Sony: PSN Losing Money Right Now, Next Year Should Be Better

[Logan Westbrook]

Sony: PSN Losing Money Right Now, Next Year Should Be Better

Sixty million people use PSN, and unfortunately for Sony, that makes the service rather pricey to run.

Sony Computer Entertainment Chief Executive Kaz Hirai has admitted that the PlayStation Network isn't making Sony any money at the moment. He was confident, however, that all that would change in the next financial year.

According to Hirai, revenue from PSN added up to around ¥36 billion, or approximately $434 million, a figure he says "nearly doubled" in 2010. Hirai said that the service was growing, with 60 million registered accounts - split between the PS3 and PSP - as of November, and that he expected content revenue to significantly increase over the next two years.

PSN is expected to start making money for Sony in the 2011 financial year, although Hirai didn't say how much money it would take to make that happen. It's less than ¥300 billion, or $3.6 billion, however, which is how much Sony estimates the service will generate by the year 2012.

It's not hard to imagine the fairly enormous costs involved it keeping a network that big up and running. It's also not hard to see why Microsoft made the decision very early on to charge people for the ability to play online.

Source: 1up [http://www.1up.com/news/hirai-psn-losing-money-turn]



Permalink

 

[Delusibeta]

And yet Steam makes Valve buckets of money, without charging a subscription fee. Hmmm...

 

[Delusibeta]

And yet Steam makes Valve buckets of money, without charging a subscription fee. Hmmm...

Simple because people HAVE to buy games on Steam/Find it convienent.

Not to mention the prices are far better than on XBL/PSN so not really a fair comparision.

Here's the problem: people don't have to buy games on Steam. They could buy games on Direct2drive, GOG, Gamersgate, Impulse... Meanwhile, 360 and PS3 gamers HAVE to buy via Live or PSN. The fact that Steam can make more money than the PSN despite being under competition and while being cheaper suggests to me that something has gone wrong.

 

[binvjoh]

Good on Sony for keeping the service (mostly) free.

 

[gphjr14]

If there was any real incentive to pay for PSN I would. Temporary access to games and demos isn't enough to warrant a subscription. I remember a Vanquish demo being up on JPN PSN and the same demo was only available in the US PSN through the Plus service its a ripoff and Sony is going to continue to lose money until they actually offer something worth pay for.

 

[Therumancer]

To be entirely honest I don't think it costs them all that much money. What's more when I hear comments about "not making any money" from companies, I am incredibly cynical, as it typically means "not making as much money as our projections showed". In general companies only LOSE money on things like this in any real sense when they borrow against projected earnings and then wind up not making back enough money to cover the loans and interest.

To run PSN basically takes three things, it requires computers, places to put the computers, and employees to run the computers. PSN is a service designed to encourage people to buy the hardware and games, it's a benefit included in that price. While other systems like the 360 are selling better than the PS-3, it's a massive success by any objective standard. I suppose it's possible that in of itself PSN is not making money purely on Sony's cut of sales for games, movies, and DLC, but then again that wasn't really the point of the service since they are making a profit from the PS-3 overall in terms of hardware, games, and of course simply selling Blu-Ray movies which a lot of people play off of a PS-3 rather than having a dedicated Blu-Ray player.

It's akin to how Sony was claiming that they were losing money off of the PS-3 hardware, charging less than it cost to make. A lot of people didn't believe this, and while it was a while ago I remember reading that their claims (lies actually) were based on the idea that the lasers used for the PS-3 to play Blu-Ray players are the same ones that go into dedicated Blu-Ray systems. If that component which makes up a good part of the cost of the item was instead put into a dedicated Blu Ray system, they would make more money. The reason being that the dedicated Blu-Ray systems apparently outsell the PS-3 to people who don't want the "stigma" of watching movies off of a more powerful machine.

The point here being that it's a comparitive thing, which is one of the big reasons why I'm so critical of the industry. Comments made on a "grass is always greener on the other side of the pasture" logic where Analysts and those pushing for other products are always saying that no matter how money is being used, using it differantly could see bigger returns. The differance between that theory and the reality is claimed as loss to the media.

