Myth of Console Sales

[Blu-Ray Buckeye]

Every story you read is spun to make it seem as if Wii is kicking serious tail and PS3 is failing miserably, although PS2 is still selling strong. Every story quotes the units sold in a given timeframe.

Well I'm a CFO and last I checked I report income and revenue in dollars not units. If you do what any normal financial analysis requires and count the console sales in $$ things look entirely different. PS3 & X-Box 360 are pretty much dead even (both were near $80MM in March) and Wii is trailing by quite a bit. PS2 is dead last by a wide margin despite high unit totals that will ultimately result in PS3 sales.

Just thought I'd bring a touch of common sense to the console discussion. It's as if the price was not supposed to have any effect at all on units. Didn't the world expect Wii to move more units at that price point?

[dialog_gvf]

Yes, the price point is definitely the chief reason for the high unit sales of the Wii.

But, as a CFO, isn't cash flow and earnings important too?

Sony is subsidizing every PS/3 (as is Microsoft to a lesser amount with 360s), while Nintendo is reportedly making a profit on the consoles, and just had to boost their earnings forcast for the 3rd or 4th time.

Gary

[Musashi]

Number of systems sold does matter as userbase often determines where the games go. Once the PS2 made its lead very clear, it became the first choice of all developers.

PS3 is actually getting more userbase already. Its probly moving more systems worldwide than the 360 (b/c of Japan), but the real test will be what it has for total sold after Metal Gear and Final Fantasy have been out for awhile.

[jbuttler007]

Most people say that a certain console is better by the units sold. Obviously any business has a bottom line and it's always going to be $$$$$$$$$$$$.

[Blu-Ray Buckeye]

Originally Posted by dialog_gvf

Yes, the price point is definitely the chief reason for the high unit sales of the Wii.

But, as a CFO, isn't cash flow and earnings important too?

Sony is subsidizing every PS/3 (as is Microsoft to a lesser amount with 360s), while Nintendo is reportedly making a profit on the consoles, and just had to boost their earnings forcast for the 3rd or 4th time.

Gary

Of course, profit is key. However there's no other market niche I can think of where people just accept units as the primary measure like they do in consoles. Movies quote only the box office take ignoring that prices have always risen over time.

Also they clearly have a different model for long-term profits. I understand the need to grow the user base but someone also has to consider the price rather than just inane blanked statement about how Wii is winning.

[bruce]

In very simple terms-

PS3 is rumored to cost a tad over $800.00 to make, so if we use the $800.00 dollar mark, 3 million sold, that means a $600 million dollar loss($200.00 times 3 million).

They have taking in about $1.8 trillion dollars ( 3 million units times $600.00 ).
But in costs, 3 million units times $800.00= $2.4 trillion dollars= a $600 million dollar loss.

The Wii is rumored to cost around $100.00 -$150.00 to make, use $150.00, 7 million sold, that means a $700 million dollar profit.

They have taking in about $1.75 trillion dollars ( 7 million units times $250.00 ).
But in costs, 7 million units times $150.00= $1.05 trillion dollars = a $700 million dollar profit.

Now I know that Sony hopes to make it's money back in Software Sales, but they need to get a lot more units out there and Software folks want to buy.

The Wii has already made a profit and selling software, wait till the next Pokemon game comes out in June for it, with 7 million units out there, it will sell like crazy.

Not saying the Wii is better then the PS3, but any CFO can say a $700 million dollar profit with more to come is better then a $600 million dollar loss.


Now, I have two PS3, one downstairs for the projector, one upstairs on the 62" Toshiba, I also have a Wii hooked up to the TV, my in-laws and my parents were over for my daughter birthday last weekend, we all watched Night at the Museum on the PS3 and they all played the Wii, they cared nothing about Blu-Ray but they both planned on buying the Wii, folks love the damn thing.

[dialog_gvf]

Originally Posted by Blu-Ray Buckeye

Also they clearly have a different model for long-term profits. I understand the need to grow the user base but someone also has to consider the price rather than just inane blanked statement about how Wii is winning.

Very true. And unlike Microsoft, Sony has show they can make this initial subsidy model work very, very well.

I'm of the position that the Wii and the PS/3 are serving two very different gaming demographics. Certainly some sales are lost, but I think mostly the Wii represents sales that wouldn't have gone to the PS/3, at least not for several years until the price comes down to around the same price as the Wii today.

So, I cheer on the Wii. If people are making price-based decisions, then it is much better for the PS/3 that they choose a PS/2 or a Wii than an Xbox 360. And if it is increasing the gaming base, then that is positive for future sales.

Gary

[Blu-Ray Buckeye]

Not saying the Wii is better then the PS3, but any CFO can say a $700 million dollar profit with more to come is better then a $600 million dollar loss.

Actually no they can't. It is totally dependent on the long-term profitability model. If you have a copy, please feel free to pass it on. In 5 years we'll see which console has become a steamroller. Also realize that Sony has an interest in pushing Blu-ray movies as they are in that business as well and PS3 is a lever there. Your 1-liner is short-term and limited in scope. Investments of this magnitude often take years to work themselves out.

If they were focused on Year 1 profits they wouldn't have loaded the console w/ so much leading edge technology... they would have made a cheap gimmick masquerading as a Next Gen console.