Activision boss all but threatens Sony to drop the PS3 price

[erwos]

Originally posted by: DaveSimmons

If it's costing them twice as much to sell half as many just how much does that equal?

Possibly for a single-platform exclusive title, definitely not for adding a second platform that uses the same engine, models, textures, sounds, voice acting, cutscenes, level design and game design.

Before I begin, realize that all numbers are made up and just being used to illustrate a point about how businesses spend their money. But some of you are really missing the point about how costs are calculated.

Let's say a game cost $10000 to develop, including both platforms, 360 and PS3. You'd split the development costs between both:

PS3: $5000
Xbox 360: $5000

The 360 version sells two thousand copies. The PS3 version sells a thousand copies. We'll say the price is $10. Profit per copy is $7.50 for the 360 version, profit per copy is $5 for the PS3 version.

If someone in finance looks at the numbers, they'll notice that the return on investment of the 360 version is WAY higher than the PS3 version. That's not very good for the PS3, because finance is going to tell them to invest in stuff with higher ROI, if it can be found.

So, what if they decided to only develop for the 360? Let's assume sales of 2500 copies - some multi-console owners would buy the 360 version, and maybe quality would be higher, leading to more sales. Dev costs would be $8000. Profit margin would only be at $6.8 per copy of the game sold, but that is still higher than the PS3's profit per copy in the former scenario. _If they can spend that $2000 on some other product with a return greater than 50%, they'll make more money than building a PS3 version of the current product._

It's not about "how can this game make us the most money?" It's about "how can our _money_ make us the most money?" ROI is king, and corporate accounting rules can lead to results you would not expect in that realm.

Now, I know what the next objection is: an even split between versions doesn't capture true development costs. And that's true, but _doing that would hurt the PS3 even more_, because it is by far the harder of the two systems to develop for.

 

[RyanPaulShaffer]

Originally posted by: Queasy
Sony Responds (via Kotaku)

"PlayStation has tremendous momentum coming out of E3, and we are seeing positive growth with more than 350 titles slated to hit across all our platforms, including many anticipated games from our publishing partners," said Playstation spokesman Patrick Seybold. "We enjoy healthy business relationships with and greatly value our publishing partners and are working closely with them to deliver the best entertainment experience."

What momentum? Two hundred and forty nine US dollars? A motion controller that the Wii already has the that Microsoft is also planning? Final Fantasy games that are going multi-platform?

I mean, I know that this is a typical, fluffy PR press release, but wow.

 

[Thraxen]

Ars thinks it is a ploy to squeeze Sony for better licensing deals: Link

 

[mugs]

Originally posted by: Thraxen
Ars thinks it is a ploy to squeeze Sony for better licensing deals: Link

That's what I figured when I saw the license fees in the OP. Activision is basically saying that if the PS3 didn't have Activision games, people wouldn't buy the PS3. So if you want Activision games on the PS3, you have to make it more beneficial to us. Can't say I blame Activision - you can't expect people to pay as much for the privilege of developing for a third place console as they would for the privilege of developing for a first place console.

 

[hans030390]

Originally posted by: SunnyD
WHAAAAAAAAAA! MY WALLET ISN'T FAT ENOUGH!!!! WHAAAAAAAAAA!

This pretty much describes what it sounds like.

Sony will probably drop the price on the PS3 within a few months. I don't see what they're whining about.

 

[Queasy]

Probably not related to Activision at all but GameStop is expecting a $100 PS3 price cut in August to coincide with the release of Madden 10. They also expect Nintendo to drop the price of the Wii by $50 in response.

 

[DaveSimmons]

Originally posted by: erwos

Originally posted by: DaveSimmons

If it's costing them twice as much to sell half as many just how much does that equal?

Possibly for a single-platform exclusive title, definitely not for adding a second platform that uses the same engine, models, textures, sounds, voice acting, cutscenes, level design and game design.

Before I begin, realize that all numbers are made up and just being used to illustrate a point about how businesses spend their money. But some of you are really missing the point about how costs are calculated.

