The Great Video Game Business and Financial (In)Stability Thread

Is there a point where Nintendo can survive by selling 10-20 million hardware without taking a loss?

Is there a point where any of the console manufacturers can do that? A lot of Sony's earnings last year are due to layoffs and service reductions. MS flat out isn't making money with the XBox division. Both of those companies are selling tons of consoles, too.

cube wrote:
Is there a point where Nintendo can survive by selling 10-20 million hardware without taking a loss?

Is there a point where any of the console manufacturers can do that? A lot of Sony's earnings last year are due to layoffs and service reductions. MS flat out isn't making money with the XBox division. Both of those companies are selling tons of consoles, too.

I'd be really curious about an in-depth study of the relationship between profits/production costs and high-quality assets. Maybe even a chart. Did the industry have this same trouble in the PS1 era? Or is this more unique to the cost of asset creation for HD consoles?

shoptroll wrote:

I expect the next Nintendo system is going to be underpowered and likely a very conservative design. Given historical data we're going to see less than 10 million units for the next system. That doesn't give them a lot of wiggle room for the overall system design.

I'm wondering what sort of architecture the next systems will have. I'm going to predict it now: An ARM based Nintendo Super FunCube U.

shoptroll wrote:
garion333 wrote:

I just want achievements.

/troll

You'll take your Miiverse stamps and you'll like it!

Sorry, I meant real achievements.

Sony in a vacuum may or may not have a profitable video console/game company.. Microsoft for sure would not.. Nintendo right now appears to also not be able (3 years of straight losses). Microsoft is propped up by hugely profitable divisions that allow it to continue this "war" almost indefinitely..Nintendo by a massive cash reserve.. Sony ironically though the most "successful" of the 3 is probably as a company in the worst position of the three.. the Video Game division cannot sustain the company in its current form.. its just not that successful.

So in that is the real problem.. is this industry profitable anymore for the "traditional" platform holders? Where is the huge upside and profit margins?

DSGamer wrote:
cube wrote:
Is there a point where Nintendo can survive by selling 10-20 million hardware without taking a loss?

Is there a point where any of the console manufacturers can do that? A lot of Sony's earnings last year are due to layoffs and service reductions. MS flat out isn't making money with the XBox division. Both of those companies are selling tons of consoles, too.

I'd be really curious about an in-depth study of the relationship between profits/production costs and high-quality assets. Maybe even a chart. Did the industry have this same trouble in the PS1 era? Or is this more unique to the cost of asset creation for HD consoles?

Anecdotal evidence, but the GDC 2005 developer's rant had a good bit about the rising cost of development in the PS2 era and how the "HD generation" was going to be worse. So even before this last generation started, the industry was already at a point where the ROI was starting to suck for making games.

Coincidentally, 2005 was the same year Nintendo started talking about their "blue ocean" strategy with their console hardware.

If Nintendo never made another piece of hardware I really wouldn't care. Unlikely though. The closest I've come to liking Nintendo's hardware is the sound chip on the SNES and the draw distance that was possible in some N64 games.

Mr GT Chris wrote:

If Nintendo never made another piece of hardware I really wouldn't care. Unlikely though. The closest I've come to liking Nintendo's hardware is the sound chip on the SNES and the draw distance that was possible in some N64 games.

I adored the GBA SP. I like the 3DS better in terms of games, but in terms of pure hardware I miss that form factor and how I carried it with me constantly as a result.

The SPs form factor was nice but they cheaped out on the sound chip in the GBA.

Good article on Free to Play mobile games vs Paid Premium:

http://www.polygon.com/2014/5/9/5699...

I still have my GBA SP, what a joy to hold (ditto my DS Lite). I really really really should have known better than to buy a 1st gen 3DS. I'd trade my regular 3DS but then I'd feel bad (for the other person).

NathanialG wrote:

Good article on Free to Play mobile games vs Paid Premium:

http://www.polygon.com/2014/5/9/5699...

Interesting article. It's made me do a lot of thinking about mobile gaming. Thanks for sharing.

This might be more relevant in the One thread, but Kinect-less version of the One launches 6/9/2014 for $399. Also MS is dropping the Gold requirement for Netflix and other services and expanding Games for Gold to the One.

http://arstechnica.com/gaming/2014/0...

Considering the June 9th date matches he timing of their E3 presentation something must've seriously spooked management to jump the gun on the announcement.

That's a good thing in the end.. we need a healthy competitive ecosystem at all costs so I'm happy to see Microsoft reacting to sales and trying to attack this head on.

