@frob - It seems Nintendo has lost $228 million mostly because of the poor performance of the WiiU. I think Big N is doing more crying than laughing at the bank.

Where are you getting your loss numbers from, because last information from MS was they were breaking even on the console itself.

XBox One price breakdown - they estimate that the parts cost $471, including manufacturing, but excluding the amount retailers take, and excluding the cost to ship it to those retailers from overseas. So they could be breaking even, give or take ~$10.

There is also the sunk cost of research and development and marketing, which is where Microsoft was estimated to have lost $1 billion.

Where are you getting your loss numbers from, because last information from MS was they were breaking even on the console itself.

XBox One price breakdown - they estimate that the parts cost $471, including manufacturing, but excluding the amount retailers take, and excluding the cost to ship it to those retailers from overseas. So they could be breaking even, give or take ~$10.
There is also the sunk cost of research and development and marketing, which is where Microsoft was estimated to have lost $1 billion.

The $150 and $75 were from CoG and BoM reports back at the console launch.

There was speculation that the companies might have negotiated better deals than the very low prices the investigative reporters had discovered, but it was unlikely. The costs go down over time, but the exact costs have never been revealed.

I haven't seen anything definitive that either Microsoft or Sony has reached the black line on per-console sales. Nintendo was clear on that point in advance, that they do not believe in operating at a loss.


Looking up newer leaked numbers and wholesale price sheets, Sony's cost to manufacture is currently about $381, Microsoft's is about $471. So going by wholesale prices (rather than the retail markup), various Google searches suggest Sony is currently wholesaling the PS4 for $229, a loss of $152, and Microsoft's wholesale of about $340, a loss of $131. I don't see any leaks on the exact prices, as those are usually very closely guarded secrets, but given the number of web sites showing exactly (for PS4) or nearly (for XBO) those numbers, they're likely closer than a Fermi estimate.

Nintendo was clear on that point in advance, that they do not believe in operating at a loss.

Or at all for that matter :D

Well, there is some evidence to suggest that due to things like MOBAs and indie games that the PC games market is now bigger than the console market.

Ultimately, I think the idea of a machine that can only play games is going away. We're already seeing that with the current generation, with the XBone in particular marketing itself as much as a HTPC as a games console.

Yahtzee made a good point that the advantage of consoles was ease of use compared to PCs, but these days, that advantage has been eroded from both sides; gaming PCs are easier to use and consoles have become more complex (i.e. waiting to install games, etc). On the PC side, things like Steam boxes start to blur the lines even further.

We've also reached a point of diminishing returns in terms of computing (and let's face it, we're really talking graphics) power. The quantum leaps in graphics quality that we saw from each previous playstation just aren't there any more. And yeah, you can actually build a gaming PC for close to the price of a console, just not a laptop. In 6 months to a year, you'll easily be able to build a gaming pc for less than the price of a console that's actually more powerful, and will actually give you a better experience of many console titles, especially when the likes of CoD and BF4 won't even run at 1080p. And if you want to play it from the couch, using a controller on your TV, that's trivially easy now (you'll get absolutely owned, but that's your fault for playing an fps with a controller )

My prediction is that eventually the dedicated gaming console and the desktop gaming PC will disappear and we'll see something more like a generalised home media server that does everything and streams to TVs, tablets, etc.

I think the distinguishing factor, really, is going to prove to be the cloud-processing that's a part of Xbox Live. Sony itself doesn't have the expertise to just design and build that kind of infrastructure any time soon, and will have a hard time funding an acquisition given their current financials (not to mention, no one worth buying is interested in selling).

That's not entirely true: Sony bought Gakai.

Yes, mobile is a market. The market is for when people are out-and-about. The successful titles have 2-5 minute chunks of play, and are designed for casual play.

And PC is a market. It is usually a good seat, by yourself, with a highly accurate pointing device and a keyboard. Lots of games live here.

