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Opinion Business Sony “Blew it With the PS5 Digital Edition,” Says Analyst Michael Pachter

Felessan

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Mar 11, 2013
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Does anyone know how much of Sony's revenue comes from in-app purchases and actual new game revenue?
For 1Q20 (rounded at 100 yen/$)
378mil - physical games
1.48bil - digital games
2.77bil - add-on content (dlc, mtx)

For FY19
1.16bil - physical games
3.76bil - digital games
6.34bil - add-on content (dlc, mtx)
 
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Piercatore

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“So I think they blew...but it’s hard to tell...but it’s all sold... and we don’t know...But I think...’’

Yeah, so I know that you know that we know. You know, right?
 

chonga

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Aug 17, 2020
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Pachter should refrain from drinking before he writes. If Sony earns more on direct digital sales than disc, the gap between a higher priced console with discs and a lower priced one pure digital isn't as large as he makes it out to be. Then, there's the point everyone is mentioning that he doesn't seem to think over the course of the generation the average user will buy enough games to make up for the loss? On a $399.99 (U.S.) console? HAHAHAHA. FFS. He's really desperate for clicks and attn.
So go on then, what are your estimates?

A couple of months ago the average games per console sold was 14 - we'll say it is about 15 now. Additionally we know the physical/digital split for full titles is about 50/50.

Armed with those figures, of those who will buy the Digital Edition, what percentage of games do you think they currently buy digitally, and also how many games do you think they will buy in this forthcoming generation?
 

Northeastmonk

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Mar 18, 2013
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I went basically all digital this gen minus a handful of titles here and there. I’m looking at doing more of a mix this gen because frankly I kinda miss having the physical games. However, I think we are seeing another case of the industry changing. Its a form of entertainment and the ways we get music, movies and books are all digital. Gaming has had to prove its worth the price tag in the public eye.

It’s proven itself to loyalist and people who accept video games as a medium. There’s still that large percentage of people who don’t know what the difference between a Wii and an N64. I think there’s some sorta unawareness to it all. Digital goes great when you don’t want to go to the store for a new game or you don’t want a lot of clutter. It’s great for getting back to a game without swapping discs. The many reasons to why a digital PS5 exists is quite obvious. Ask the crowd buying Kindle books or their 1k+ songs on iTunes. Ask the person who doesn’t watch DVDs or BluRays anymore. I’ve been a fan of digital content since DLC was available on the original Xbox. It’s good content if you make the choice to accept it.

I don’t think they’ll lose a lot. I think this sub based game service is going to be more popular to people who just want something without micromanaging it. Who knows what that’ll bring down the road. Streaming is only going to get better. It’s been proven to be a valuable method of retrieving content.
 
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quest

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Meaning that a digital version was not needed. Most would buy the disc version anyways and the demand for the ps5 is there. So having a digital version does not make sense. Thats how i see it.
Even better people are just switching to digital on their own. You save the DE version for when a node shrink and costs go down. Until then Sony still sells out for a long time make more money people still move to digital on their own. It is just part of the scared to fail playstation under Ryan.
 

martino

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it's dlc numbers first I assume and mtx second. From the sheer number of games with dlc compared to games with mtx.
semantics to me.
too much dlc are mtx or small enough to be.
big content dlc where you pay to reward work to add something meaningful in games are minority.
 

ZippyTheOtter

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Aug 29, 2020
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Selling something at a loss to get people completely into your ecosystem is what I believe us arm chair analysts call "a long term play"
 

Justin9mm

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Oh look another person who thinks the world revolves around America. Sony's pricing model is different in other countries.

The digital edition here in Australia is $150 less than the disk version. But each digital game on ps store at release is nearly $30 more than physical in the shop. You do the math!

Yep Sony really blew it lol
 
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Darklor01

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Jan 28, 2012
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So go on then, what are your estimates?

A couple of months ago the average games per console sold was 14 - we'll say it is about 15 now. Additionally we know the physical/digital split for full titles is about 50/50.

Armed with those figures, of those who will buy the Digital Edition, what percentage of games do you think they currently buy digitally, and also how many games do you think they will buy in this forthcoming generation?

I've been looking for the sources of your comment about 14 games sold per console for an entire gen per avg. buyer. I can't find that data. I'm also not very good at this kind of analytic to be straight forward.

Sony are making fewer of these Digital Editions. I have to assume that is because they know that people still overall prefer disc to digital, despite the pandemic shift to purchase more digital titles. Still, digital purchase aren't limited to digital edition console.

I thought about myself, I buy something like 10+ games a year. I'm probably above avg., but even then, Pachter's comment was about the ability to make up the money over the course of a whole gen. It doesn't account for the fact that they're going to make up money for the digital edition over the course of the gen from multiple revenue sources.
 