There is some truth that a lot of us as investors would of course want the biggest possible returns on our money, as opposed to simply being content to make more than we put in. The issue of course is how things are represented, and of course claims that products are failing when losses of revenue are due to bad desicians made on the part of the company. For example if someone decides that a game or game console is going to make a billion dollars a year, so the company "banks" on that projection and borrows what will amount to 5 billion dollars over five years from something like Citigroup, and then five years later finds out that they only made 4.8 billion dollars... well that's not a 200 million dollar loss on the product no matter what they claim (and that is what they will claim) that's them being idiots. A product that established is of course going to be on the chopping block anyway in the gaming industry, but this kind of belief/justification is going to fuel why they aren't going to continue support even if it has a large following since the profits are going to be lower, and ultimatly they want 200 million dollars to pay off that loan, and something to show off so they can justify borrowing even more money.

Remember, while some companies do self-finance projects, a lot of business is done by borrowing from bankers nowadays. That's what things like Citigroup/Citicorp and other groups you hear about now and again apparently do (from my reading), they lend money based off of projections (typically "investing" the money you put into the bank). A lot of problems with business typically amount to them dealing with ultra-high end loan sharks and trying to count their chickens before they hatch. When such deals fail though, typially these same companies pass it off to insurance (which charges a premium based on how reliable the company usually is) anyway which raises our premiums on various things and suffer very little in the way of repurcissions. The CEOS and such rarely lose out on much from even the most disasterous gambles.

All this rambling aside (and I'm far from an expert, so no need to point out mistakes, this is intended to be general) the bottom line is that I'd take what Sony says with a grain of salt unless they decide to reveal all these finances to the general public. In a case like this it's probably mismanagement and bad gambling overall, assuming it's even true. Talking about how much money they expect it to make next year also says a lot about their attitude and the problems... they should wait until next year is over before they decide what those revenues are going to look like. Almost guaranteed someone is looking at that projection and itching to borrow money against it.

 

[dragonburner]

One of the reasons I bought a PS3 was free online. I like PSN!

 

[Irridium]

And yet Steam makes Valve buckets of money, without charging a subscription fee. Hmmm...

Simple because people HAVE to buy games on Steam/Find it convienent.

Not to mention the prices are far better than on XBL/PSN so not really a fair comparision.

Here's the problem: people don't have to buy games on Steam. They could buy games on Direct2drive, GOG, Gamersgate, Impulse... Meanwhile, 360 and PS3 gamers HAVE to buy via Live or PSN. The fact that Steam can make more money than the PSN despite being under competition and while being cheaper suggests to me that something has gone wrong.

You need Steam to play Fallout New Vegas, Black Ops, and Civilization 5. 3 very big name games. People either have to use Steam for them, or just not buy them. Or buy New Vegas/Black Ops on a console. And with more and more games requiring Steam as time goes on, more people will need to run Steam to play their games.

 

[Delusibeta]

And yet Steam makes Valve buckets of money, without charging a subscription fee. Hmmm...

Simple because people HAVE to buy games on Steam/Find it convienent.

Not to mention the prices are far better than on XBL/PSN so not really a fair comparision.

Here's the problem: people don't have to buy games on Steam. They could buy games on Direct2drive, GOG, Gamersgate, Impulse... Meanwhile, 360 and PS3 gamers HAVE to buy via Live or PSN. The fact that Steam can make more money than the PSN despite being under competition and while being cheaper suggests to me that something has gone wrong.

You need Steam to play Fallout New Vegas, Black Ops, and Civilization 5. 3 very big name games. People either have to use Steam for them, or just not buy them. Or buy New Vegas/Black Ops on a console. And with more and more games requiring Steam as time goes on, more people will need to run Steam to play their games.

Three very big games: all available to buy from Direct2drive. Point stands.

 

[jpoon]

Free online was the major reason I bought a PS3. They better keep that shit free!

 

[KEM10]

Spoiler: He even said it was rambling

To be entirely honest I don't think it costs them all that much money. What's more when I hear comments about "not making any money" from companies, I am incredibly cynical, as it typically means "not making as much money as our projections showed". In general companies only LOSE money on things like this in any real sense when they borrow against projected earnings and then wind up not making back enough money to cover the loans and interest.

To run PSN basically takes three things, it requires computers, places to put the computers, and employees to run the computers. PSN is a service designed to encourage people to buy the hardware and games, it's a benefit included in that price. While other systems like the 360 are selling better than the PS-3, it's a massive success by any objective standard. I suppose it's possible that in of itself PSN is not making money purely on Sony's cut of sales for games, movies, and DLC, but then again that wasn't really the point of the service since they are making a profit from the PS-3 overall in terms of hardware, games, and of course simply selling Blu-Ray movies which a lot of people play off of a PS-3 rather than having a dedicated Blu-Ray player.