Let's say a game cost $10000 to develop, including both platforms, 360 and PS3. You'd split the development costs between both:

...

It's not about "how can this game make us the most money?" It's about "how can our _money_ make us the most money?" ROI is king, and corporate accounting rules can lead to results you would not expect in that realm.

Now, I know what the next objection is: an even split between versions doesn't capture true development costs. And that's true, but _doing that would hurt the PS3 even more_, because it is by far the harder of the two systems to develop for.

That's assuming quite a cannibalization of 360 sales by the PS3, which seems odd since everyone except rabid fanboys agrees that the 360 version is usually visually better and has better online play.

With 25% shift (which is probably still too high):
$8,000 for 22,500 = 2.8x ROI
+$2,000 dev cost for +7,500 income = 3.75x ROI = PS3 is more profitable.

Your model is made up of course, but +25% development cost is a reasonable assumption given the non-code asset costs go up only slightly to add the PS3.

 

[SunnyD]

Originally posted by: Queasy
Probably not related to Activision at all but GameStop is expecting a $100 PS3 price cut in August to coincide with the release of Madden 10. They also expect Nintendo to drop the price of the Wii by $50 in response.

Because GameStop was oh so right the last half dozen times they predicted a PS3 price cut?

 

[DaveSimmons]

It depends on how soon the PS3 Slim is coming. Also, 1up had posted a rumor that Sony will be adding blu-ray to it.

 

[SunnyD]

Originally posted by: DaveSimmons
It depends on how soon the PS3 Slim is coming. Also, 1up had posted a rumor that Sony will be adding blu-ray to it.

LOL wut? The PS3 already has blu-ray. 😕

 

[DaveSimmons]

Then 1up finally has a chance to get one right 😉

 

[Ackmed]

Another anti-Sony thread, but the same user. Who would have known!

Maybe they should put out a $200 version, and charge $100 for wifi, and $100 for a HD. Oh wait, there is already a 360 model like that out.

 

[Queasy]

Originally posted by: Ackmed
Another anti-Sony thread, but the same user. Who would have known!

Maybe they should put out a $200 version, and charge $100 for wifi, and $100 for a HD. Oh wait, there is already a 360 model like that out.

😕

Now I know how some of the game journos feel.

I'll try not to post any interesting news from now on for fear of hurting one set of fans feelings.

 

[Dari]

Originally posted by: Queasy

Originally posted by: Ackmed
Another anti-Sony thread, but the same user. Who would have known!

Maybe they should put out a $200 version, and charge $100 for wifi, and $100 for a HD. Oh wait, there is already a 360 model like that out.

😕

Now I know how some of the game journos feel.

I'll try not to post any interesting news from now on for fear of hurting one set of fans feelings.

http://www.engadget.com/2009/0...xbox-360-is-maxed-out/. Just saying. You seem to be up on all the console news but somehow missed this one🙂

EDIT: Nice sig btw.

 

[gar655]

Originally posted by: DaveSimmons

If it's costing them twice as much to sell half as many just how much does that equal?

Possibly for a single-platform exclusive title, definitely not for adding a second platform that uses the same engine, models, textures, sounds, voice acting, cutscenes, level design and game design.

It's not the price of the PS3 but the ridiculous Sony royalties and that it's an expensive pain in the ass to develop for.

The "second" platform does not use the same engine- that's the problem. It's also the reason why most dual platform games look better on the 360, because no one has yet figured out how to code for the PS3. So even with much more powerfull specs most games look like shit on it.

So Activision/Blizzard spends twice (maybe more) as much to "make" games for the PS3 which also has a much lower install base and has to give much more royalties with little to no support (advertising) from Sony.

Why not drop em if they're not making any money off the PS3? Make good business sense.

 

[Queasy]

Originally posted by: Dari

Originally posted by: Queasy

Originally posted by: Ackmed
Another anti-Sony thread, but the same user. Who would have known!

Maybe they should put out a $200 version, and charge $100 for wifi, and $100 for a HD. Oh wait, there is already a 360 model like that out.

😕

Now I know how some of the game journos feel.

