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Kaz Hirai: "PS4 hardware is already profitable"

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#1 Andrew

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Posted 22 May 2014 - 18:06

http://av.watch.impr....22_649764.html

 

平井CEO「PS4はすでにハードウェア単体で利益を計上しており、従来のプラットフォームビジネスとは異なる事業体制となっている」

 

Is Kaz Hirai saying that PS4 hardware is profitable already?

 

Originally Posted by extralite
Yes, and that it differs in that regard to the business model of previous platforms.

 

From Gaf

 

-----

 

 

Sony: PS4 "likely" to exceed profits earned from PS2

Kaz Hirai hails strong hardware sales and digital services.

 

By Wesley Yin-Poole Published 22/05/2014

 

jpg

It's all part of the plan.

 

The PlayStation 4 is off to a strong start, with seven million units sold since it launched in November 2013.

 

But what's the long term view?

 

During a corporate strategy meeting today, reported on by Japanese website Impress Watch and spotted by NeoGAF, Sony boss Kaz Hirai said that the strong hardware sales, coupled with the growing popularity of digital services, should allow the PS4 to produce profits beyond what Sony managed with PlayStation 2 - the best-selling console of all time.

 

Here's the direct quote, translated for Eurogamer by Digital Foundry contributor John Linneman.

 

"It is likely that PS4 will become the platform which exceeds the profits earned with PS2."

 

Before the quote, there is a line not in quotes, which specifies strong sales and network services as a driving factor.

 

While Sony is suffering billion dollar losses - and expects those losses to continue - PS4 is doing well. Sales for the company's Game segment were up 38.5 per cent during the last financial year, but it still posted an operating loss of $78m due to the costs associated with the launch of the PS4 and the write off of some of Sony Online Entertainment's old MMOs.

 

Sony expects to shift a total of 17m PS3 and PS4 consoles combined during the current financial year.

 

Console hardware manufacturers typically make a loss on each console sold during the early years of its life in an effort to establish an install base. The real money, however, is made from software sales and network services. That's stuff like PlayStation Plus subscriptions, and digital sales of game content, movies and the like.

 

This is in keeping with comments made to Eurogamer by Sony Japan executive Masayasu Ito in September last year. He said the PlayStation 4 hardware would make a loss at launch, but insisted Sony expected to immediately recoup the costs when a typical user also bought a PlayStation Plus subscription and games.

 

It was a different case with the PS2, of course, which launched in 2000. That console didn't have a digital storefront to sell subscriptions and downloadable content from. But it was hugely successful - it's the best selling video game console of all time, with an incredible 155m units sold globally.

 

Sony made well-documented losses on the PlayStation 3 during the early years of its life. And it was always part of the plan to avoid a similar situation with PS4. Back in May 2013, Sony chief financial officer Masaru Kato explained the difference.

 

"Unlike PS3, we are not planning a major loss to be incurred with the launch of PS4," Kato said.

 

"At the time we developed PS3, we made a lot of in-house investments to develop the Cell chip. Development of the chip saw the silicon processing and all the facilities invested by us ourselves. But this time, yes we have a team working on chip development, but we already have existing technology to incorporate and also product investment, and all the facilities will now be invested by our partners, other foundries, so we don't have to make all the investment in-house."

 

http://www.eurogamer...earned-from-ps2




#2 DeltaXray

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Posted 22 May 2014 - 18:30

Doesn't surprise me, since if I remember rightly the teardowns showed that the estimated build cost was only a fraction below retail. I wouldn't think they're making megabucks on the hardware but never thought they'd make a loss on it either.

#3 theyarecomingforyou

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Posted 22 May 2014 - 18:42

It depends what they mean by profitable. I highly doubt that the PS4 has recouped the cost of R&D and advertising on the slim margins being made on each unit.



#4 panacea

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Posted 22 May 2014 - 18:42

Did not they say both XB One and PS4 are not sold at a loss?     I thought this was already common knowledge


It depends what they mean by profitable. I highly doubt that the PS4 has recouped the cost of R&D and advertising on the slim margins being made on each unit.

 

 

no way.    but at least they are not losing it on each sale.  which is better then the last gen.



#5 Enron

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Posted 22 May 2014 - 18:43

Well of course it is. It doesn't cost more than $399 to build.

 

The Xbox was about the same way, just under the retail price to build.



#6 OP Andrew

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Posted 22 May 2014 - 18:50

Doesn't surprise me, since if I remember rightly the teardowns showed that the estimated build cost was only a fraction below retail. I wouldn't think they're making megabucks on the hardware but never thought they'd make a loss on it either.

 

There's been a few estimates since the specs were announced/teardowns. Some said they were losing a small amount, some said it was even and some said $18 profit. Either way it's known now but not how much by.

 

AllThingsD estimate the X1 costs $471 to make so profitable from the start. Removing Kinect might have changed that either way though.



#7 torrentthief

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Posted 22 May 2014 - 18:52

Good news. Now if they could release a slim version next year with a 20nm SoC instead of 28nm for £299 that would be great.



#8 Aergan

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Posted 22 May 2014 - 18:58

I would think that the PS2 & especially the PS3 have taught them quite a bit about being smarter with their bill of materials and not dividing so many I/O processes into separate logic components. Good on them to be honest.



#9 McKay

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Posted 22 May 2014 - 19:00

There's been a few estimates since the specs were announced/teardowns. Some said they were losing a small amount, some said it was even and some said $18 profit. Either way it's known now but not how much by.

 

AllThingsD estimate the X1 costs $471 to make so profitable from the start. Removing Kinect might have changed that either way though.

