & early 80's the peak was 30 million
When Nintendo showed up the peak was roughly 50 to 60 million, double the Atari's era.
When Sony showed up they doubled the peak again to 100 million while N64 went lower than SNES back at the 30 million level.
When Sony's PS2 came to town they upped the ante to 140 million while GC went even lower than N64 at the 20 million level.

Nintendo while still profitable was on a downward spiral in the home console market before Wii. Eventually the marketshare would become so small that it would hamper profits if they continued on this course.

Meanwhile through the 3rd & 4th gens, their handheld Game Boy was breaking records & delivering profits.
The failure of the Virtual Boy couldn't even stop it. And just when they could have run out of steam in the middle of the 5th gen they put out Pokémon & then the Game Boy Color version pushed the handheld to record sales up to 118 million+ (now beaten by the DS).

In the GC era, it was the GBA doing the heavy lifting gaining its 81 million+ sales in its short time.
This is why Sony decided to get into handhelds (well one reason) which led to the PSP.
Nintendo hung on to relevance through the GBA in Japan, a country that increasingly became more handheld-friendly to the point of it mattering more than home consoles.

See this clip:

History of Video Game Marketshare in Japan 1996-2007
http://www.youtube.com/watch?v=NdpMv5FjQ5M

It wasn't until the DS gamble paid off that Nintendo reclaimed their marketshare throne. DS set the stage for Wii & for what we see today with those twin Nintendo record breakers.

However, as MaxwellGT2000 points out (hopefully he's only counting SCE instead Sony Corp. whole) Nintendo consistently profitted despite marketshare & public perception while Sony made relatively small amounts compared to all their record success with both PS1 & PS2.

Sony HAD to be on top of the mountain just to make a profit! Nintendo made money "up" "down" "in-between" whereever.
And it paid off big once they got their total sales back in order in this generation.

Nintendo's workforce is so comparatively smaller but they can fend off these corporate giants so easily.
It proves that razor/blades is at best a starting model to work your way off from instead of a permanent one. If you take a risk on using that shaky strategy at all.

And again if in the Gamecube era—consistently called Nintendo's worse—Nintendo can profit like that, then it underlines that the razor/blades model is flawed.

John Lucas



Words from the Official VGChartz Idiot

WE ARE THE NATION...OF DOMINATION!

 

theprof00 said:

The only thing you can find is that "sony doesn't even have 30% stake", which implies that it is very near 30%. 

Also, I would like to know exactly how much you think BDA requires to maintain operations. If they take, say 5 pennies from every movie sales, they made 150k last week. Average 100k a week and you're looking at 5.2M a year just on movie sales, not including blank discs, players, drives, writers, etc etc etc

Also, BDA makes about 2M$ a year just on membership fees, and the entire BDA is a consortium made up of member companies.

In my condo association, there is a yearly fee, and we all chip in to pay for extra renovations. It would seem logical that the member companies pay for a lot of the overhead already. So, I'd really like to know what kind of numbers we're talking about because, at this point that whole area of discussion is very cloudy to me.

I'm not implying anything. But if you make a such a specific claim, I expect that you should be able to back it up with a reference.

I don't know how much money the BDA eats up, but it seems like a pretty extensive organization with its own staff including staff, managers, legal and engineering across multiple continents.

 



Anyone can guess. It takes no effort to throw out lots of predictions and have some of them be correct. You are not and wiser or better for having your guesses be right. Even a blind man can hit the bullseye.

Grimes said:
theprof00 said:

The only thing you can find is that "sony doesn't even have 30% stake", which implies that it is very near 30%. 

Also, I would like to know exactly how much you think BDA requires to maintain operations. If they take, say 5 pennies from every movie sales, they made 150k last week. Average 100k a week and you're looking at 5.2M a year just on movie sales, not including blank discs, players, drives, writers, etc etc etc

Also, BDA makes about 2M$ a year just on membership fees, and the entire BDA is a consortium made up of member companies.

In my condo association, there is a yearly fee, and we all chip in to pay for extra renovations. It would seem logical that the member companies pay for a lot of the overhead already. So, I'd really like to know what kind of numbers we're talking about because, at this point that whole area of discussion is very cloudy to me.

I'm not implying anything. But if you make a such a specific claim, I expect that you should be able to back it up with a reference.

I don't know how much money the BDA eats up, but it seems like a pretty extensive organization with its own staff including staff, managers, legal and engineering across multiple continents.

 

... I think you misunderstood.

I mean, "If you were to look online, there are several places which say 'Not 30%' or 'not even 30%'. These kind of statements imply that it is near 30%, otherwise, these statements would say 'Not even 25%', or something similar."