It's akin to how Sony was claiming that they were losing money off of the PS-3 hardware, charging less than it cost to make. A lot of people didn't believe this, and while it was a while ago I remember reading that their claims (lies actually) were based on the idea that the lasers used for the PS-3 to play Blu-Ray players are the same ones that go into dedicated Blu-Ray systems. If that component which makes up a good part of the cost of the item was instead put into a dedicated Blu Ray system, they would make more money. The reason being that the dedicated Blu-Ray systems apparently outsell the PS-3 to people who don't want the "stigma" of watching movies off of a more powerful machine.

The point here being that it's a comparitive thing, which is one of the big reasons why I'm so critical of the industry. Comments made on a "grass is always greener on the other side of the pasture" logic where Analysts and those pushing for other products are always saying that no matter how money is being used, using it differantly could see bigger returns. The differance between that theory and the reality is claimed as loss to the media.

There is some truth that a lot of us as investors would of course want the biggest possible returns on our money, as opposed to simply being content to make more than we put in. The issue of course is how things are represented, and of course claims that products are failing when losses of revenue are due to bad desicians made on the part of the company. For example if someone decides that a game or game console is going to make a billion dollars a year, so the company "banks" on that projection and borrows what will amount to 5 billion dollars over five years from something like Citigroup, and then five years later finds out that they only made 4.8 billion dollars... well that's not a 200 million dollar loss on the product no matter what they claim (and that is what they will claim) that's them being idiots. A product that established is of course going to be on the chopping block anyway in the gaming industry, but this kind of belief/justification is going to fuel why they aren't going to continue support even if it has a large following since the profits are going to be lower, and ultimatly they want 200 million dollars to pay off that loan, and something to show off so they can justify borrowing even more money.

Remember, while some companies do self-finance projects, a lot of business is done by borrowing from bankers nowadays. That's what things like Citigroup/Citicorp and other groups you hear about now and again apparently do (from my reading), they lend money based off of projections (typically "investing" the money you put into the bank). A lot of problems with business typically amount to them dealing with ultra-high end loan sharks and trying to count their chickens before they hatch. When such deals fail though, typially these same companies pass it off to insurance (which charges a premium based on how reliable the company usually is) anyway which raises our premiums on various things and suffer very little in the way of repurcissions. The CEOS and such rarely lose out on much from even the most disasterous gambles.

All this rambling aside (and I'm far from an expert, so no need to point out mistakes, this is intended to be general) the bottom line is that I'd take what Sony says with a grain of salt unless they decide to reveal all these finances to the general public. In a case like this it's probably mismanagement and bad gambling overall, assuming it's even true. Talking about how much money they expect it to make next year also says a lot about their attitude and the problems... they should wait until next year is over before they decide what those revenues are going to look like. Almost guaranteed someone is looking at that projection and itching to borrow money against it.

Problem is, all the revenue that PSN gets is internal. The money that you get from buying the games on there goes mostly to the producers and programmers while the service is borrowing money from inside the company. XBL has solved this problem with charging for their service, but a lot of people (me included) took that Live charge into account when purchasing a system to see how much money the "whole" system would cost, and those numbers are hard to factor into the overall purchasing trends of the system.

And yet Steam makes Valve buckets of money, without charging a subscription fee. Hmmm...

Simple because people HAVE to buy games on Steam/Find it convienent.

Not to mention the prices are far better than on XBL/PSN so not really a fair comparision.

Here's the problem: people don't have to buy games on Steam. They could buy games on Direct2drive, GOG, Gamersgate, Impulse... Meanwhile, 360 and PS3 gamers HAVE to buy via Live or PSN. The fact that Steam can make more money than the PSN despite being under competition and while being cheaper suggests to me that something has gone wrong.

Here's the problem, Steam doesn't actually set up all of the online play. Users make servers to host matches while XBL and PSN have to set up all of that themselves and front those costs. Steam is little more than a marketplace and the only reason the console version has markets is to try and bring in more revenue. Their comparison is a little unfair in Steam's favor.

 

[Irridium]

And yet Steam makes Valve buckets of money, without charging a subscription fee. Hmmm...

Simple because people HAVE to buy games on Steam/Find it convienent.

Not to mention the prices are far better than on XBL/PSN so not really a fair comparision.

Here's the problem: people don't have to buy games on Steam. They could buy games on Direct2drive, GOG, Gamersgate, Impulse... Meanwhile, 360 and PS3 gamers HAVE to buy via Live or PSN. The fact that Steam can make more money than the PSN despite being under competition and while being cheaper suggests to me that something has gone wrong.

