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

Grimes on 29 December 2009
theprof00 said:
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?

I'm not going to justify my number because I have no idea. Sony could still be billions in the hole or could be in profit. I don't know.

The only thing I know is that the PS division has been losing billions of dollars and that the fees for licensing blu-ray discs is 11 cents. It may not even be that much because I'm not sure what deals are in place that circumbent the licensing.



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.

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theprof00 on 29 December 2009

Yes, that's all I know as well lol.

I don't think anyone is saying BR is saving them, but that BR will save,..er.. vindicate them eventually.

We will see how they are doing come next financial report



Azelover on 29 December 2009

It's so complicated. If Sony and Microsoft were only interested in gaming as it is, their ways would make absolutely no sense. Which is why Sega was totally stupid for trying to react to Sony's business model when they didn't have a secondary plan like Sony did.

Microsoft and Sony see videogames eventually taking over and becoming the device that does it all. That possibility is very threatening to Microsoft and hugely oportunistic for Sony, so if that comes true and either company ends up on top, all the money they spent will have been more than worth it.

The problem is, the money they're spending isn't helping them the way it should. Their direction isn't really being realistically in synch with what the market wants. For many people PS2 was good enough, so they're going mobile/handhelds. For others the Wii interests them more. It's not inherently flawed, but it was financially risky to bank on a certain paradigm that you don't know will be the real future.

Maybe it's not so much flawed as much as failed. The way of technology, and razor/blade model is no longer a risk worth taking because gaming isn't evolving in a straight line. It used to make more sense when the graphics were primitive and the line was straighter, but now technology is good enough. New advances will be harder to predict, therefore profit with hardware is a must.



hkthui on 29 December 2009
Azelover said:
It's so complicated. If Sony and Microsoft were only interested in gaming as it is, their ways would make absolutely no sense. Which is why Sega was totally stupid for trying to react to Sony's business model when they didn't have a secondary plan like Sony did.

Microsoft and Sony see videogames eventually taking over and becoming the device that does it all. That possibility is very threatening to Microsoft and hugely oportunistic for Sony, so if that comes true and either company ends up on top, all the money they spent will have been more than worth it.

The problem is, the money they're spending isn't helping them the way it should. Their direction isn't really being realistically in synch with what the market wants. For many people PS2 was good enough, so they're going mobile/handhelds. For others the Wii interests them more. It's not inherently flawed, but it was financially risky to bank on a certain paradigm that you don't know will be the real future.

Maybe it's not so much flawed as much as failed. The way of technology, and razor/blade model is no longer a risk worth taking because gaming isn't evolving in a straight line. It used to make more sense when the graphics were primitive and the line was straighter, but now technology is good enough. New advances will be harder to predict, therefore profit with hardware is a must.

Well said.



bdbdbd on 29 December 2009

@raygun: Let's get this straight:
This is based on assumption that Sony owns around 30% share of BDA and it gets royalties accordingly.
The BD movies you have bought, have made Sony something between 50 cents to a dollar.
The BD drive licencing was 30$ earlier, now it's 9,50$ per drive. So, instead of Sony losing 20$ just with licence fees with PS3 fat, they lose only 6,50$ with the slim. You may notice that you haven't yet even paid the licence it cost to Sony (think about it, fat PS3's BD licence cost Sony 400 000 000 as a company and 600 000 000 SCE).
With 18 games your PS3 was profitable, but if you had bought a PS3, that Sony had made 20$ profit with, and a standalone BD player that Sony had made another 20$ profit, Sony would've made more money. Now they sold you a PS3, that they lost money with, and to add to that, they lost one BD player sale that they had otherwise profited from.

The only way to make the inclusion of BD player a clever choice, is driving HD-DVD out of the market. And even then, BD needs eventually turn into profit. What i read about the reason why Toshiba ditched HD-DVD, was because they didn't believe the HD video discs wouldn't become as popular as DVD, so even winning the (costly) battle, it would be hard to turn the venture profitable. I would be guessing Toshiba laughs its ass off every time they see Sony struggling with PS3.

Sonys (as a company) bad current state is because of recession, increased competition and segments that just lose money anyway, but as we are talking about SCE, it made huge losses even riding the wave of all-time high economic.

The model Sony took with PS3 had worked if PS3 had sold as Sony projected. What Sony projected as PS3 sales at the end of (calendar) 2007, were the numbers of the end of (calendar) 2008. Now it's currently somewhere around projected mid-2008 sales, i believe.



Ei Kiinasti.

Eikä Japanisti.

Vaan pannaan jalalla koreasti.

 

Nintendo games sell only on Nintendo system.

