PS4 and Xbox One not profitable?
Everyone is focusing on just how much each Xbox One and PS4 box costs to make and sells for. And, beyond the obvious expectations for long term profit, there are a number of ways both companies are cashing in right even as we speak.
Even after production costs drop, the profit margins on the consoles themselves remain razor thin. They make sizeable profits for a quarter or two when prices first start coming down. But ultimately, they will compete on price and continue to sacrifice margins on the console.
The primary sources of revenue for both companies have long been elsewhere. So even bringing up the console margins and profit is nothing but a red herring. Lump sums are made from accessories and ongoing revenue from subscriptions. And those margins and profits are alive and real even on day 1.
Most console owners will buy at least one extra controller, and most who will, bought it the same day they bought the console. At $50-60 a pop for a controller that costs less than $5 to make, instantly yields more than double the estimated profit margin for each console before the rest of the supply chain is considered. After the remainder of the supply chain takes their chunk, the profit on accessories like controllers, charging stands and other official merchandise could be as much as an order of magnitude higher in terms of profit. These companies NEVER made their money off of the consoles directly. Profiting off of them is simply a silver lining.
Subscriptions on the other hand in the form of PS+ and Xbox Live Gold are recurring revenue. And each person who subscribes increases the profit margins for Sony and Microsoft. And, based on what I've seen, MANY people subscribe. This is infinitely better than selling a console once, even at a profit. This ensures that some percentage of their buyers give them additional profit every single year.
Don't be fooled. Microsoft and Sony are making money. Have already made money. That the consoles based on the tear downs imply that they aren't selling them at a loss or at least not necessarily at a loss means even one more way in which these companies are cashing in.
So, not only have they made money, if not off the consoles then off accessories, both have set the stage to continue making money off their shiny new consoles.
AND... now I'm adding more onto this post. I feel lame making yet another Xbox One vs. PS4 post and this one was one of the smaller posts I've made, so I figured it made sense to expand on this one.
Firstly, fan boys (and girls)! On both sides. SHUT UP! Wow, is trying to read a thread ever irritating? Which console is selling better? No one actually knows! Availability in different regions, let alone on a store by store basis, is incredibly variable at this point. Simply put, most stores are sold out. Of both. Including online. So, even if one console has sold more than the other, those sales are largely based more on availability than demand. Xbox One appears to have beaten PS4 in black Friday sales in the US. PS4, beat the crap out of the Xbox One in the UK. But, Microsoft appears to have had far more stock than Sony in the US, so selling more units is not surprising. Sony may simply have had more units available in the UK to sell.
Or they may actually be more popular in the UK. Which leads to yet another factor... demand will vary by region as well. It is entirely possible for that one of them will outsell in certain key markets like the US and still be outsold globally. Even once availability ceases to be a factor.
And, while I may be wrong. I still believe that for 2013 Xbox One will outsell PS4. I don't think this has anything at all to do with which console is better or is in greater demand. Microsoft has expressed a goal to make sure their product is actually available at retail stores this holidays. And everything from rumours of their hardware choices having better yields and anecdotal evidence that stores are receiving more Xbox One units than PS4 units seems to support that.
I think Xbox One will sell more units, because there will be more units for them to sell. As long as there is demand for more Xbox One's than there is availability of PS4's this WILL happen. And frankly, given the frenzy over both consoles. I think this is a given. Once the availability problems abate, it is entirely possible that PS4 will then shoot back ahead.
I also still believe that Microsoft's gamble on higher yield hardware to be able to get that better initial availability, and thus potentially the better 2013 sales numbers will result in them netting some game studios and titles that may have otherwise gone to Sony, which will server as good ammunition in the years to come. But, that is even harder to measure than the inconclusive numbers we already have on sales.
Fact is, it will be hard to tell until someone has some final numbers. Which probably won't actually come until the new year. And, at that point the numbers STILL won't tell the whole story because availability will likely remain a sporadic problem well into the new year. Expect accurate launch numbers Q4 2014. Please don't bother arguing until then!!!!
And frankly, even when the numbers come out, both have already sold over a million units. Both products have made Nintendo's Wii U sales look abysmal. Both are already successful. I'm no tech idiot. Honestly, I think most true gamers will actually buy both. In fact, most people waiting in line with me for the Xbox One on opening day already owned a PS4.
I've said it before. And I will undoubtedly repeat it again. Both consoles are going to be great. Both consoles are going to have problems. Each console will have *something* the other doesn't. Be it a particular feature, or a platform exclusive game title. If, you can only justify one, buy based on elements like that and you won't be disappointed.
If there is no differentiating factor there which you care about... is money a factor? Buy a PS4, saving $100 is a big deal for a lot of people. Neither console comes with any games, making that $100 savings even more relevant. You can buy a PS4 and a game and still spend less than an Xbox One. If the sums of money we're talking about don't bother you, buy an Xbox One. Kinect and the TV integration in my opinion do offset the extra $100 more than adequately.
As a side note on why I tossed Kinect in there. Controlling the OS via gestures is my least favourite input method. But, I have a kid on the way. I have friends over occasionally. And on top of that, some of them have kids. At some point or another I'll buy a dance or a sport game that relies on motion. Not because of my inner gamer, but because those games are much more fun in larger gatherings or to keep kids pre-occupied. Wii/PS3 style remotes double as evil projectiles and make everyone feel stupid. And frankly, I don't think either the Kinect 1.0 or the PS4 eye even come close to the Kinect 2.0 with the Xbox One. I'm interested in seeing some comparisons between the two. But, since the differences in the consoles and their controllers are only marginal... if money isn't a concern and neither are the exclusive titles or features... why buy the console with the inferior motion sensing tech?