I'll try not to post any interesting news from now on for fear of hurting one set of fans feelings.

http://www.engadget.com/2009/0...xbox-360-is-maxed-out/. Just saying. You seem to be up on all the console news but somehow missed this one🙂

EDIT: Nice sig btw.

I didn't post that one because it sounded like typical BS. No console is ever 'maxed out' because devs can always find ways to eek out more power from consoles. Some of the most amazing PS2 games came toward the end of the PS2's life as the major console on the market. I expect the same for the PS3 and the 360 and even the Wii. The Burnout Devs, Criterion, even came out and called it out as a BS statement. I didn't post that either you'll notice.

 

[Dari]

Originally posted by: Queasy

Originally posted by: Dari

Originally posted by: Queasy

Originally posted by: Ackmed
Another anti-Sony thread, but the same user. Who would have known!

Maybe they should put out a $200 version, and charge $100 for wifi, and $100 for a HD. Oh wait, there is already a 360 model like that out.

😕

Now I know how some of the game journos feel.

I'll try not to post any interesting news from now on for fear of hurting one set of fans feelings.

http://www.engadget.com/2009/0...xbox-360-is-maxed-out/. Just saying. You seem to be up on all the console news but somehow missed this one🙂

EDIT: Nice sig btw.

I didn't post that one because it sounded like typical BS. No console is ever 'maxed out' because devs can always find ways to eek out more power from consoles. Some of the most amazing PS2 games came toward the end of the PS2's life as the major console on the market. I expect the same for the PS3 and the 360 and even the Wii. The Burnout Devs, Criterion, even came out and called it out as a BS statement. I didn't post that either you'll notice.

Considering the XBOX is easier to code for, you don't think there may be some truth in that? Anyway, I don't expect the engineers to make a political statement like that, only the suits.

 

[Tu13erhead]

.

 

[mugs]

Originally posted by: Ackmed
Another anti-Sony thread, but the same user. Who would have known!

Maybe they should put out a $200 version, and charge $100 for wifi, and $100 for a HD. Oh wait, there is already a 360 model like that out.

Glad to see you're making useful contributions to the conversation, as always. :roll:

 

[DaveSimmons]

Originally posted by: gar655

Originally posted by: DaveSimmons

If it's costing them twice as much to sell half as many just how much does that equal?

Possibly for a single-platform exclusive title, definitely not for adding a second platform that uses the same engine, models, textures, sounds, voice acting, cutscenes, level design and game design.

It's not the price of the PS3 but the ridiculous Sony royalties and that it's an expensive pain in the ass to develop for.

The "second" platform does not use the same engine- that's the problem. It's also the reason why most dual platform games look better on the 360, because no one has yet figured out how to code for the PS3. So even with much more powerfull specs most games look like shit on it.

So Activision/Blizzard spends twice (maybe more) as much to "make" games for the PS3 which also has a much lower install base and has to give much more royalties with little to no support (advertising) from Sony.

Why not drop em if they're not making any money off the PS3? Make good business sense.

Do you have a link to where Sony royalties are substantially higher than Microsoft's? I haven't seen anything either way.

Unreal, gamebryo etc. are cross-platform engines. Unreal just doesn't run as well on PS3.

You're also ignoring my main point: They only have to pay the artists, level designers and Patrick Stewart once. The main cost of modern games is not the programmers. Look at the credits for a game and see how small a part of them the coders are.

 

[ric1287]

Originally posted by: DaveSimmons

Originally posted by: gar655

Originally posted by: DaveSimmons

If it's costing them twice as much to sell half as many just how much does that equal?

Possibly for a single-platform exclusive title, definitely not for adding a second platform that uses the same engine, models, textures, sounds, voice acting, cutscenes, level design and game design.

It's not the price of the PS3 but the ridiculous Sony royalties and that it's an expensive pain in the ass to develop for.

The "second" platform does not use the same engine- that's the problem. It's also the reason why most dual platform games look better on the 360, because no one has yet figured out how to code for the PS3. So even with much more powerfull specs most games look like shit on it.

