• Hey, guest user. Hope you're enjoying NeoGAF! Have you considered registering for an account? Come join us and add your take to the daily discourse.
  • The Politics forum has been nuked. Please do not bring political discussion to the rest of the site, or you will be removed. Thanks.

Sony Gamepass: Does it really not make sense financially? Let's see

ToadMan

Member
Dec 2, 2018
2,010
7,821
685
No they don’t recognise $14.99 when the user pays $1. That would be artificially inflating income and that’s illegal. Lol the shit you read on these forums.

They sure do.

From an accounting perspective all those subscribers will go down on the GP income statement with the full value of the subscription.

Elsewhere on that income statement a charge will be recognized which is the discounted revenue. Thus the final cash flow is an accurate figure.

Sadly, because MS obfuscate the Xbox portion of their business, these and other numbers are impossible to identify so no one can tell how much they're spending per sub, making or losing.

The problem with this is that MS are offering a discount which is available to all purchasers and is clearly available for many financial periods... Not a very satisfactory way to evaluate the health of that part of the business is it? All investors get (right now anyway) is "18 million subs!" and an assumption those subs will all go to full price one day.

I've yet to see a single person saying they pay full price for GP...
 
Last edited:
  • Like
Reactions: Zoro7
Oct 26, 2018
22,619
31,787
885
I've yet to see a single person saying they pay full price for GP...
That means nothing, since you don't know millions of Xbox gamers personally all giving you their info.

I can say the same thing.

I've yet to see a single person even admit paying for a PS Now sub plan at all. Therefore, Sony's claim of having millions of subbers is false. It's at zero.
 
Last edited:
  • LOL
Reactions: DaGwaphics

ToadMan

Member
Dec 2, 2018
2,010
7,821
685
That means nothing, since you don't know millions of Xbox gamers personally all giving you their info.

I can say the same thing.

I've yet to see a single person even admit having a PS Now sub plan at all. Therefore, Sony's claim of having millions of subbers is false. It's at zero.

Absolutely right - I don't know anyone using PSNow either.

So yeah - I'll assume both these services are failing to the same extent.
 

Zoro7

Banned
Sep 15, 2013
1,877
6,622
690
They sure do.

From an accounting perspective all those subscribers will go down on the GP income statement with the full value of the subscription.

Elsewhere on that income statement a charge will be recognized which is the discounted revenue. Thus the final cash flow is an accurate figure.

Sadly, because MS obfuscate the Xbox portion of their business, these and other numbers are impossible to identify so no one can tell how much they're spending per sub, making or losing.

The problem with this is that MS are offering a discount which is available to all purchasers and is clearly available for many financial periods... Not a very satisfactory way to evaluate the health of that part of the business is it? All investors get (right now anyway) is "18 million subs!" and an assumption those subs will all go to full price one day.

I've yet to see a single person saying they pay full price for GP...
I do agree but discounts are included in the revenue section of the income statement. Its important to differentiate between discounts and legitimate operating expenses.
 

DaGwaphics

Member
Dec 29, 2019
4,397
5,863
540
That means nothing, since you don't know millions of Xbox gamers personally all giving you their info.

I can say the same thing.

I've yet to see a single person even admit paying for a PS Now sub plan at all. Therefore, Sony's claim of having millions of subbers is false. It's at zero.

I have a PSNow sub, you can check that one off of your bucket list. Paid less than $25 for the year with a crazy offer from CDkeys, but still.
 

Bryank75

Member
Jan 12, 2018
11,238
27,190
995
Ireland
That means nothing, since you don't know millions of Xbox gamers personally all giving you their info.

I can say the same thing.

I've yet to see a single person even admit paying for a PS Now sub plan at all. Therefore, Sony's claim of having millions of subbers is false. It's at zero.

I have a sub actually... I got it for my son, since he has his own PS5 now.
 

luffie

Member
Mar 13, 2012
291
349
750
luffie.deviantart.com
The real question isn't whether it is sustainable or not, but it is more financially profitable than thier current strategy. And when does Sony shift cause it makes more sense to line up future profits instead of getting current ones.

I don't know if anyone has the Sony margin and profit for this year.
Sustainable is also very important, people don't just jump to crrating gamepass system until they need to, companies constantly innovate to get ahead in competition.

Is gamepass sustainable? Maybe yes, but that would require MS getting the majority share of the market. Netflix is still not profitable at this point, and they have the major market share.

A lot of this business model depends on gambling into the future where the competition simmers down and they have a major market share and most people switch to their services.