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Squilliam on 29 December 2009
MaxwellGT2000 said:

Yeah since a smaller disc even GC size but still a subset of Blu-ray could still hold more than a DL DVD and cut a few middlemen out.  Wasn't the license issue the reason why DVD playback not allowed in the Wii?  Cause Nintendo talked about a Wii with a DVD player built in could come later prior to launch on IGNs site.

Yep pretty much. Why pay all that money, up to $500M over 100M consoles for something which people already have like 20 different players for? If you can't play back Blu Ray you can save that $10 right off the bat. Thats either extra profit or you could spend it to make your console faster. The cheaper you make your console also the more that fee will hurt you relative to the cost of the console itself.



Tease.

theprof00 on 29 December 2009
bdbdbd said:
@raygun: Let's get this straight:
This is based on assumption that Sony owns around 30% share of BDA and it gets royalties accordingly.
The BD movies you have bought, have made Sony something between 50 cents to a dollar.
The BD drive licencing was 30$ earlier, now it's 9,50$ per drive. So, instead of Sony losing 20$ just with licence fees with PS3 fat, they lose only 6,50$ with the slim. You may notice that you haven't yet even paid the licence it cost to Sony (think about it, fat PS3's BD licence cost Sony 400 000 000 as a company and 600 000 000 SCE).
With 18 games your PS3 was profitable, but if you had bought a PS3, that Sony had made 20$ profit with, and a standalone BD player that Sony had made another 20$ profit, Sony would've made more money. Now they sold you a PS3, that they lost money with, and to add to that, they lost one BD player sale that they had otherwise profited from.

The only way to make the inclusion of BD player a clever choice, is driving HD-DVD out of the market. And even then, BD needs eventually turn into profit. What i read about the reason why Toshiba ditched HD-DVD, was because they didn't believe the HD video discs wouldn't become as popular as DVD, so even winning the (costly) battle, it would be hard to turn the venture profitable. I would be guessing Toshiba laughs its ass off every time they see Sony struggling with PS3.

Sonys (as a company) bad current state is because of recession, increased competition and segments that just lose money anyway, but as we are talking about SCE, it made huge losses even riding the wave of all-time high economic.

The model Sony took with PS3 had worked if PS3 had sold as Sony projected. What Sony projected as PS3 sales at the end of (calendar) 2007, were the numbers of the end of (calendar) 2008. Now it's currently somewhere around projected mid-2008 sales, i believe.

The main reason is the global recession coupled with a giant loss of revenue due to exchange rate.

The average sale in America is 30% less profitable than it was just 2 years ago.



Kasz216 on 29 December 2009
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 fact that you called it Microsofts HD video format.... pretty much shows how much you know about the subject.  (little.)



theprof00 on 29 December 2009
Kasz216 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 fact that you called it Microsofts HD video format.... pretty much shows how much you know about the subject.  (little.)

It's too bad nobody can figure out how much MS was actually funding HDDVD or how much was paid to Universal or Paramount (I forget which).

However, the HDDVD drive on 360 was for a long while, the cheapest HDDVD player on the market.

Perhaps he meant it metaphorically... a viewpoint a lot of people share.



Kasz216 on 29 December 2009
theprof00 said:
Kasz216 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 fact that you called it Microsofts HD video format.... pretty much shows how much you know about the subject.  (little.)

It's too bad nobody can figure out how much MS was actually funding HDDVD or how much was paid to Universal or Paramount (I forget which).

However, the HDDVD drive on 360 was for a long while, the cheapest HDDVD player on the market.

Perhaps he meant it metaphorically... a viewpoint a lot of people share.

A viewpoint that is wrong... I may as well say Lays potato chips are a Sony product.

Sure, Microsoft was funding HD-DVD, for no real benefit to themselves.

 

Regardless...  some things to know about Blu-ray and Sony profitability.

1) Sony owns LESS then 30% of the IP. 

2) The Blu-ray Assosiation wasn't collecting too many royalties until 2008... after Februrary some time.

3) Blu-ray is not expected to be as profitable as DVD... due to digital distribution, China's own HD format (you'd be surprised just how up it is on Blu-ray despite being released later) and a number of other reasons.

 http://news.cnet.com/8301-10784_3-9874317-7.html

4) Blu-ray royalties are not $30 dollars for a player anymore.  They are $23.75.

4) Blu-ray royalties are expected to plunge in prices.  Quicker then DVDs ever did... why?  See number 3. 

They are plunging 40% per drive.  So now each drive will be... $9.50 per drive... actually cheaper then the $12 DVD was making... last year.  Why?  Probably trying to regain the chinese market and chinese manufacturers... probably number 3. 

http://www.myce.com/news/Blu-ray-prices-to-fall-as-patent-holders-simplify-licensing-15591/?utm_source=cdfreaks&utm_medium=email&utm_campaign=email_newsletter_activestories_week

 

It looks like a giant wash honestly.