TheGameguru wrote:

That's a good thing in the end.. we need a healthy competitive ecosystem at all costs so I'm happy to see Microsoft reacting to sales and trying to attack this head on.

I still don't have a lot of interest in a One but I agree it's definitely good to see a company aggressively reacting to the competition.

http://www.joystiq.com/2014/05/15/ap...

I'm hearing that the PS4 is around 200k units sold. I think we have plateaued

Ulairi wrote:

http://www.joystiq.com/2014/05/15/ap...

I'm hearing that the PS4 is around 200k units sold. I think we have plateaued

The most amazing part of those numbers is the performance of Minecraft on the 360. As someone who has a nephew (and friends) who's addicted to it and plays it with me online I'm thoroughly convinced that Minecraft is to the current generation of kids what Mario was to me.

Ulairi wrote:

http://www.joystiq.com/2014/05/15/ap...

I'm hearing that the PS4 is around 200k units sold. I think we have plateaued

I'm not sure I believe your argument unless you supplement it with pie charts

DSGamer wrote:
Ulairi wrote:

http://www.joystiq.com/2014/05/15/ap...

I'm hearing that the PS4 is around 200k units sold. I think we have plateaued

The most amazing part of those numbers is the performance of Minecraft on the 360. As someone who has a nephew (and friends) who's addicted to it and plays it with me online I'm thoroughly convinced that Minecraft is to the current generation of kids what Mario was to me.

I think games like Minecraft, LoL, and DOTA and others have changed the game. Especially coupled with mobile devices. I think the console industry really has turned into the comicbook industry or modern Hollywood. A few games on the top that cost a whole lot to make draw big revenue and then on the bottom with independent games. Nothing really in-between will do any business. I just hope that independent developers start to grow and develop more complex and deep games.

Another thing I like to point out is that the console industry needs a healthy Nintendo. Sony wouldn't have been as successful if kids didn't grow up with Mario and Zelda and then "graduate" into another console for their shoot shoot bang bang interactive cinematic experiences. I think kids like your nephew who don't have that connection to consoles won't ever make the leap. They will continue with the Games as a Service model.

I think you're underestimating the value of Minecraft. When I play with my nephew (6 years old) he's in full-on creativity mode. I'm not sure he'd be better off with Nintendo. He's building underground layers, learning how to craft items, learning how to make railway tracks. It's kind of amazing. And it's all play. He just prefers that and Lego games over Mario and Zelda. I'm not sure that's the end of the world as much as it's the world changing.

Ulairi wrote:
DSGamer wrote:
Ulairi wrote:

http://www.joystiq.com/2014/05/15/ap...

I'm hearing that the PS4 is around 200k units sold. I think we have plateaued

The most amazing part of those numbers is the performance of Minecraft on the 360. As someone who has a nephew (and friends) who's addicted to it and plays it with me online I'm thoroughly convinced that Minecraft is to the current generation of kids what Mario was to me.

I think games like Minecraft, LoL, and DOTA and others have changed the game. Especially coupled with mobile devices. I think the console industry really has turned into the comicbook industry or modern Hollywood. A few games on the top that cost a whole lot to make draw big revenue and then on the bottom with independent games. Nothing really in-between will do any business.

It's been this way for a long time now. There were grumblings at the end of the PS2/GC/XBox era that this model was unsustainable. Lo and behold, the middle-tier market dried up at the start of the last generation because those games were costing too much for the amount of money they brought in.

shoptroll wrote:
Ulairi wrote:
DSGamer wrote:
Ulairi wrote:

http://www.joystiq.com/2014/05/15/ap...

I'm hearing that the PS4 is around 200k units sold. I think we have plateaued

The most amazing part of those numbers is the performance of Minecraft on the 360. As someone who has a nephew (and friends) who's addicted to it and plays it with me online I'm thoroughly convinced that Minecraft is to the current generation of kids what Mario was to me.

I think games like Minecraft, LoL, and DOTA and others have changed the game. Especially coupled with mobile devices. I think the console industry really has turned into the comicbook industry or modern Hollywood. A few games on the top that cost a whole lot to make draw big revenue and then on the bottom with independent games. Nothing really in-between will do any business.

It's been this way for a long time now. There were grumblings at the end of the PS2/GC/XBox era that this model was unsustainable. Lo and behold, the middle-tier market dried up at the start of the last generation because those games were costing too much for the amount of money they brought in.

You mean that middle tier market of 40 million and growing 3DS gamers? Or the "indie" market increasingly dominated by smaller but not small games from large publishers?