So while uncle Phil says yes it's going to be profitable/sustainable, remember Netflix, Uber, Lyft and many huge companies still hasn't turn a profit.
 
Oct 26, 2018
22,619
31,787
885
Sustainable is also very important, people don't just jump to crrating gamepass system until they need to, companies constantly innovate to get ahead in competition.

Is gamepass sustainable? Maybe yes, but that would require MS getting the majority share of the market. Netflix is still not profitable at this point, and they have the major market share.

A lot of this business model depends on gambling into the future where the competition simmers down and they have a major market share and most people switch to their services.

So while uncle Phil says yes it's going to be profitable/sustainable, remember Netflix, Uber, Lyft and many huge companies still hasn't turn a profit.
Netflix has been profitable since 2003, but only the last 3-4 years have profits really ramped up after they hit critical mass of subs.
 

Heisenberg007

Member
Nov 16, 2020
2,842
9,820
465
Netflix has been profitable since 2003, but only the last 3-4 years have profits really ramped up after they hit critical mass of subs.
With Netflix, it is more nuanced. Their profitability has increased (mostly because of the pandemic), but their cash outflow has also increased. More importantly, their content cost per subscriber has ballooned. If they cut it down, they risk losing subscribers (which would make Netflix net a loss once again).

Some excerpts:

"Viewed from the lens of net income, Netflix has been performing well, with its net profits growing 3x from around $0.6 billion in 2017 to $1.9 billion in 2019. That said, the company has been burning cash, with free cash flows falling from -$2 billion in 2017 to -$3.3 billion in 2019."

"The company’s cash spending on content is growing fast, rising from about $9 billion in 2017 to $14.6 billion in 2019."

"Netflix content outlays have been growing not just in absolute terms, but also in terms of content spending per active subscriber and the company faces a paradox, in a sense. While it needs to rein in content spending in the long-run to boost cash flows, this could prove tricky, as subscriber growth could slow (or even decline) if it doesn’t keep updating its library at the same pace."


And they are still roughly $15 billion in debt that they have to pay, assuming they don't take more debts (as the executive is now saying they won't) to fund their content (but that's always how Netflix has funded its content).
 
  • Like
Reactions: megreotsugua

luffie

Member
Mar 13, 2012
291
349
750
luffie.deviantart.com
Netflix has been profitable since 2003, but only the last 3-4 years have profits really ramped up after they hit critical mass of subs.
Other poster above may have put some details more specifically.

But Netflix was profiting then when they still have very little competition and have Disney contents under them. Then Disney pulled out and want a share of the pie and Netflix has been bleeding momey for content since.
 

reksveks

Member
Jun 4, 2020
5,257
4,965
425
The whole comparison to Netflix doesn't make sense. The better comparison is Prime Video.
 

reksveks

Member
Jun 4, 2020
5,257
4,965
425
I hate Prime Video though. Thinking you can watch with your subscription only to find out you have to rent it is irksome.
I also have that issue sometimes, that's going to be true with all services that try to combine a way to 'rent' content and then buy other content which they don't have a deal for.

Personally think Prime Video needs to a better job at splitting the two.
 
  • Like
Reactions: NahaNago

Bramble

Member
Jan 15, 2016
426
482
415
Last place company did something, first place company needs to respond. I keep missing the logic in that. GP only exists because MS couldn't compete with Sony the way they did.

What surprises me even more, is nobody seem to be asking why MS hasn't released a AAA exclusive in almost 600 days and hasn't made a new AAA IP for years.

Games like Death Stranding and even the new God of War with the one shot camera, are huge risks in current times. Do people know about the debts services like Netflix and Disney+ have? And they have a lot more subs than GP and making a movie or TV show is not as expensive as a huge blockbuster videogame.

I don't have the numbers, so I'm just going with the facts here. I would love to see the revenue/profits of a successful full priced blockbuster game vs. giving it away in a rental service.
 

xShaun

Member
Apr 3, 2021
114
173
210
United Kingdom
The way I look at it-
Xbox wants to be Netflix for gaming.
Sony want to be the Cinema for gaming.

They are both very different and cannot be compared to each other at this point.
 

Bankai

Member
Jul 14, 2015
1,081
1,689
625
To put your avatar to good use:

tom cruise laughing GIF


It's never gonna happen. Sony is way to comfortable and I don't see that changing any time soon.
 

massivekettle

Member
Jun 2, 2013
3,713
324
785
True...

The best approach to this would be for Sony to get a lump of their cash and maybe 50% debt (since debt is so cheap) and go out and buy a controlling stake in several publishers.... then starve Xbox of content.

