Kaz Hirai: "PS4 hardware is already profitable"

[HawkMan]

I don't see how, please explain.  If you're making a game it has to be financed no matter what platform it's for, be it console or PC.  You either have the money and can finance it yourself or you don't and have to seek financing elsewhere (typically through a publisher).  That's the same for both console and PC games so how it's financed makes no difference. ON TOP OF THAT however the console version has to pay an additional licensing fee to the platform holder.

 

Say the game has already been developed, they used PC to develop the game, it costs them nothing to actually release a PC version.

 

ie. the console versions need to cost 60 dollars to make money, the PC version is basically sponsored by the console versions and will make money even if they sold it at 5 dollars. it's not really factored into the budget in the same way. 

 

it wasn't the PC game they financed development of it was the console versions. so as such the PC version is bonus pay, spend a small token sum for a port and it's all gold after that. 

[+Asmodai MVC]

Say the game has already been developed,

Then it's irrelevant to the point.

they used PC to develop the game, it costs them nothing to actually release a PC version.

It cost them money to make the PC version. They have to sell it for something to recoup the development cost which you just ignored in your "Say it's already developed". Games don't just magically appear already developed for people to sell on PC for nothing but profit.

ie. the console versions need to cost 60 dollars to make money, the PC version is basically sponsored by the console versions and will make money even if they sold it at 5 dollars. it's not really factored into the budget in the same way.

it wasn't the PC game they financed development of it was the console versions. so as such the PC version is bonus pay, spend a small token sum for a port and it's all gold after that.

This goes both ways depending on which platform you develop for first. If you make the PC version first you need to charge $60 or whatever to recoup your development cost/financing. If you then decide to port it a console then the console version is basically sponsored by the PC version and will make money even if they sold it at 5 dollar (plus the platform holders licensing fee).

In this case it wasn't the console game they financed development of it was the PC version. Since this works both ways it's irrelevant.

Also I think you trivialize how difficult it is to port between console and PC but that's a different issue as well.

[HawkMan]

Then it's irrelevant to the point.

 

 

Of course it's not. 

 

As for the rest, how many games do you see making a PC version first nowadays, that's right virtually none, the few that are are sold at a much higher cost on PC than console first games.

 

when developers make games today they give them a say 10 million budget to make a game for either PS, Xbox or both. Those have to recoupe the cost of development. Sometimes the developer will tell the publisher or license holder, "well for 100k extra we can make a PC port as well" and the publisher will say, ok do it. after all, it makes good business sence, for 100k they can sell the game cheap and make extra money.

 

it may seem unfair and and makes prices look weird, but often PC sales aren't part of the budget at all. they're a mere bonus, hence, PC games are cheaper. even games that are developed so called "PC First", while that may be partially true from the developers point of view, the PC isn't where they expect to actually make money and sales. 

 

It's not logical and doesn't appear to make a lot of sense, but it's how it is. PC games are generally unless they're pure PC games, subsidized by their console undermensch. 

Also I think you trivialize how difficult it is to port between console and PC but that's a different issue as well.

 

 

Really, if you're developing the game for xbox to start with, the port is sometimes as much as the push of a button, at most some code to add in keyboard and mouse controls. but the're usually there anyway from when the devs where in the early dev stages and didn't use controllers yet for their test code. 

 

a lot of other times the game engine has already done the job for them. and besides the only ones who need to do work for the port is generally the coders, and it's not the most costly part of the development anyway, 100k should be enough for any port more than enough .

[DrunknMunky Veteran]

OP updated

[trooper11]

Sony and MS chose a more pc like build, which meant they could cut costs right at the beginning and reap the benefits as those parts get cheaper at a faster rate then using custom parts.

Sony is doing especially well thanks to this and it will help the Gaming division on a positive track. Hopefully they can sort out the other parts of the company that are hurting them.

[neoadorable]

Good news any way you look at it. I'm glad Sony can make money on PS4 and proud to be part of the community. A successful Sony means many many thousands of families with secure income around the world, and as someone who knows a thing or two about job security a profitable business that sells products that make people happy is the best business there can be.

[Raa]

(which is why console games used to be $60 while the same game for PC costs $50.) 

 It still is. In fact I've seen some games where the price is $20 extra for an X1/PS4 version now. :|

[GotBored]

Sony said awhile back that it loses money on each console sale but it makes a profit once someone signs up for PS+ and buys a single game.

 

I'm going to assume that everyone who owns a PS4 has bought at least two games and lots of people are signing up for PS+ (Due to being a requirement for online play now).

 

Looking at most recent sales the PS4 has sold over 7.7 million units and say 5 million of those signed up for PS+ ($50/year) that would be $250,000,000 in profits.

 

XBL was a huge money maker and now PS+ will be also.

[DrunknMunky Veteran]

On the subject of PS+

 

"Approximately half" of PlayStation 4 users now have a Plus subscription

[DeltaXray]

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.

 

No its not good for anyone.  Platform holders sold at a loss because they thought they had to to get the product out there.