So Activision/Blizzard spends twice (maybe more) as much to "make" games for the PS3 which also has a much lower install base and has to give much more royalties with little to no support (advertising) from Sony.

Why not drop em if they're not making any money off the PS3? Make good business sense.

Do you have a link to where Sony royalties are substantially higher than Microsoft's? I haven't seen anything either way.

Unreal, gamebryo etc. are cross-platform engines. Unreal just doesn't run as well on PS3.

You're also ignoring my main point: They only have to pay the artists, level designers and Patrick Stewart once. The main cost of modern games is not the programmers. Look at the credits for a game and see how small a part of them the coders are.

you don't think they'd have to pay the developers less/use less devs to only make a 360 version?

 

[ric1287]

Originally posted by: Ackmed
Another anti-Sony thread, but the same user. Who would have known!

Maybe they should put out a $200 version, and charge $100 for wifi, and $100 for a HD. Oh wait, there is already a 360 model like that out.

Do you need wifi or a $100 hdd to play games on the 360?

Keep on rationalizing that paying $400 was a solid deal.

 

[erwos]

Originally posted by: DaveSimmons
+$2,000 dev cost for +7,500 income = 3.75x ROI = PS3 is more profitable.

You totally missed my point, which is that it's _not_ $2000 for $7500 more revenue. If you did what you're describing, you'd have to spread out the initial development costs amongst both consoles when doing financial calculations, which is what I addressed in the first case. You are erroneously assigning all asset development costs to the 360 version the way you're doing it. It's _easy_ to make something look more profitable than it really is by doing that, which is exactly the mistake I was trying to point out.

 

[DaveSimmons]

Originally posted by: erwos

Originally posted by: DaveSimmons
+$2,000 dev cost for +7,500 income = 3.75x ROI = PS3 is more profitable.

You totally missed my point, which is that it's _not_ $2000 for $7500 more revenue. If you did what you're describing, you'd have to spread out the initial development costs amongst both consoles when doing financial calculations, which is what I addressed in the first case. You are erroneously assigning all asset development costs to the 360 version the way you're doing it. It's _easy_ to make something look more profitable than it really is by doing that, which is exactly the mistake I was trying to point out.

Except that the 360 version is going to be made either way. The art, levels, voice acting, etc. must be paid for either way. Those costs are committed. They're sunk costs.

The question being asked is: does it make financial sense to also do a PS3 version along with the 360 version that's already been budgeted, using the assets that will exist because of the 360.

The ROI on adding the PS3 version is the differences in income and cost from adding it vs. not adding it.

Your argument was that historical data on adding a PS3 version was misleading because the PS3 cannibalizes some 360 sales, i.e. the 360 sales would have been higher if the game was 360-exclusive.

I showed that wasn't true if the cannibalization was not too high, that the ROI on adding a PS3 game was higher than the ROI of putting that money towards a second 360 game.

Edit: That's the dollars-and-cents effect. If you're talking about some financial accounting rule that adding the PS3 version means dividing art costs equally, then you're missing the point that adding the PS3 version increases the ROI of the 360 version by lowering its costs for assets. You can't say the ROI of the PS3 version is too low while ignoring the effect on the 360 ROI. That is, you must look at total ROI which -does- increase as I say above regardless of how accounting makes you divide up costs.

 

[DaveSimmons]

Originally posted by: ric1287

Originally posted by: DaveSimmons

Do you have a link to where Sony royalties are substantially higher than Microsoft's? I haven't seen anything either way.

Unreal, gamebryo etc. are cross-platform engines. Unreal just doesn't run as well on PS3.

You're also ignoring my main point: They only have to pay the artists, level designers and Patrick Stewart once. The main cost of modern games is not the programmers. Look at the credits for a game and see how small a part of them the coders are.

you don't think they'd have to pay the developers less/use less devs to only make a 360 version?

You have to pay PS3 coders and buy a more expensive license for Unreal but that added cost is much less than the budget of the complete 360 game including art, levels, music, voice acting, ...

You don't need to pay artists or level designers anything close to double for the two versions, just a small extra amount to do any tweaking needed, like making the textures blurrier 😉