They won't do it because their incompetent at a management level right now but that would kick MSFT right in the balls and make content prices very high.

Depending what kind of publishers. The ones that would really make it painful on Xbox (i.e., EA, Ubisoft, Take-Two, Activision, Ubisoft, Epic) are probably out of reach for Sony, both from a monetary standpoint and legal standpoint (you'd probably face some antitrust issues after a few controlling stake purchases). Also, in some jurisdictions, if you purchase significant stake in a publicly-listed company, you are forced to submit a bid for the entirety of the shares (i.e., mandatory takeover offer)... so that's that.

From an accounting perspective all those subscribers will go down on the GP income statement with the full value of the subscription.

Elsewhere on that income statement a charge will be recognized which is the discounted revenue. Thus the final cash flow is an accurate figure.

Sadly, because MS obfuscate the Xbox portion of their business, these and other numbers are impossible to identify so no one can tell how much they're spending per sub, making or losing.

Unless you're intimate with MS' revenue recognition, this is simply not correct. Typically, companies always record discounts within revenues (i.e., from gross to net revenues). Ultimately, it's semantics as you rightfully pointed out that cash flow from operations should tell us exactly how Gamepass is doing if MS had been reporting Xbox on a standalone basis.

Do people know about the debts services like Netflix and Disney+ have? And they have a lot more subs than GP and making a movie or TV show is not as expensive as a huge blockbuster videogame.

Not sure that movies or TV shows are cheaper than AAA games. Netflix just paid $470m for 2 Knives Out sequels, and Witcher Season 1 reportedly cost c. $10m/episode (so nearly $100m per season). The Crown reportedly cost $13m/episode in later seasons, and Stranger Things is probably near that ballpark as well. Also, production costs for TV shows increase massively as the show matures which is why Netflix tends to cancel underperformers early on (i.e., Altered Carbon).

The advantage of GamePass over movie/TV streaming is higher customer engagement and the potential for ancillary revenues (MTX, discounted store purchases when game leaves GamePass).
 
Last edited:

RAIDEN1

Member
Aug 2, 2013
3,220
1,661
820
I just wanted to flag this up because for those of us who are still fans of Ridge Racer 7, the Motorstorm series or who have yet to check out the Resistance series means that literally there is a countdown in how long we get to play these titles going forward...granted the PS3 is not a young console anymore etc...but this would also impact PS4/Pro users who have built up a digital collection...

In a nutshell: Both the PS4 and PS3 (not known yet on the PS5) have to verify that the time frame shown on the PS3 and PS4 is correct, a form of authentication...problem is the battery (known as CMOS/PRAM) within the console can breakdown over a period of time and the solution then is for the console to ask PSN what time it is which would then allow you to access your digital content etc...with the stores closing down that means that it is only a matter of time before the network itself is unavailable, which means that you will be locked out of your digital games indefinitely... also to note that physical media also requires a similar level of authentication..

Now I may not have covered all this as well as some may think but below is the video that goes into it further:

 

Papacheeks

Gold Member
Jan 30, 2013
7,892
4,193
895
Watertown, NY
To put your avatar to good use:

tom cruise laughing GIF


It's never gonna happen. Sony is way to comfortable and I don't see that changing any time soon.

Sony literally just bought Crunchy roll in Dec. 2020. Why do you think that is? They just launched Bravia service that has some of the highest quality 4k encode for streaming service that has basically all anything Sony published/Produced by their TV/FILM.

Jim Ryan in his GQ interview talked about Gamepass competitor. It's coming and it will from what I know not only be games. Sony is Disney+, Microsoft is Netflix. Disney was able to literally get over half the subscribers in half a fraction of the time it took netflix to get to that number. ANd they are half of what netflix currently has WW for subs. ANd they are cheaper.

Reason why? Disney owns all their content. Netflix is slowly replacing bought licensed films with their own, same with shows. But they started way too late in terms of intensity. Soon your going to see Disney steam roll netflix in earning reports.

Disney spends money for sure, but it's all content they own. Every show so far they have put out has been the #1 watched show. Sony has the IP's and the tv/film, and now ANime. Imagine a service where you get to watch your favroite shows like Dragon ball super and have classic games new and old from playstations finest?

To me thats more compelling than Microsoft throwing games at a wall and finding who wants to play them.
 
  • Like
Reactions: megreotsugua

lh032

I cry about Xbox and hate PlayStation.
Mar 8, 2021
1,863
4,124
470
You guys are acting like it's a good thing for Sony to make a GamePass contender.