Selling at a loss, realistically, isn't a good long term solution.  Selling at cost is still a benefit to the consumer, because it is a realistic price to pay for the goods.  Just because you were used to paying less than it cost to build just makes the consumer self-entitled.  Paying cost price is a very good deal, and it goes to show since PS4 at least is flying off the shelves the consumers think so too.

[sanctified Veteran]

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.

 

Every company that uses the word 'profitable' means that the initial costs, including manufacturing, have already been covered and now its product is making profit.

[HawkMan]

Every company that uses the word 'profitable' means that the initial costs, including manufacturing, have already been covered and now its product is making profit.

No, they hardly ever mean that, as the R&D costs go in a separate budget.

[sanctified Veteran]

No, they hardly ever mean that, as the R&D costs go in a separate budget.

 

That would be a serious shoot in the foot, one of the only straight things about capitalism is that companies hace to be sincere about their financial situation because the investors have every right to sue if they lie.

[+Asmodai MVC]

No its not good for anyone.  Platform holders sold at a loss because they thought they had to to get the product out there.

Selling at a loss, realistically, isn't a good long term solution.  Selling at cost is still a benefit to the consumer, because it is a realistic price to pay for the goods.  Just because you were used to paying less than it cost to build just makes the consumer self-entitled.  Paying cost price is a very good deal, and it goes to show since PS4 at least is flying off the shelves the consumers think so too.

 

I disagree.

Platform holders sold at a loss initially, in part, because console buyers are locked into a fixed set of hardware for the life of the console.  So the consumer benefits because they get hardware that is worth more than what they paid and the platform holder benefits because they get a new consumer locked into their closed ecosystem.  They recoup the loss and make a profit through the sales to the consumer within that closed ecosystem over the products life.  That isn't entitlement.

 

Additionally selling at a loss is not a long term situation at all.  Computer technology advances quickly which makes costs drop for the same piece of hardware or performance increase at the same price very quickly.  Since a console has fixed hardware specs you can ignore the performance increase, but the platform holders DO benefit from the reduced cost.  So while AT LAUNCH the hardware they have may be selling at a loss in a year or two that same hardware may be break even or even profitable already, possibly even with one or more price cuts.  I'm not saying they have ever, or even should, sell consoles at a lose for their entire lifetime, that would be silly.  They HAVE traditionally sold at a loss AT LAUNCH though and those days seem to be over.  Gamers are therefore getting a worse deal now then they have historically.

 

I own a PS4, I'm not saying they're so bad of a deal no one should buy a console.  My only point is that consumers are no longer getting as good of a deal as they historically have.  With them selling consoles at break even also this generation is going to seem even more obsolete, even faster then prior generations compared to PCs.  In fact I wouldn't be surprised if ARM phone/tablet SoCs outstrip this gen consoles before they've been around as long as the PS3 and XBox360 were current gen. Android consoles and such are really a joke right now but 64bit CPU based SoCs are coming (already here on iPhone/iPad), GPUs on tablets/phones are getting DirectX 11+ level capabilities already, and heck Imagination Technologies of PowerVR fame has hardware ray tracing acceleration in their new PowerVR Wizard line of GPUs and this is only about 6 months from launch of this new console generation.  Where do you think they will be in 2 or 3 years?

[HawkMan]

That would be a serious shoot in the foot, one of the only straight things about capitalism is that companies hace to be sincere about their financial situation because the investors have every right to sue if they lie.

That's why they have quarterly budget reports...

[sanctified Veteran]

That's why they have quarterly budget reports...

 

I know, but still a shoot in the foot. Anyone can compare the financial reports with these claims and look for incongruences. Business lie all the time, about specs, making word-plays between units sold and units distributed, about deadlines. But they just cannot lie about financial status. Just look at Enron.

[HawkMan]

It's not really a lie, R&D is generally taken as a loan or at least written up as a loan. So the console only needs to make one cent more than the cost of the loans added to parts and they can freely claim it's making money, even if it's technically not true.

[theyarecomingforyou]

It's not really a lie, R&D is generally taken as a loan or at least written up as a loan. So the console only needs to make one cent more than the cost of the loans added to parts and they can freely claim it's making money, even if it's technically not true.

I don't see how spending more money than you make can be classed as profitable. Only when all the associated costs have been recouped is a product really profitable, which includes R&D, staffing, marketing, manufacturing, utilities, legal, etc. Selling a product for more than it costs to manufacture isn't an achievement - it's expected business practice.

 

It will be years before the PS4 is truly profitable and even longer to recoup from the losses taken with the PS3.

[Thief000]

I don't see how spending more money than you make can be classed as profitable. Only when all the associated costs have been recouped is a product really profitable, which includes R&D, staffing, marketing, manufacturing, utilities, legal, etc. Selling a product for more than it costs to manufacture isn't an achievement - it's expected business practice.

 

It will be years before the PS4 is truly profitable and even longer to recoup from the losses taken with the PS3.

 

That's why this is all so funny. People that know how the business works, know that this not the case and basically a lie. But Sony has done such things in the past and they have a large financial grave to dig themselves out of, so I'm not surprised.