GCD2: Games Chart Discussion

[Neon Ignition]

Some will say chip production limitations... others would say less demand leads to lower production orders
Without having uncapped stock of both it couldn't be confirmed but given past generation stock demands and the availability of the Series S it's pretty much a lock it's the latter.

[Neon Ignition]

Embedded Tweet

This is a snapshot older than the most recent figures but it suggests that PS5 is now closing in on Switch sales per month and is building a 3:1 lead over Series S/X

[DeathAdder]

More than 200,000 Switches sold in Japan last week, and less than 2,000 PS5s.

https://www.installbaseforum.com/forums/threads/media-create-sales-week-48-2021-nov-29-dec-05.330/

Woeful stock situation for Sony.

[Neon Ignition]

VGChartz isn't always very reliable for hardware shipping/sales numbers but since the new console launches they've not been that bad so if we take their data following this update:

Embedded Tweet

We can then look at making a distinction. Now, the Switch... the Switch is broadly considered to be an eighth generation console due to when it launched however it was no secret that the console was also rushed out to market due to the demise of Nintendo's also eighth generation console the WiiU. I find it hard to believe the Switch would have originally released too much later but looking at the general scope of things it's not unreasonable to think Nintendo may have held off till 2018 originally had its predecessor done alright... maybe, maybe early 2019 had the WiiU been capable of recreating the success of Nintendo's biggest hits. Either way, the gap between the Switch and the new machines would have been smaller and Nintendo wouldn't have been so off cycle. It's also hard to pin point Switch 2 and the form it will take, Nintendo talks about being keen to simply let Switch continue, despite constant rumours of a replacement, as the system is selling so strongly that only a moron would introduce a replacement currently. It feels more appropriate that the Switch is actually just Nintendo's premature ninth generation console and if you take that position and group it in with the PS5 and XSX then based on the figures on the site the current figures would sit at:

01 - Nintendo Switch - 101.9m
02 - PlayStation 5 - 17.25m
03 - Xbox Series S/X - 11.48m

The figure for SX is slightly down on the tweet but does align given the tweet refers to shipments and the figure here relates to sales. If these are accurate then it would suggest that the Series S/X has narrowed the gap between its sales and those of the PS5 from 45% to 33%, likely due to the appeal of affordably picking up a Series S as a secondary system or for those frustrated by constant stock issues.

It also would mean that together, ninth generation total sales stand at 130.63m

Compared to the eighth generation total of 180.18m

That obviously breaks if you consider Nintendo as having two console generations in one and move the Switch into Gen 8 but I see that as a harder fit than it being early Gen 9 given the XBO/PS4/WiiU launch cycle.

We can dial the clock further back though and look at the seventh generation which still stands as the most success one in terms of balancing success across the three console makers. Taking the Wii/PS3/360 sales:

The seventh generation sales total is: 274.85m

Essentially, it means that just one year into the lives of the Series S/X and PS5 the current generation market is nearing 50% of the sales of the highest selling generation.

[Cassius_Smoke]

I suspect all those with a seriesS will have to upgrade to a seriesS 2 in a few years since its being near enough matched by a last gen machine already.
Which would mean there is only about 5m SeriesX out there that I'd actually consider a match for the PS5.

[Neon Ignition]

https://www.sony.com/en/SonyInfo/IR/library/presen/er/pdf/21q3_supplement.pdf

Sony revises down the number of PS5's it expects to sell as the component shortage bites harder

[Neon Ignition]

Embedded Tweet

[fishbowlhead]

Not sure what their actual profit margins are but even if its 3b, thats going to be over 20 years before MS sees their investment back.

[wakka]

Considering that MS will be using them for Game Pass collateral rather than monetising the games individually, I'm not sure that's how they're calculating it though.

[fishbowlhead]

That would be even worse, as that would instantly put gamepass 70b in the hole without whatever its already loosing a year. So I’m not sure what or how their working all that out.

[wakka]

I don't really have the energy to even try to work it out, but I'd be very surprised if the super smart folks at Microsoft don't have a clear plan to profitability.