 

Either way both consoles are in a much better position than last gen. They're outselling their predecessors and they aren't losing a bucket of money in each one. 



#10 rfirth

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Posted 22 May 2014 - 19:08

The hardware is profitable. The division isn't due to research and development costs, marketing, distribution...

 

And the company is drowning... $1.25 billion loss for 2013 and a forecasted loss of $490 million for 2011.

 

Microsoft staring a price war with them would be a disaster for Sony.

 



#11 Asmodai

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Posted 22 May 2014 - 19:19

Good news. Now if they could release a slim version next year with a 20nm SoC instead of 28nm for £299 that would be great.

They aren't going to shrink the process in the first year.  They also aren't going to lower the price as long as they are selling them as fast as they can make them.



#12 DeltaXray

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Posted 22 May 2014 - 19:22

Yeah Sony have absolutely no reason to lower the price for a while yet. They've hit a sweet spot and are still flying off the shelves.

#13 Asmodai

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Posted 22 May 2014 - 19:30

Either way both consoles are in a much better position than last gen. They're outselling their predecessors and they aren't losing a bucket of money in each one. 

 

This is actually bad for consumers though.  It used to be that when you bought a console you got far more hardware than what you paid for at launch.  The manufacturers recouped the losses over time because they take a cut of all the games for the platform unlike on PC (which is why console games used to be $60 while the same game for PC costs $50.)  Also over time the hardware would become cheaper until later in the consoles life they'd actually start making a profit on hardware.

 

Now the hardware at launch isn't that much better (if at all) then what you could get just buying a PC for the same price.  So you're locked into a closed platform without getting a great deal on hardware and the platforms holders just pocket the extra money from the games... profit!  PC gamers even get screwed now because with widespread multi-platform development publishers now typically keep prices the same across PCs and consoles ($60 everywhere instead of $50 on PC) and so they're just screwing PC gamers by taking the money that goes to the platform holders on consoles and just pocketing it.

 

So yeah, things are great for the platform holders... not so much for gamers.



#14 McKay

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Posted 22 May 2014 - 19:49

This is actually bad for consumers though.  It used to be that when you bought a console you got far more hardware than what you paid for at launch.  The manufacturers recouped the losses over time because they take a cut of all the games for the platform unlike on PC (which is why console games used to be $60 while the same game for PC costs $50.)  Also over time the hardware would become cheaper until later in the consoles life they'd actually start making a profit on hardware.

 

Now the hardware at launch isn't that much better (if at all) then what you could get just buying a PC for the same price.  So you're locked into a closed platform without getting a great deal on hardware and the platforms holders just pocket the extra money from the games... profit!  PC gamers even get screwed now because with widespread multi-platform development publishers now typically keep prices the same across PCs and consoles ($60 everywhere instead of $50 on PC) and so they're just screwing PC gamers by taking the money that goes to the platform holders on consoles and just pocketing it.

 

So yeah, things are great for the platform holders... not so much for gamers.

 

True in the short term yes, but look where drastically underpricing the PS3 got Sony. If they got into more trouble it might have impacted their gaming division. I'm happy to pay pretty much the price it cost to make, considering my other gadgets were bought for so much more than they cost. 



#15 HawkMan

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Posted 22 May 2014 - 20:08

This is actually bad for consumers though.  It used to be that when you bought a console you got far more hardware than what you paid for at launch.  The manufacturers recouped the losses over time because they take a cut of all the games for the platform unlike on PC (which is why console games used to be $60 while the same game for PC costs $50.)  Also over time the hardware would become cheaper until later in the consoles life they'd actually start making a profit on hardware.

 

Now the hardware at launch isn't that much better (if at all) then what you could get just buying a PC for the same price.  So you're locked into a closed platform without getting a great deal on hardware and the platforms holders just pocket the extra money from the games... profit!  PC gamers even get screwed now because with widespread multi-platform development publishers now typically keep prices the same across PCs and consoles ($60 everywhere instead of $50 on PC) and so they're just screwing PC gamers by taking the money that goes to the platform holders on consoles and just pocketing it.

 

So yeah, things are great for the platform holders... not so much for gamers.

 

 

True but false.

 

this assumes license cost to release games on the consoles haven't changed with the time and that inflation hasn't affected this business. both false. 

 

Sure they could have released the consoles at 100$ less or more, and take a loss recouping the money on software sales(Sony which historically has slightly worse attach rate gets a bit worse off there). HOWEVER, then games would have had to cost more.

 

Now I know what your counter argument is "that is BS, games are the same price or more than they used to be". No they're not, inflation makes them cheaper and even if they are the same price they used to be, that ignores a MAJOR part of game development; Production costs. In the past generation production costs where lower since all the games used low poly models only a few models even used high detail normal maps textures got away with less detail and so on. Today it's a different story, ALL characters and monsters not only need a high res in game model, they also need super high res movie quality models to generate normals maps from, the modelling alone costs a lot, then you have to remodel them 2-3 times for different lods(not it's not as simple as just hitting a magic button to get a lower res model, there are short cuts, but you still have a lot of work to do on each LOD. and each LOD needs to be texture mapped and skinned for animation, both time consuming labour). And then there's animations, even if you buy an expensive middleware solution like endorphin for those super sweet realistic animations and reactions to the environment, you still need to animate the character for all the non every day stuff an scenes he'll be in. Then you have voice acting, and all the res of the environment models and the levels and environments themselves. 

 

Games today are ridiculously expensive to make. So a cheaper console would mean more expensive games, pick one. As it is and in the long run when you add it all up, I'd say the consumers are winning with consoles that aren't losing money.