If you want to make the movie comparison, remember that indie movies are often anything but independent, and that there's a thriving middle market that's home to things like romantic comedies, horror movies, and other genres that aren't super hero and fantasy movies.

Ulairi wrote:
DSGamer wrote:
Ulairi wrote:

http://www.joystiq.com/2014/05/15/ap...

I'm hearing that the PS4 is around 200k units sold. I think we have plateaued

The most amazing part of those numbers is the performance of Minecraft on the 360. As someone who has a nephew (and friends) who's addicted to it and plays it with me online I'm thoroughly convinced that Minecraft is to the current generation of kids what Mario was to me.

I think games like Minecraft, LoL, and DOTA and others have changed the game. Especially coupled with mobile devices. I think the console industry really has turned into the comicbook industry or modern Hollywood. A few games on the top that cost a whole lot to make draw big revenue and then on the bottom with independent games. Nothing really in-between will do any business. I just hope that independent developers start to grow and develop more complex and deep games.

Another thing I like to point out is that the console industry needs a healthy Nintendo. Sony wouldn't have been as successful if kids didn't grow up with Mario and Zelda and then "graduate" into another console for their shoot shoot bang bang interactive cinematic experiences. I think kids like your nephew who don't have that connection to consoles won't ever make the leap. They will continue with the Games as a Service model.

I believe someone from Sony straight up said they need Nintendo to exist for this very reason.

DSGamer wrote:

I think you're underestimating the value of Minecraft. When I play with my nephew (6 years old) he's in full-on creativity mode. I'm not sure he'd be better off with Nintendo. He's building underground layers, learning how to craft items, learning how to make railway tracks. It's kind of amazing. And it's all play. He just prefers that and Lego games over Mario and Zelda. I'm not sure that's the end of the world as much as it's the world changing.

I don't know how you're disagreeing with me. I'm not underestimating the value of Minecraft at all. It has changed thing. I think you're underestimating the importance of Nintendo. Nintendo does a very valuable service and that's providing games that are fun for the whole family and are very mechanically sound. The Lego games get by on the strength of the licenses they are attached to. Mario and Zelda are important for the console industry because it introduces to new players the core concepts of console gaming. If you grow up playing Minecraft, LoL, DOTA, and other Games as a Service titles you're not going all of a sudden when you're 18 decide to buy a PS# and Xbox StupidName. I just don't think that's going to happen. But, if you grow up playing a Nintendo portable and console, being trained by Nintendo on how console gaming works, you may graduate into the other platforms.

Minecraft is a whole lot of fun. The value in the game isn't from the core mechanics of the game but in the tools that it allows the players to utilize. Different from what Nintendo does.

I can't sleep and this thread always interests me. My two cents, for what it's worth.

Microsoft are set up to continue with their console division until they outlast the competition. It's about having a slice of that particular cake, regardless of whether that slice is enough to sustain them, because they have their very own bakery chain (that will never be in peril) to turn to whenever required. Their aim is to put everyone else out of business so they become the sole provider.

Sony have their games division keeping the entire company afloat. How long can that last? If Playstation was a company in and of itself, similar to Nintendo, they'd be set. As it stands Sony, as a whole, are bleeding cash worse than Nintendo until they sell off their floundering divisions. If the internet is to ge believed.

Nintendo aren't in great shape, but they're far from finished. The 3DS/2DS is turning a profit whilst the Wii U is not. The cash reserves are there to take the hit, but there needs to be a plan for how to recoup these losses with the next generation of hardware. It's not a matter of sheer technological oomph. They've done that before and it didn't match innovation paired with good marketing.

The problem for Nintendo and Sony alike is the change in the market towards gaming on mobile phones and tablets, as well as the downturn in the economy. There's less money to go around on luxury items, and less of a market share to compete for as dedicated gaming devices lose their mass appeal. Microsoft need not care as no loss will ever register as a blip in the Gates empire.

Sony have a great standing amongst the media and are the most popular of the three. They have fantastic third-party support and a great online service. Nintendo are not in good stead with the press, nor gamers, who both hold a grudge concerning the previous Wii console. Their online services are also a little behind the times. Profits and losses aside, Nintendo have the more difficult task. They need to convince the press and the public that they're still relevant, and still worth investing in, all the while knowing it may fall on deaf ears. With dwindling third-party support that may be the definition of a hard sell. E3 and Mario Kart 8 need to convince a lot of people who may simply not care.