Then we have the console market. It is not going away. The biggest reason it isn't going away is that in most middle-class and above homes, there is the room or area dedicated to entertainment. It has a large screen, usually a great sound system, and comfortable seating. It is good for both groups and individuals. Much of the Wii's success and the Wii U's core audience is the group play; the ability for many people to gather. Little Big Planet was a key title for PS3, and it also was a group game. XBox had several big hits but it was mostly solitary play that could have done just as well on PC with an xbox controller plugged in.

Right now the PS4 and XBO both have mainly single-player games that could be played just as well on PC as on console. You can buy Titanfall for console or for PC, with little compelling reason to favor one or the other. The big difference is that right now we have no defining titles on any of them.

There is still a big market for console games. There are no "must have" titles or features of the current generation. Usually it takes some time for the big hits, and there will be that one must-have game that everybody wants to play. Eventually there will be the next game that defines the platform, the next thing like Halo, or Little Big Planet, or Wii Sports, some single-platform exclusive title that makes people say "I must buy". The numbers right now are 5M, 6M, and 7M. Nothing stellar for any of the platforms. When that key title comes out for a platform, history shows that the number of consoles will spike as everyone decides to buy the console for that one big game.

Well they also had to sell their headquaters in central Tokyo building soo ouch all around for Sony.

They did not sell their headquarters, they sold a pair of twin buildings a kilometer away plus a few more minor ones around the vicinity.
Fairly sure those buildings were related to their PC products (R&D and hardware development to some extent, at least prototyping).


L. Spiro

Where are you getting your loss numbers from, because last information from MS was they were breaking even on the console itself.

XBox One price breakdown - they estimate that the parts cost $471, including manufacturing, but excluding the amount retailers take, and excluding the cost to ship it to those retailers from overseas. So they could be breaking even, give or take ~$10.
There is also the sunk cost of research and development and marketing, which is where Microsoft was estimated to have lost $1 billion.

The $150 and $75 were from CoG and BoM reports back at the console launch.

There was speculation that the companies might have negotiated better deals than the very low prices the investigative reporters had discovered, but it was unlikely. The costs go down over time, but the exact costs have never been revealed.

I haven't seen anything definitive that either Microsoft or Sony has reached the black line on per-console sales. Nintendo was clear on that point in advance, that they do not believe in operating at a loss.


Looking up newer leaked numbers and wholesale price sheets, Sony's cost to manufacture is currently about $381, Microsoft's is about $471. So going by wholesale prices (rather than the retail markup), various Google searches suggest Sony is currently wholesaling the PS4 for $229, a loss of $152, and Microsoft's wholesale of about $340, a loss of $131. I don't see any leaks on the exact prices, as those are usually very closely guarded secrets, but given the number of web sites showing exactly (for PS4) or nearly (for XBO) those numbers, they're likely closer than a Fermi estimate.

So far the only word from MS has been that at the 500 USD price point the console breaks even or has a minor margin of profit. MS didnt want to make a loss on the Hardware sales this time round and they have said this around E3 last year. So whats out there are speculations and I think both Sony and MS have better contracts with the parts manufactures, remember 10 year contracts on these things, so I think these numbers people speculate on might be too high.

That's not entirely true: Sony bought Gakai

That's true, I had forgotten about that. But I also don't know if that's quite the experience they need. Building and running a cloud service for general-purpose, 3rd-party use is quite another from building and running a purpose-built service for game streaming. Most of gaikai's tech was around real-time compression and adaptive video streaming, not in dev-ops or scalability or service management. They might have expertise they could bring to bare, but they don't appear to have the experience.

Not to mention that all those folks are presumably working on integrating gaikai's functionality with PSN.

It won't surprise me when PSN gets cloud compute, or that gaikai people might play a role, but I think that's not something that will happen until the tail end of this generation or next.

But sony will head there too. In fact, I don't think its entirely unlikely that the next generation of "consoles" might just be the cloud connected to some relatively dumb terminals. The economics of that make sense, but I'm on the fence over whether internet infrastructure will be able to handle it.