I added an update above, which I will post here as well:

UPDATE:

I've been doing some checking and found out that there are additional fees on top of per disc licensing. Totaling all costs, logo fee, AACS+formats, keys, certification, duplication, etc etc, you pay about 15k-30k$ per BR title that is released. There are about 1500 titles in existence as of Jan 2009. At 15k, that's another 22.5M in fees paid on top of per disc licensing costs.



MaxwellGT2000 said:
raygun said:

 

bdbdbd said:
@raygun: Wii has easilly 18 games i want to buy. That's to add to the more than 18 games i already own for it.

You know, you may not notice but you just pointed out the stupidity in Sonys strategy. Since you obviously want to watch BD; if PS3 didn't have BD player in it, you had bought a BD player to go with your 16 BD:s. Now Sony sold you a BD player they made loss with, instead of selling a standalone player that had been sold at a profit. Sounds like they lost money twice with selling you the PS3.

Stupidity??? You forget Sony was in a battle with Microsofts HD video format. Who knows, maybe the PS3s had a major part to play in blu-rays win, at one time I remember reading that 75% of the blu-ray players 'in the wild' were PS3s. Imagine if the PS3 didn't have blu-ray, would HDvideo have won the war? Then Sony would have really been in trouble. But they were smart and stuck a blu drive in their PS3 to help it win the format war.  So now with every blu-ray sold Sony makes a profit. Simple. And yet you call that stupid strategy?? And they haven't lost twice, jezzus! I have bought 18 games so far, and Sony wouldn't have gotten those sales if I bought a stand alone player, RIGHT?? Also, as far as attachment rates are concerned, the fact that some people bought a PS3 solely as a blu-ray player because it was the best player available brings down the 'attachment rate'. Yet they fail to factor in the profit from blu-ray video sales sold to people who just own a PS3, like me. Shouldn't blu-ray VIDEOS be counted as SOFTWARE sales in PS3's case?? What would that do to the 'attachment rate'? LOOK AT THE BIG PICTURE MY FRIENDS, THERE WAS NO FLAW IN THEIR STRATEGY!

The billions of losses seem to say otherwise...

I heard lots of the loses were because of the monetary crisis, but to explain, when you buy a printer, it might take a while before the printer manufacturer  starts to make a profit, after you've bought a few ink cartridges. So yes, Sony has lost some cash up front, that's what we are talking about, that's how razor blade economics works. They will get all that back in the long term, and much more.



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theprof00 said:

... I think you misunderstood.

I mean, "If you were to look online, there are several places which say 'Not 30%' or 'not even 30%'. These kind of statements imply that it is near 30%, otherwise, these statements would say 'Not even 25%', or something similar."

I added an update above, which I will post here as well:

UPDATE:

I've been doing some checking and found out that there are additional fees on top of per disc licensing. Totaling all costs, logo fee, AACS+formats, keys, certification, duplication, etc etc, you pay about 15k-30k$ per BR title that is released. There are about 1500 titles in existence as of Jan 2009. At 15k, that's another 22.5M in fees paid on top of per disc licensing costs.

You keep on throwing out numbers without much context or reference. Just throwing out raw numbers doesn't tell me anything. Without knowing the expenses, distribution and other details, these numbers are practically meaningless.



Anyone can guess. It takes no effort to throw out lots of predictions and have some of them be correct. You are not and wiser or better for having your guesses be right. Even a blind man can hit the bullseye.

Sorry, I really have no idea how many BR titles are available.
According to Netflix, they had 1900 BR titles as of 2008.

Here, http://www.blu-ray.com/movies/movies.php?genre=Action, shows categories with totals, but most of the movies have multiple categories. So, I picked the largest one, 'drama' which has 3300, assuming drama incorporates all the other movies, just to make a conservative estimate (not including porn either)

So really we are looking at about 50M$ for most of the licensing costs alone on a very very very conservative estimate. (for example, comedy is almost surely not drama, which consists of another 1800 titles...and no porn...which is probably also in the thousands.)

All in all, there is a F**** gigantic amount of profit made by the BDA on it's own, so I really wonder how much of ANY of the licensing profits get distributed...

 

My numbers: http://www.blu-raydisc.info/format_spec/obtain_specs_manu.php

And no, I don't know what their costs are either. So it's pointless to argue who makes what.



raygun said:
MaxwellGT2000 said:
raygun said:

 

bdbdbd said:
@raygun: Wii has easilly 18 games i want to buy. That's to add to the more than 18 games i already own for it.

You know, you may not notice but you just pointed out the stupidity in Sonys strategy. Since you obviously want to watch BD; if PS3 didn't have BD player in it, you had bought a BD player to go with your 16 BD:s. Now Sony sold you a BD player they made loss with, instead of selling a standalone player that had been sold at a profit. Sounds like they lost money twice with selling you the PS3.