LordOfChaos

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Seems pretty ideal to me. I was almost all digital on PS4 so it just saves me that cost up front, if someone wants to pay 100 more and save that up by hustling physical games over the generation that's valid too. I think the DE is the most ideal price point next gen - the Series S also has no disk drive, but for 100 more the DE is the full version of the PS5, no GPU or RAM gimp.
 

wd40

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Oct 5, 2020
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Or:

For just $100 more you can get a no-compromise next-gen console instead of a nerfed 1080p machine.

To me the PS5 DE is so obviously a better value than the XSS.
from what I understand the XSS is like barely less powerful, and most people including me don't have a 4K tv lol. When you say it like that it makes it sound pretty good, but at that point you may aswell just get a disc version, because you're going to be paying out the hole for those digital games
 

mckmas8808

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Because they could of sold it for 449.99 and still sold out just as fast. It is throwing money away basically.

But they wanted the price to be $399.99 long term. Sony clearly isn't only thinking about the first 6 months. How would it look if Sony sold the PS5 DE for $450 and then dropped the price to $400 after 1 year?
 

chonga

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I've been looking for the sources of your comment about 14 games sold per console for an entire gen per avg. buyer. I can't find that data. I'm also not very good at this kind of analytic to be straight forward.

Sony are making fewer of these Digital Editions. I have to assume that is because they know that people still overall prefer disc to digital, despite the pandemic shift to purchase more digital titles. Still, digital purchase aren't limited to digital edition console.

I thought about myself, I buy something like 10+ games a year. I'm probably above avg., but even then, Pachter's comment was about the ability to make up the money over the course of a whole gen. It doesn't account for the fact that they're going to make up money for the digital edition over the course of the gen from multiple revenue sources.
It was from Zhuge on Twitter. If I had more time I could hunt it down but the dude tweets a lot and the first result in Google is a tweet about Sony's 2019 results which shows it at 11 (`twitter.com/ZhugeEX/status/1214353738175057920), we are obviously in October 2020 now and judging by your post I'm guessing you thought it would be a lot higher, so hopefully that is good enough for you to put faith in the 14 figure.

The reason I asked you to come up with those answers is because those are the most critical parts of determining if the Digital Edition, sold at a steeper loss, is able to to recoup that difference.

Sony won't make a loss on the Digital Edition over the lifetime - and he isn't suggesting they will - but instead because people already buy digital games and because people with the physical edition also will continue to buy some digital games that a disc edition user may well net Sony more revenue than a Digital Edition user, and therefore if the rationale people often use for discounting a digital console is locking them in to higher margin games what's the point.

I am with Pachter, I think the numbers don't add up. But I think that Sony knows that and is happy with it. Sony are obviously not stupid and $399 was always my prediction I think that was always their goal and the DE helps them reach that goal and consequently the disc version is 'overpriced' in the sense that it is cheaper to make than the retail price, which is unusual but means it can subsidise the digital edition.
 
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reksveks

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It was from Zhuge on Twitter. If I had more time I could hunt it down but the dude tweets a lot and the first result in Google is a tweet about Sony's 2019 results which shows it at 11 (`twitter.com/ZhugeEX/status/1214353738175057920), we are obviously in October 2020 now and judging by your post I'm guessing you thought it would be a lot higher, so hopefully that is good enough for you to put faith in the 14 figure.

The reason I asked you to come up with those answers is because those are the most critical parts of determining if the Digital Edition, sold at a steeper loss, is able to to recoup that difference.

Sony won't make a loss on the Digital Edition over the lifetime - and he isn't suggesting they will - but instead because people already buy digital games and because people with the physical edition also will continue to buy some digital games that a disc edition user may well net Sony more revenue than a Digital Edition user, and therefore if the rationale people often use for discounting a digital console is locking them in to higher margin games what's the point.

I am with Pachter, I think the numbers don't add up. But I think that Sony knows that and is happy with it. Sony are obviously not stupid and $399 was always my prediction I think that was always their goal and the DE helps them reach that goal and consequently the disc version is 'overpriced' in the sense that it is cheaper to make than the retail price, which is unusual but means it can subsidise the digital edition.

Also that 14 will probably include f2p games/ps plus games.

I don't think the numbers add up on game sales, on mtx though it might make more sense than to lose the price battle to xbox
 

Sorcerer

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Jul 4, 2012
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Pachter is making it seem as though because you buy a digital only console. that individual is only going to buy 2-3 games and be done with it. What does having a digital or physical media system have to do with the number of games an individual purchases? This guy is really reaching for relevancy.
 
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oldergamer

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Aug 20, 2004
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Patcher is saying a lot lately. Honestly, in the last 20 years, how many times has patcher been right with his game industry predictions. I'd live to see someone keep track.
 