Meanwhile Sony is crushing the contender who has it.


If Sony isn't threatened by it, there's no reason to invest in it.
I worry that things will get different when Microsoft buys more publishers, you and I know they are going to do it.
 
Last edited:

The_Mike

Member
Nov 5, 2017
5,533
9,226
800
I worry that things will get different when Microsoft buys more publishers, you and I know they are going to do it.
What do you think will change though?

Microsoft ain't done buying. They can still buy a big part of the industry.

But that's Microsoft answer to PlayStations exclusives, which Sony already has.

We went from a gen where the majority of exclusives were on playstation, while Microsoft was a bit draught in that regard.

Seems like this gen down the line could be a competition between the two, which is a good thing for the consumer.

Different platforms might lose some third party games, but now they will compete for the consumers money instead of sony just rolling on their current exclusive series.

But what are you exactly worried about?
 

lh032

I cry about Xbox and hate PlayStation.
Mar 8, 2021
1,863
4,124
470
What do you think will change though?

Microsoft ain't done buying. They can still buy a big part of the industry.

But that's Microsoft answer to PlayStations exclusives, which Sony already has.

We went from a gen where the majority of exclusives were on playstation, while Microsoft was a bit draught in that regard.

Seems like this gen down the line could be a competition between the two, which is a good thing for the consumer.

Different platforms might lose some third party games, but now they will compete for the consumers money instead of sony just rolling on their current exclusive series.

But what are you exactly worried about?
Why are you not worry? i don't understand.
They just bought Zenimax at the start of this current gen, more publisher bought > probably means less games for Playstation.

Some third party games? yea if they really did bought other mega publishers like Sega, "some" will be an understatement.
 

The_Mike

Member
Nov 5, 2017
5,533
9,226
800
Why are you not worry? i don't understand.
They just bought Zenimax at the start of this current gen, more publisher bought > probably means less games for Playstation.

Some third party games? yea if they really did bought other mega publishers like Sega, "some" will be an understatement.
Well, that's the outcome of an entire generation of Microsoft being the underdog with mediocre exclusives.

I understand the problem if you don't own a Microsoft platform, but now there's more reasons to play on xbox or simply play on pc.

Maybe Sony create their own competitive Fallout elder Scrolls game.
 

Black_Stride

do not tempt fate do not contrain Wonder Woman's thighs do not do not
Mar 31, 2011
6,681
5,104
1,130

Elysion

Member
Jan 11, 2020
385
600
305
Frankly, I don‘t think we need another subscription service, in a world where everything and everyone is already trying to sell us their subscription services.

It is often said that one of the biggest benefits of gamepass is that it incentivizes subscribers to try more games that they wouldn‘t have tried otherwise, which in turn opens the possibility for further monetization through mtx/dlc. On the other hand, a subscription might still be a considerable hurdle for many, a psychological barrier that could be unappealing to those who don‘t want to sign on to a subscription service.

I don’t think Sony (or Nintendo, for that matter) should imitate gamepass, but try to do something new when it comes to content delivery. The question is, is there a way to incentivize people to try more new games, like gamepass is doing, without forcing them to sign on to (yet another) subscription? This is actually something I‘ve been thinking about for a while.

For example, how about a payment system inspired by arcades, where people have the option of paying a small amount of money to play for a short amount of time, instead of having to buy the whole game at full price?

So let‘s say you want to try out the new CoD multiplayer, but don‘t want to pay full price since you aren‘t usually into mp games. Instead you have the option to pay a dollar to play a match of multiplayer, for the next match you pay another dollar, and so on. Or, alternatively, if you want to try the singleplayer, you can pay a certain amount (let‘s say five dollar) to play the first level, and if you want to continue to the next level/chapter, you pay another five dollar, etc.

Of course, paying per match or level wouldn‘t really work in certain games, like Assassin’s Creed for example; for games like that it would probably make more sense to pay for time instead. So if you just want to see the world in the newest AC for a bit,, try the combat etc, you pay one dollar, and can then play the game for let’s say one hour, either through streaming, or by downloading the necessary parts of the game (downloading and install times shouldn‘t count as playtime, obviously). When the hour is up, you can continue your session by paying another dollar, or leave it and try another game.

To make it even better, let‘s say that each dollar you spent this way on a game gets subtracted from the game‘s full prize. So if you are really into the game, and play it for tens of hours (or have payed for lots of levels or matches), you‘ll eventually have spent enough money that you can access the full game without having to pay anymore. The game is then yours forever, as if you had bought it regularly. Or, if you’re already convinced that you want the full game after playing only a few levels/a few hours, the money you spent gets subtracted from the price, and you can pay the rest in one go. That way your playtime isn‘t ‚wasted‘, and you won‘t have to pay the game‘s full prize on top of whatever you have already paid for.