You need Steam to play Fallout New Vegas, Black Ops, and Civilization 5. 3 very big name games. People either have to use Steam for them, or just not buy them. Or buy New Vegas/Black Ops on a console. And with more and more games requiring Steam as time goes on, more people will need to run Steam to play their games.

Three very big games: all available to buy from Direct2drive. Point stands.

And all require you to install and run Steam. At least thats what I assume that little "3rd party download required" image right under the user ratings is. And checking quite a few other games that aren't exclusive to Steam and seeing that they don't have that, I'd say its safe to assume thats what its referring to.

 

[Delusibeta]

And yet Steam makes Valve buckets of money, without charging a subscription fee. Hmmm...

Simple because people HAVE to buy games on Steam/Find it convienent.

Not to mention the prices are far better than on XBL/PSN so not really a fair comparision.

Here's the problem: people don't have to buy games on Steam. They could buy games on Direct2drive, GOG, Gamersgate, Impulse... Meanwhile, 360 and PS3 gamers HAVE to buy via Live or PSN. The fact that Steam can make more money than the PSN despite being under competition and while being cheaper suggests to me that something has gone wrong.

You need Steam to play Fallout New Vegas, Black Ops, and Civilization 5. 3 very big name games. People either have to use Steam for them, or just not buy them. Or buy New Vegas/Black Ops on a console. And with more and more games requiring Steam as time goes on, more people will need to run Steam to play their games.

Three very big games: all available to buy from Direct2drive. Point stands.

And all require you to install and run Steam. At least thats what I assume that little "3rd party download required" image right under the user ratings is. And checking quite a few other games that aren't exclusive to Steam and seeing that they don't have that, I'd say its safe to assume thats what its referring to.

He said "Simple because people HAVE to buy games on Steam". Suggesting that there are games that are *only* available on Steam. I took your examples, and pointed out that they were not *only* available on Steam. I realise that there's some exclusive games on Steam, but likewise there's some exclusive games on Direct2drive (Split/Second), GOG (Planescape Torment), Gamersgate (early Paradox games, I think) and Impulse (Stardock's games).

 

[Irridium]

And yet Steam makes Valve buckets of money, without charging a subscription fee. Hmmm...

Simple because people HAVE to buy games on Steam/Find it convienent.

Not to mention the prices are far better than on XBL/PSN so not really a fair comparision.

Here's the problem: people don't have to buy games on Steam. They could buy games on Direct2drive, GOG, Gamersgate, Impulse... Meanwhile, 360 and PS3 gamers HAVE to buy via Live or PSN. The fact that Steam can make more money than the PSN despite being under competition and while being cheaper suggests to me that something has gone wrong.

You need Steam to play Fallout New Vegas, Black Ops, and Civilization 5. 3 very big name games. People either have to use Steam for them, or just not buy them. Or buy New Vegas/Black Ops on a console. And with more and more games requiring Steam as time goes on, more people will need to run Steam to play their games.

Three very big games: all available to buy from Direct2drive. Point stands.

And all require you to install and run Steam. At least thats what I assume that little "3rd party download required" image right under the user ratings is. And checking quite a few other games that aren't exclusive to Steam and seeing that they don't have that, I'd say its safe to assume thats what its referring to.

He said "Simple because people HAVE to buy games on Steam". Suggesting that there are games that are *only* available on Steam. I took your examples, and pointed out that they were not *only* available on Steam. I realise that there's some exclusive games on Steam, but likewise there's some exclusive games on Direct2drive (Split/Second), GOG (Planescape Torment), Gamersgate (early Paradox games, I think) and Impulse (Stardock's games).

Oooooh, I see now.

Sorry, I misunderstood.

 

[mjc0961]

It's not hard to imagine the fairly enormous costs involved it keeping a network that big up and running. It's also not hard to see why Microsoft made the decision very early on to charge people for the ability to play online.

Or why they made the decision to raise the price. Which they can do with less angry people than Sony would have to face if they tried to implement a fee now.

And personally I think there are some things Sony could be doing to improve the Playstation Network experience. I know I hate it when I'm browsing the Playstation Store and the controls lock up for a few seconds and I can't be the only one. It wouldn't be that big a deal but when even the Wii Shop Channel doesn't do that I have to give Sony a funny look and ask them what the fuck they're doing over there. Same thing with their update times, why doesn't the store update on a regular schedule? "Tuesday whenever we feel like it" is terrible, if a retail store did this, they'd go out of business because people would get pissed off and go elsewhere. And that's pretty much what I've done with the Playstation Store at this point. Unless something is only on the Playstation Store, I'm buying it elsewhere to support a platform that doesn't have its head up its ass.