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You are definitely high if you think the digital edition isn't going to outsell the disc version by a metric fuckton. I've seen it first hand with my friends who aren't heavily into gaming. They prefer digital games even if they are more expensive than their physical counterpart. The majority of people don't care about trading games in anymore (look at GameStop dying). The amount of people clinging to physical at this point is a small fraction of the gaming market.
 

RoboFu

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So all Sony has to do is put out a optical drive add on through usb-c and over charge for that next year. 🤷‍♂️
 

Nymphae

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You are definitely high if you think the digital edition isn't going to outsell the disc version by a metric fuckton. I've seen it first hand with my friends who aren't heavily into gaming

Everyone I know is laughing at the discless version. Buying an $800 console but need to save a few $ on the disc drive lol.
 

Darklor01

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Jan 28, 2012
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It was from Zhuge on Twitter. If I had more time I could hunt it down but the dude tweets a lot and the first result in Google is a tweet about Sony's 2019 results which shows it at 11 (`twitter.com/ZhugeEX/status/1214353738175057920), we are obviously in October 2020 now and judging by your post I'm guessing you thought it would be a lot higher, so hopefully that is good enough for you to put faith in the 14 figure.

The reason I asked you to come up with those answers is because those are the most critical parts of determining if the Digital Edition, sold at a steeper loss, is able to to recoup that difference.

Sony won't make a loss on the Digital Edition over the lifetime - and he isn't suggesting they will - but instead because people already buy digital games and because people with the physical edition also will continue to buy some digital games that a disc edition user may well net Sony more revenue than a Digital Edition user, and therefore if the rationale people often use for discounting a digital console is locking them in to higher margin games what's the point.

I am with Pachter, I think the numbers don't add up. But I think that Sony knows that and is happy with it. Sony are obviously not stupid and $399 was always my prediction I think that was always their goal and the DE helps them reach that goal and consequently the disc version is 'overpriced' in the sense that it is cheaper to make than the retail price, which is unusual but means it can subsidise the digital edition.

I think all digital, at least in the U.S. which is the area I'm most familiar, has many challenges. Data caps are one, and for me, one of the most problematic. I think one of the challenges to digital at start of this gen is that expanded storage issue. It's pricey, and the internal storage is limited.
 

quest

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But they wanted the price to be $399.99 long term. Sony clearly isn't only thinking about the first 6 months. How would it look if Sony sold the PS5 DE for $450 and then dropped the price to $400 after 1 year?
Why would they need to drop the price? The 90 year old ps4 is still 299.99 ffs. When you have the mindshare Sony does it lets you do lots of cool stuff. Like how apple can charge premium Sony really blew it. They played it ultra conservative when there's no real competition. Playing not to lose as they say.
 

NickFire

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Is he completely ignoring how much Sony loses by a defection to a new eco-system, and how much they gain from PS+, sales in general (there's profit in addition to extra profit from digital), and no used games on a digital? Good grief I think he'd rather watch a snake eat itself than feast on a tasty mouse each day.
 
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mckmas8808

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Why would they need to drop the price? The 90 year old ps4 is still 299.99 ffs. When you have the mindshare Sony does it lets you do lots of cool stuff. Like how apple can charge premium Sony really blew it. They played it ultra conservative when there's no real competition. Playing not to lose as they say.

That's your (and Michael Pachter's) perception though. I believe Sony is playing to win by making the PS5DE $400. They know more than us what the maturity rate of their hardware is and what they can expect as far as lower manufacturing cost will be in 2021 and 2022. Maybe their keep the price at $400 for 2 years and just sell the PS5DE at that price if the demand stays super high. That's playing to win, not playing to please shareholders.
 

NickFire

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That's your (and Michael Pachter's) perception though. I believe Sony is playing to win by making the PS5DE $400. They know more than us what the maturity rate of their hardware is and what they can expect as far as lower manufacturing cost will be in 2021 and 2022. Maybe their keep the price at $400 for 2 years and just sell the PS5DE at that price if the demand stays super high. That's playing to win, not playing to please shareholders.
I'm of the position that Sony is playing to please shareholders. You know why? Simple. Shareholders won't be happy if Sony loses its dominant position in the console sphere and all the associated revenue / profit. The corporate vulture types might prefer bust outs and scoff at long term visions when they buy companies, leverage the shit out of them, and then declare bankruptcy. But Sony has lead this entire industry for generation after generation for a reason.
 

imbrock

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Pretty sure over the course of the console life cycle they will do better than $40 average profits per console. It doesn't matter if some people only buy a few games if other people buy fifty.
 