Now, those are just examples; I haven‘t actually calculated if one dollar per hour/match or five dollar per level is enough for this idea to be profitable. It would probably be necessary to adjust the price/time ratio for different kinds of games. But this would provide a great incentive for people to try games they‘re usually unwilling to spend much money on, without forcing them to subscribe to anything. For example, I personally have no interest in buying most sports games, but if I could play a few rounds/matches for a dollar or two, then I would probably try it out at least once.

The concept probably has tons of holes I haven‘t thought about, but I think the idea could be pretty cool if implemented correctly.
 

Romulus

Member
Mar 21, 2019
7,035
8,171
555
You guys are acting like it's a good thing for Sony to make a GamePass contender.

Meanwhile Sony is crushing the contender who has it.


If Sony isn't threatened by it, there's no reason to invest in it.

Xbox could give away even more and Sony could literally do nothing and still crush them.
 
  • Like
Reactions: The_Mike

Raonak

Member
Aug 19, 2010
8,618
1,993
1,065
30
New Zealand
dreammodule.com
Imo: gamepass only works because MS have yet to actually release any of their big AAA games on it.

Once they actually have to make back up the development costs of their own games in addition to publishing third party games we see how impactful it is for their bottom line.

In any case, I think Sonys response is right infringe of our eyes. The PS+ collection. I think it's just gonna get bigger and bigger over time and negate the need for a third Sony subscription model.
 
Last edited:

DJ Shalad

Member
Dec 10, 2018
4,203
10,192
770

In this hypothetical equation, mafs : Xbox Live fee revenue are included (GPU $200), PS+ revenue is not. Also not taking into account add. license costs like UE4, Unity etc. ($5+$15+$30+$60:4 = avg. price):

SONY
Sony ships, sells towards 250mll. software & titles (not incl. dlc) per year. Minus 20mll.? for Sony titles: avg. $27.5 * 30% platform fee = $1.90bll. /y. + 20mll. Sony titles * $27.5 = $2.44bll./y.

MICROSOFT

(365 days GPU subs, platform fee, MS Games, excl. **service cost like hardware, software, acquiring new games, people, etc.)

18mll. GPU subs * $200/365days = $3.6bll. revenue (excl. dlc) and if we assume 15% of the games are from MS, 85% of 3.6bll. = 3rd party revenue * 30% platform fee = $0.9bll. + 15% MS games = $1.44bll. + $0.17bll. (retail) = $1.61bll./y

GPU@365days + retail = $1.61bll./y excl. add. costs**
GPU@avg. "on&off" + retail = $0.84bll./y excl. add. costs**
avg. of the two^ = $1.22bll./y excl. add. costs**

MS wanted to sell up to 70mll. software (both retail, digital?) titles with the launch of XBX, meaning they were selling below that prior. If 70% stopped buying retail because of GPU, 30% of 70mll. * avg. price of $27.5 = $0.57bll. * 30% platform fee = $0.17bll.

If few sub&cancel GPU after:

365 days $1.44bll.
180 days $0.72bll.
90 days $0.36bll.
30 days $0.18bll.
(avg. 4x variable = $0.67bll. revenue + retail platform fee

$0.67bll. + $0.17bll. = $0.84bll. (avg. GPU annual revenue, taking into account ppl. leaving after x-days + retail sold titles (assuming 70mill. shipped 2017 * 30% still buying retail * 30% platform fee, excl. add. costs**).

If you already are paying $200 for GPU, how many are willing to pay for another $200 Sony "pass"?
 

Sw0pDiller

Member
Jan 8, 2018
414
985
365
The Netherlands
sony's ace up their sleeve is the already massive 50m+ psplus subscribers. The need to hold on to those customers and that can be done to add value to the subscription. If feel if they make online free most subscribers will leave so best they could do in make a different plus membership for "online only" for about 29 euro. That would keep al lot of customers in the system. Meanwhile I would say: attack gamepass were it hurts. That 180 euro a year is serious money while you can't get the games you really want. Ms decides witch game is on it.

I would look at the option of giving psplus members a whopping 50pct discount on 1st party games and try to make more deals with 3rd party games. For the same discount for play members. While still broadening the plus collection and monthly freebees. That way, you as customer make your own chooses about witch game you want to play and buy.
 
  • Like
Reactions: megreotsugua