The long and the short of it is that once they get to the magic point where GP is costing them less per month to run than they're raking in in subs, it'll all be gravy. GP currently has 25 million subscribers. Considering sales of a games console normally top out at 120 to 150 million, there is plenty of room to grow.

They are hardly likely to run into cash flow issues in the near term, so they can afford to make these big investments.

[Neon Ignition]

If you assume that the reasonable maximum number of subscribers Game Pass can ever attract is 120m and every single user paid the default monthly sub cost (which we know they don't) then the maximum GP could bring in per year would be $1.3bn
There are all sorts of other factors such as MTX earnings, hardware, physical and digital sales etc but I'm starting to come to the view that Game Pass is simply designed to be a black hole of money loss permanently. I don't think Microsoft ever expects the Xbox division to actually be of financial worth to the company.

I think the entire aim is to bring in user engagement. Like how MS Rewards just loses them money, but it ensures you use a range of MS services pretty much every single day that they can then earn via advertising and making you more likely to both use their services over their rivals and also that when you do come to spend money on hardware, software, services etc you will be more likely to choose their product.

Effectively, the Xbox Division is a loss leader to get people into Microsoft products. It's a change of perception that would have saved Xbox rather than turning the business around. Giving it greater context to the rest of the company. I'm beginning to think MS has come to terms that in the traditional console war space they're incapable of overtaking Sony so Xbox and Game Pass is the Microsoft what the free game given out by the Epic Store is to Epic.

[wakka]

If you assume that the reasonable maximum number of subscribers Game Pass can ever attract is 120m and every single user paid the default monthly sub cost (which we know they don't) then the maximum GP could bring in per year would be $1.3bn
There are all sorts of other factors such as MTX earnings, hardware, physical and digital sales etc but I'm starting to come to the view that Game Pass is simply designed to be a black hole of money loss permanently. I don't think Microsoft ever expects the Xbox division to actually be of financial worth to the company.

I think the entire aim is to bring in user engagement. Like how MS Rewards just loses them money, but it ensures you use a range of MS services pretty much every single day that they can then earn via advertising and making you more likely to both use their services over their rivals and also that when you do come to spend money on hardware, software, services etc you will be more likely to choose their product.

Effectively, the Xbox Division is a loss leader to get people into Microsoft products. It's a change of perception that would have saved Xbox rather than turning the business around. Giving it greater context to the rest of the company. I'm beginning to think MS has come to terms that in the traditional console war space they're incapable of overtaking Sony so Xbox and Game Pass is the Microsoft what the free game given out by the Epic Store is to Epic.

It would be substantially more than $1.3bn.

If I've got my maths right (and tell me if I haven't), 120,000,000 subscribers paying $15 per month would be $21.6bn per year.

I'm not sure that I agree that it's a good way to get people into Microsoft products. I mean, using Halo to drive customers to Powerpoint - bloody hell, that's a long marketing game. I'm not sure how you'd be able to trace user growth on Windows or Office back to people enjoying Xbox.

Without actually being a proper finance person or doing any proper research or anything, it seems to me that if you can bring in $20bn+ per year in subscriptions, and the average AAA super game costs ~$200m, you could release one a month plus a raft of smaller games and still come out well ahead. So I don't see why Game Pass couldn't be profitable down the line.

[Neon Ignition]

Yep, I tried again and had clearly stopped calculating part way through the math


Yep, $20bn per year would be good. I suppose the caveat with that is lapsed users, lapsed months, paying less than listed, deduction of development and publishing costs (to a small extent where it goes beyond retail budgets), any impact on lost retail sales and then the absolute chasm of debt the Xbox Division has already built over the last 20 years plus the spending being done now.

I suppose that sets aside as well that it's incredibly unlikely that Game Pass will ever get past 60m active subs as well. Definitely kicks any profit into the 2030's but the plus there is MS doesn't need a quick buck off it and it reflects long term commitment which is nice considering by all accounts we came very close some times to them withdrawing from the market all together.

[fishbowlhead]

Basically MS are resided now to loose as much as it takes to just stay in the game, which has probably always been the case for the Xbox division, I just can’t seeing how it has ever turned a profit overall.