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ethomaz

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While I agree with him... what weird math lol

If a digital game only give $6 to Sony then they are dommed lol
 
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Hairsplash

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Speaking to GamingBolt in a recent interview, Pachter said that given the cost of making a PS5, combined with the additional money Sony makes per every digital game sold, they are still taking a loss on each PS5 Digital Edition sold. Pachter says that the average consumer won’t buy the number of games that they’ll need to recoup the losses on a PS5 Digital Edition.

“I think Sony really blew it with that, because as far as we can tell, the cost of making a PlayStation 5 is $450, so they are breaking even on the $500 version, but losing $40 or so on the digital version,” he said. “A disc drive isn’t worth that much. So they’re losing $40, but they gain $6 more per digital game than they would gain otherwise. So you would have to buy a lot of games to cover up the loss, and I just think it’s unlikely many will buy that many games.”

The analyst went on to say that most consumers will still end up purchasing the main PS5 SKU with a disc drive in order to have that option, before adding that Sony will likely make and sell fewer digital consoles.

“I actually don’t think many consumers will want to save the money, I think most would rather have the disc drive on hand so they have the option to take their game to their friend’s house or trade it in or whatever,” Pachter said. “So I think they blew it with the Digital Edition, but it’s hard to tell early numbers, because it’s all sold out anyway, and we don’t know how many of each they made. But I think over the long run, they’ll sell and make fewer digital editions.”

what an @££hole...or is it an @€€hole... or a @¥¥hole , or @$$hole not sure. lol... i am buying the digital edition, cheaper. all i have to do is wait, and the games are cheaper. (it seems disc games get cheaper faster, i am a person who does not resell games, all i would think about is how much i lost selling the game...)

heck wait long enough and the ps+ membership will allow you to play it. (ok, so not all, and the games included, everybody has already played (2 years waiting is a long time, lol)

wait 6 months and almost any popular game is half price.
i have a shelf full of ps3 games, cool, but how often do i look at the art work, not like they are vinyl albums...
so i decided to go full digital upon getting my first ps4 (only ps4 disc i have is destiny, and i rebought it on digital. i do not watch bluray movies on disc... i use mkv format and infuse pro on appletv to watch the movies (arrh, pirate mate!) lol
 
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levyjl1988

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I can't help but feel Sony is relaxing this gen. Sony did really well with PS4 and they think they can relax and take advantage of the consumer. Microsoft is not pulling any punches they came dead last. Now they are trying to be as uber-friendly to the consumers. Backwards compatibility, reusing Xbox One controllers on Series X, cross-platform saves, free cross-gen upgrades.

Sony requires you to buy a new set of controllers. Limited backwards compatibility,pay to upgrade a game you already have, difficulty with cross saves. I think Sony is going to lose this gen.
 

imbrock

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I can't help but feel Sony is relaxing this gen. Sony did really well with PS4 and they think they can relax and take advantage of the consumer. Microsoft is not pulling any punches they came dead last. Now they are trying to be as uber-friendly to the consumers. Backwards compatibility, reusing Xbox One controllers on Series X, cross-platform saves, free cross-gen upgrades.

Sony requires you to buy a new set of controllers. Limited backwards compatibility,pay to upgrade a game you already have, difficulty with cross saves. I think Sony is going to lose this gen.

One could argue thats because other than raw off the shelf cpu and gpu upgrades microsoft hasn't really changed anything about their console or controller. Where as the ps5 has a list of new controller specific features, and literally one game that is less of a paid upgrade and more of a bonus inclusion with a 13 dollar extra charge on a seperate games ultimate edition. Which arguably it should be available separately but that could happen down the road we'll see.
 

RoadHazard

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from what I understand the XSS is like barely less powerful, and most people including me don't have a 4K tv lol. When you say it like that it makes it sound pretty good, but at that point you may aswell just get a disc version, because you're going to be paying out the hole for those digital games

It has 1/3 the graphics power of the XSX. If you wanna compare it with the PS5 (either version) it's 4 vs 10.3TF. So you'd get more than 2.5x the graphics power for just $100 more, plus the faster and larger SSD etc.

But sure, if you're satisfied with 1080p it should be fine.
 
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MarkMe2525

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This guy.... he always knows better than the console manufacturers. I'm surprised he hasn't launched his own gaming platform with his unique insight into the gaming industry. He is always spot on, just like when in April 2018 when he was preaching that Nintendo was in trouble with the Switch.
 
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mckmas8808

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It has 1/3 the graphics power of the XSX. If you wanna compare it with the PS5 (either version) it's 4 vs 10.3TF. So you'd get more than 2.5x the graphics power for just $100 more, plus the faster and larger SSD etc.

But sure, if you're satisfied with 1080p it should be fine.

And that's if EVERY game on the XSX and PS5 is a native 4K game. But Demon Souls Remake already is showing us that some games next-gen will be 1440p. Which means it'll probably had been 720p on the Xbox Series S.