I read a few articles concerning Sony's losses, not that they're as abundant, nor as popular as 'Nintendo Doomed' headlines for some of the worst journalism in gaming, but they were a surprise. Is it true that Sony have recorded losses for four out of the last five years? That's staggering, if true. Could Playstation effectively be strangled from within if Sony don't balance these figures soon?

Turning to handhelds for a moment. I would look it up, but sleep is just around the corner now. Has the Vita turned a profit for Sony? Has the 3DS ran its course based on total sales and pace of which they're declining?

Sony have their games division keeping the entire company afloat. How long can that last? If Playstation was a company in and of itself, similar to Nintendo, they'd be set. As it stands Sony, as a whole, are bleeding cash worse than Nintendo until they sell off their floundering divisions. If the internet is to ge believed.

The games division isn't doing anything good or bad for Sony. It's their property and insurance that is keeping the company afloat. Sony makes more from selling insurance than it does from selling games. They could cut the games out of their business and not really hurt from it.

RnRClown wrote:

I read a few articles concerning Sony's losses, not that they're as abundant, nor as popular as 'Nintendo Doomed' headlines for some of the worst journalism in gaming, but they were a surprise. Is it true that Sony have recorded losses for four out of the last five years? That's staggering, if true. Could Playstation effectively be strangled from within if Sony don't balance these figures soon?

Yes, that's true. The games division is doing good right now, it's some of the other divisions at Sony that are pulling the company down. They're spinning off their PC business soon which will help their books, but I think their TV division is still hurting a lot (as is true of many TV vendors since people didn't really adopt 3D TV like they did with HDTV and 4K TV is still a few years away from being affordable for the mass market).

EDIT: Ulari'd!

Ulairi wrote:

The games division isn't doing anything good or bad for Sony. It's their property and insurance that is keeping the company afloat. Sony makes more from selling insurance than it does from selling games. They could cut the games out of their business and not really hurt from it.

This paragraph alone has just trashed a handful of articles by supposedly professional gaming journalists. Thanks for clearing it up. I need to rethink what sources are worth reading.

RnRClown wrote:
Ulairi wrote:

The games division isn't doing anything good or bad for Sony. It's their property and insurance that is keeping the company afloat. Sony makes more from selling insurance than it does from selling games. They could cut the games out of their business and not really hurt from it.

This paragraph alone has just trashed a handful of articles by supposedly professional gaming journalists. Thanks for clearing it up. I need to rethink what sources are worth reading.

In any event, I doubt Sony would kill the Playstation while it's doing well or is break-even. The only danger is Sony itself ceasing to exist.

ChrisLTD wrote:
RnRClown wrote:
Ulairi wrote:

The games division isn't doing anything good or bad for Sony. It's their property and insurance that is keeping the company afloat. Sony makes more from selling insurance than it does from selling games. They could cut the games out of their business and not really hurt from it.

This paragraph alone has just trashed a handful of articles by supposedly professional gaming journalists. Thanks for clearing it up. I need to rethink what sources are worth reading.

In any event, I doubt Sony would kill the Playstation while it's doing well or is break-even. The only danger is Sony itself ceasing to exist.

I don't think they will, either. Sony will always exist. They are a big brand and have a lot of valuable parts. How they exist is the question.

If I am a Sony shareholder or in the c-suite and I'm seeing that the growth is in mobile when it comes to consumer electronics/game. Why would I produce a Sony Playstation that is in a contracting market when I could use those resources to produce more of the devices that are growing? I think both Sony and Microsoft, from a financial perspective, would benefit more from focusing on their core businesses. Back when we thought that the living room was going to be the hub of everybody's digital life it made a whole lot of sense. Now, with the whole a screen for every person and a person for every screen, does a console make sense for them? I don't think it really does. At least not in the traditional sense.

To put the numbers in perspective more than half of Sony's operating profit is from selling property, casualty, life, and medical insurance. The electronics division (which includes Playstation) is a drag. Sony would be much better off as an insurance company and media company.

RnRClown wrote:
Ulairi wrote:

The games division isn't doing anything good or bad for Sony. It's their property and insurance that is keeping the company afloat. Sony makes more from selling insurance than it does from selling games. They could cut the games out of their business and not really hurt from it.

This paragraph alone has just trashed a handful of articles by supposedly professional gaming journalists. Thanks for clearing it up. I need to rethink what sources are worth reading.

The part that still amazes me about that paragraph is that in Japan, it's not uncommon for a company to sell electronics...and insurance. Heck, Mitsubishi runs a bank, makes cars and sells orange juice in Japan. So weird.