Stupidity??? You forget Sony was in a battle with Microsofts HD video format. Who knows, maybe the PS3s had a major part to play in blu-rays win, at one time I remember reading that 75% of the blu-ray players 'in the wild' were PS3s. Imagine if the PS3 didn't have blu-ray, would HDvideo have won the war? Then Sony would have really been in trouble. But they were smart and stuck a blu drive in their PS3 to help it win the format war.  So now with every blu-ray sold Sony makes a profit. Simple. And yet you call that stupid strategy?? And they haven't lost twice, jezzus! I have bought 18 games so far, and Sony wouldn't have gotten those sales if I bought a stand alone player, RIGHT?? Also, as far as attachment rates are concerned, the fact that some people bought a PS3 solely as a blu-ray player because it was the best player available brings down the 'attachment rate'. Yet they fail to factor in the profit from blu-ray video sales sold to people who just own a PS3, like me. Shouldn't blu-ray VIDEOS be counted as SOFTWARE sales in PS3's case?? What would that do to the 'attachment rate'? LOOK AT THE BIG PICTURE MY FRIENDS, THERE WAS NO FLAW IN THEIR STRATEGY!

The billions of losses seem to say otherwise...

I heard lots of the loses were because of the monetary crisis, but to explain, when you buy a printer, it might take a while before the printer manufacturer  starts to make a profit, after you've bought a few ink cartridges. So yes, Sony has lost some cash up front, that's what we are talking about, that's how razor blade economics works. They will get all that back in the long term, and much more.

Do you really think the PS3 can make 3 billion dollars by itself?  And even then it wouldn't break even.



MaxwellGT2000 - "Does the amount of times you beat it count towards how hardcore you are?"

Wii Friend Code - 5882 9717 7391 0918 (PM me if you add me), PSN - MaxwellGT2000, XBL - BlkKniteCecil, MaxwellGT2000

theprof00 said:

Sorry, I really have no idea how many BR titles are available.
According to Netflix, they had 1900 BR titles as of 2008.

Here, http://www.blu-ray.com/movies/movies.php?genre=Action, shows categories with totals, but most of the movies have multiple categories. So, I picked the largest one, 'drama' which has 3300, assuming drama incorporates all the other movies, just to make a conservative estimate (not including porn either)

So really we are looking at about 50M$ for most of the licensing costs alone on a very very very conservative estimate. (for example, comedy is almost surely not drama, which consists of another 1800 titles...and no porn...which is probably also in the thousands.)

All in all, there is a F**** gigantic amount of profit made by the BDA on it's own, so I really wonder how much of ANY of the licensing profits get distributed...

 

My numbers: http://www.blu-raydisc.info/format_spec/obtain_specs_manu.php

It's revenue, not profit. We don't know how much if any profit is being made. We don't know how much money has been spent or is being spent in development, marketing, dealmaking, etc. It's not like free money, it took investment and ongoing investment to get that revenue.



Anyone can guess. It takes no effort to throw out lots of predictions and have some of them be correct. You are not and wiser or better for having your guesses be right. Even a blind man can hit the bullseye.

Grimes said:
theprof00 said:

Sorry, I really have no idea how many BR titles are available.
According to Netflix, they had 1900 BR titles as of 2008.

Here, http://www.blu-ray.com/movies/movies.php?genre=Action, shows categories with totals, but most of the movies have multiple categories. So, I picked the largest one, 'drama' which has 3300, assuming drama incorporates all the other movies, just to make a conservative estimate (not including porn either)

So really we are looking at about 50M$ for most of the licensing costs alone on a very very very conservative estimate. (for example, comedy is almost surely not drama, which consists of another 1800 titles...and no porn...which is probably also in the thousands.)

All in all, there is a F**** gigantic amount of profit made by the BDA on it's own, so I really wonder how much of ANY of the licensing profits get distributed...

 

My numbers: http://www.blu-raydisc.info/format_spec/obtain_specs_manu.php

It's revenue, not profit. We don't know how much if any profit is being made. We don't know how much money has been spent or is being spent in development, marketing, dealmaking, etc.

So then how do you even begin to justify your estimate on what Sony makes?

As a realistic estimate, BDA has probably made about 250M on licensing alone (not disc or drive licenses included). What kind of costs could possibly eat up as much as you claim it eats from copy licensing (11 cents per disc), when we don't even know who covers the costs anyway?

Like I said, I'm in a condo association and we have several fees and oftentimes have to pool money together to pay for the good of the condo. Why wouldn't one association act like another?