Then of course there is the online play, is it really that hard to get an "avoid player" button like the 360 has? No more co-op games on PS3 for me if a 360 or PC version is available, that's for damn sure. No way to avoid the griefers on PS3 and leaving the game only to have it place you back in the same game you just left when you search for a new one or have the person you were trying to avoid show up a few minutes later in your new game just ruins the whole experience for me.

Of course then there is Playstation Plus which has been nothing but a joke so far. It's basically like waiting for stuff to go on sale like it normally would over time, except you get to pay $50 a year for the privilege of waiting. Take this month, they are giving away Sam & Max: The Devil's Playhouse for free. Well good for you Sony, except as a fan of Sam & Max I had it preorded back when it was just about to come out knowing full well that I could get it for less if I had waited, just like any other game. And rather than pay you $50 to wait for it to be cheaper, I've had plenty of opportunities to get the game for a lower price on Steam and directly from Telltale if I had been waiting for such a thing, and I would have saved money. Sure you can claim the savings pile up over time, but that's your scheme with this thing: We drop the $50, and then buy stuff at discounts that we didn't really want and get free stuff we definitely didn't want in an attempt to get our $50 back and assure ourselves we didn't get screwed.
Oh and of course I can't forget the beta access they give, because if there's one thing I love it's playing broken games. If I wanted to do that I'd go get a job as a game tester and at least get paid for my troubles, screw doing it at the price of $50 a year.

Basically I can see why Sony is losing money on PSN right now, and if they don't make some improvements quick, they aren't going to be gaining any more of my money. Which is quite sad really because I want to love my Playstation as much as I love my 360 and PC, but Sony really makes it hard these days to love them like I did back with the PS1 and PS2.

 

[Jumplion]

Of course then there is Playstation Plus which has been nothing but a joke so far. It's basically like waiting for stuff to go on sale like it normally would over time, except you get to pay $50 a year for the privilege of waiting. Take this month, they are giving away Sam & Max: The Devil's Playhouse for free. Well good for you Sony, except as a fan of Sam & Max I had it preorded back when it was just about to come out knowing full well that I could get it for less if I had waited, just like any other game. And rather than pay you $50 to wait for it to be cheaper, I've had plenty of opportunities to get the game for a lower price on Steam and directly from Telltale if I had been waiting for such a thing, and I would have saved money. Sure you can claim the savings pile up over time, but that's your scheme with this thing: We drop the $50, and then buy stuff at discounts that we didn't really want and get free stuff we definitely didn't want in an attempt to get our $50 back and assure ourselves we didn't get screwed.
Oh and of course I can't forget the beta access they give, because if there's one thing I love it's playing broken games. If I wanted to do that I'd go get a job as a game tester and at least get paid for my troubles, screw doing it at the price of $50 a year.

Eh, I have PS+ and it's interesting so far. You get 4 free games every 2 or whatever weeks I think (yeah, those update times are atrocious, I'll totally give you that), so I've personally probably outweighed the initial price of $50 already. And they're giving away all 5 episodes of the Sam & Max things, not just The Devil's Playhouse. Early access to beta's and/or demos means you get access to games before anyone else, and contribute to their quality in the process. That alone probably isn't worth it to most people, but the free games you get every whenevertheyfeellikeit are pretty nifty. And don't give me the crap about "You're just renting the games!", if you keep playing one of the free games for over a year you might as well buy the damn game already. PS+ also lets you test new features not yet public, and obviously some things that are exclusive to them.

I could claim that the savings pile up over time because that's the point. I think PS+ is more for the "hardy-corey" kind of gamers, but I can see why some would be reluctant to go with the plan.

But, anyway, on topic; that's a shame I suppose. The question is how much PSN is, apparently, losing money. So long as they keep online play free and keep the quality (yes, online is just fine with PSN) then I'm fine.

 

[AzrealMaximillion]

Yet they'll never charge for their online. They'd be stupid to do so. What they need to do is give people an actual reason to buy PS+. The free games you get are garbage, early demos and access to betas/features really shouldn't be under PS+. Maybe having access to game developers in the form of live Q&A. Maybe actually releasing PSOne classics that are good. Maybe actually having the option to give direct feedback to developers upon beta testing games. That way they could put out a beta test fairly long before a game's release and have potential consumers give their advice on making the game better.

 

[pretentiousname01]

I'll have to remember this next time someone brings up the psn vs xbla arguments.

Companies aren't in business to loose money that is for sure.