Even after production costs drop, the profit margins on the consoles themselves remain razor thin. They make sizeable profits for a quarter or two when prices first start coming down. But ultimately, they will compete on price and continue to sacrifice margins on the console.
The primary sources of revenue for both companies have long been elsewhere. So even bringing up the console margins and profit is nothing but a red herring. Lump sums are made from accessories and ongoing revenue from subscriptions. And those margins and profits are alive and real even on day 1.
Most console owners will buy at least one extra controller, and most who will, bought it the same day they bought the console. At $50-60 a pop for a controller that costs less than $5 to make, instantly yields more than double the estimated profit margin for each console before the rest of the supply chain is considered. After the remainder of the supply chain takes their chunk, the profit on accessories like controllers, charging stands and other official merchandise could be as much as an order of magnitude higher in terms of profit. These companies NEVER made their money off of the consoles directly. Profiting off of them is simply a silver lining.
Subscriptions on the other hand in the form of PS+ and Xbox Live Gold are recurring revenue. And each person who subscribes increases the profit margins for Sony and Microsoft. And, based on what I've seen, MANY people subscribe. This is infinitely better than selling a console once, even at a profit. This ensures that some percentage of their buyers give them additional profit every single year.
Don't be fooled. Microsoft and Sony are making money. Have already made money. That the consoles based on the tear downs imply that they aren't selling them at a loss or at least not necessarily at a loss means even one more way in which these companies are cashing in.
So, not only have they made money, if not off the consoles then off accessories, both have set the stage to continue making money off their shiny new consoles.
AND... now I'm adding more onto this post. I feel lame making yet another Xbox One vs. PS4 post and this one was one of the smaller posts I've made, so I figured it made sense to expand on this one.
Firstly, fan boys (and girls)! On both sides. SHUT UP! Wow, is trying to read a thread ever irritating? Which console is selling better? No one actually knows! Availability in different regions, let alone on a store by store basis, is incredibly variable at this point. Simply put, most stores are sold out. Of both. Including online. So, even if one console has sold more than the other, those sales are largely based more on availability than demand. Xbox One appears to have beaten PS4 in black Friday sales in the US. PS4, beat the crap out of the Xbox One in the UK. But, Microsoft appears to have had far more stock than Sony in the US, so selling more units is not surprising. Sony may simply have had more units available in the UK to sell.
Or they may actually be more popular in the UK. Which leads to yet another factor... demand will vary by region as well. It is entirely possible for that one of them will outsell in certain key markets like the US and still be outsold globally. Even once availability ceases to be a factor.
And, while I may be wrong. I still believe that for 2013 Xbox One will outsell PS4. I don't think this has anything at all to do with which console is better or is in greater demand. Microsoft has expressed a goal to make sure their product is actually available at retail stores this holidays. And everything from rumours of their hardware choices having better yields and anecdotal evidence that stores are receiving more Xbox One units than PS4 units seems to support that.
I think Xbox One will sell more units, because there will be more units for them to sell. As long as there is demand for more Xbox One's than there is availability of PS4's this WILL happen. And frankly, given the frenzy over both consoles. I think this is a given. Once the availability problems abate, it is entirely possible that PS4 will then shoot back ahead.
I also still believe that Microsoft's gamble on higher yield hardware to be able to get that better initial availability, and thus potentially the better 2013 sales numbers will result in them netting some game studios and titles that may have otherwise gone to Sony, which will server as good ammunition in the years to come. But, that is even harder to measure than the inconclusive numbers we already have on sales.
Fact is, it will be hard to tell until someone has some final numbers. Which probably won't actually come until the new year. And, at that point the numbers STILL won't tell the whole story because availability will likely remain a sporadic problem well into the new year. Expect accurate launch numbers Q4 2014. Please don't bother arguing until then!!!!
And frankly, even when the numbers come out, both have already sold over a million units. Both products have made Nintendo's Wii U sales look abysmal. Both are already successful. I'm no tech idiot. Honestly, I think most true gamers will actually buy both. In fact, most people waiting in line with me for the Xbox One on opening day already owned a PS4.
I've said it before. And I will undoubtedly repeat it again. Both consoles are going to be great. Both consoles are going to have problems. Each console will have *something* the other doesn't. Be it a particular feature, or a platform exclusive game title. If, you can only justify one, buy based on elements like that and you won't be disappointed.
If there is no differentiating factor there which you care about... is money a factor? Buy a PS4, saving $100 is a big deal for a lot of people. Neither console comes with any games, making that $100 savings even more relevant. You can buy a PS4 and a game and still spend less than an Xbox One. If the sums of money we're talking about don't bother you, buy an Xbox One. Kinect and the TV integration in my opinion do offset the extra $100 more than adequately.
As a side note on why I tossed Kinect in there. Controlling the OS via gestures is my least favourite input method. But, I have a kid on the way. I have friends over occasionally. And on top of that, some of them have kids. At some point or another I'll buy a dance or a sport game that relies on motion. Not because of my inner gamer, but because those games are much more fun in larger gatherings or to keep kids pre-occupied. Wii/PS3 style remotes double as evil projectiles and make everyone feel stupid. And frankly, I don't think either the Kinect 1.0 or the PS4 eye even come close to the Kinect 2.0 with the Xbox One. I'm interested in seeing some comparisons between the two. But, since the differences in the consoles and their controllers are only marginal... if money isn't a concern and neither are the exclusive titles or features... why buy the console with the inferior motion sensing tech?
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