Sony (quotes): console cycle mitigated by mTX revenue, userbase, ARPUs

[Deeke]

A bit ago DualShockers ran a story about Sony exploring microtransactions. I listened to the call and transcribed the following.

Before we get into it, I'd like to discuss what I think this means for Sony. Essentially the company is highlighting the current shift towards digital--big userbase, subscriptions, microtransactions, etc.--and how these recurring revenues are a boon for its business. This is nothing new for Sony, and it's Games & Network Services segment has been quite potent over the last few years.

When Sony CFO Kenichiro Yoshida says ARPUs, mTX, digital and subscriptions are "mitigating factors" to the console cycle, he essentially means these things are alleviating many of the risks associated with selling hardware--ie selling at a loss, etc.

Since these things are now so important that the "axis of the console" is shifting, this tells me the new PS5 may be another iterative system and not a full reset to ensure Sony doesn't disrupt the platform it's created, nor the current trajectory of the industry.

Now onto the quote!

Sony Chief Financial Officer Kenichiro Yoshida during the company's Fiscal Q2'17 earnings call:

"PlayStation is a console, that's the main thing, the foundation. With the cycle of the console, the performance business results may vary along the axis of the console. 2 trillion yen was the sales for this fiscal quarter, more than half of that most likely will come from Network and for this fiscal year the unit sales are approaching the level of last year. There are mitigating factors that affect the console cycle so far.

For one thing, the business model used to be B2B royalty model, but now it has shifted to a direct-to-consumer model.

And in our business, main access to hardware is important, but rather than hardware, the number of users is getting more important--monthly average users, numbers of PS Plus subscribers, etc.

And also how much time are they putting into this console--the ARPU? So the axis seems to be shifting from hardware to userbase.

Thirdly, there's a change of revenue cycle. Clearly, in-game sales, for example: after the customer's purchased the disc or after they download the software, then they can purchase items or offerings. So the in-game sales proportion is increasing.

With all these points, the console cycle is being mitigated by these factors."

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[Heckler456]

I hope they just keep it to backwards compatibility or something. Having the PS4 be the base model for like 10 years or whatever would be a nightmare.

 

[Deleted member 249]

Yeah, it sounds like the expectation of PS5 being a PS4 Pro Pro is right. Not that I necessarily mind that.

 

[Liliana]

If PS5 is just an iterative console I don't think that will go well for many people.

 

[Falcon511]

PS5 being a irritive console isn't a bad thing at all. I think it's a great idea. The jump we are expecting in graphics is getting smaller every year. Sony would be smart to just stick with x86 with the same OS and such. Make easier for users. Like a smartphone. All your previous software just works on the new system. MS wants to do this and are with OG and 360 BC.

 

[gcwy]

If PS5 is just an iterative console I don't think that will go well for many people.

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If 'iterative' implies an even weaker generational jump in performance, then it's going to be a problem for me.

 

[ArcaneFreeze]

If PS5 is just an iterative console I don't think that will go well for many people.

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PS5 being a irritive console isn't a bad thing at all. I think it's a great idea. The jump we are expecting in graphics is getting smaller every year. Sony would be smart to just stick with x86 with the same OS and such. Make easier for users. Like a smartphone. All your previous software just works on the new system. MS wants to do this and are with OG and 360 BC.

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thisisera.gif lol

Not entirely sure how I feel about PS5 being an iterative console, I could see it going both way honestly. I still have my PS4 Slim and dont have any inclination to upgrade to a Pro since the OG runs everything even if it has less bells and whistles. Unless an iterative PS5 that still has games that work on PS4 has something compelling enough for people to upgrade aside from power I dont see it doing gangbusters. Although I'll hold my tongue until i see how Xbox One X performs, if it does well then there may be a larger market for these iterative consoles than I thought.

 

[Deleted member 437]

Not resetting the playstation userbase is fucking music to my ears.

Firstly, I want ALL my PS4 shit playable on the PS5.

Secondly, and maybe this is a bit tougher, but I'd like a redesign of the OS but keep all the features.

 

[ArmsofSleep]

More credence to the thought that Sony won't be releasing a truly new console anytime soon. In fact, I think the days of traditional console cycles are over. Incremental improvements over time will be more commonplace, with publishers wanting to create thriving ecosystems that can make money on the same console for years. No sense in throwing away an Overwatch community that makes you money on the PS4 just because you want a PS5 to drop 3 years later.

 

[black070]

PS4 BC is pretty much guranteed for the PS5, which is great news.

 

[BadWolf]

So my current PS4 would be able to play PS5 games?

I'm okay with that.

 

[Heckler456]

Not resetting the playstation userbase is fucking music to my ears.

Firstly, I want ALL my PS4 shit playable on the PS5.

Secondly, and maybe this is a bit tougher, but I'd like a redesign of the OS but keep all the features.

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But that would imply that they'd still use the base PS4 as the basis to develop games for though... I'd personally rather not be stuck with that for 10 years or whatever.

That being said though, playing devil's advocate to myself: Games take a lot longer to develop too seemingly. I think it's fair to say that most if not all developers have gotten less games out on these platforms than they did in previous generations, right? Maybe that's something to keep in mind too; something that would justify a longer generation.

 

[ContraWars]

I won't buy a PS5 unless it lets me play all the old platform content I bought over the years. Unite the PSN platforms similar to what Xbox is doing.

Vita, PSP, PSOne, PS2 Classics, PS3 games. PS4 games. All of them should be emulated and available, even if limited to the digital store purchases.

 

[MatrixMan.exe]

The PS5 being an iterative console in no way means it'll be weak or not worthy of being called a "next generation system". It just means that it will not completely abandon the architecture and ecosystem that the PS4 created. It's sensible business, considering how much revenue they're making from software and subscription sales. I still expect the next system to be named PS5, and for it to be noticeably powerful, considering it's launching at minimum 2 years after the Xbox One X.

I also don't expect PS5 games to be playable on PS4 either.

 

[Dorfdad]

What I don't understand is that everyone is saying the cpus they used are bottlenecking the systems from advancing but I'm not sure why. What is preventing existence by games from running on a new variant of cpu down clocked? I'm sure it's easier to get code running on a new CPU than and entirely different GPU? (I'm not an engineer so)

I understand that it would require a new design of a chip I suppose do to size etc but I'm not sure why a 3.2 gig CPU isn't available for this kind of mass market.

 

[DriftingSpirit]

PS4 BC is pretty much guranteed for the PS5, which is great news.

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This is the biggest takeaway for me.

The power stuff will be fine.

 

[Hexa]

PS4 Pro is about 2.5x PS4 in terms of GPU.
The next iteration, let's call it PS5, will probably be 2.5x that. That means a PS5 that's about 6.3x PS4, which is perfectly reasonable for generational jump. But because it was done incrementally, I don't think it'll have as much of an impact. Hence, I think marketing the next generation may be somewhat difficult.

 

[i-hate-u]

I still want to see the PS5 branding, even if it ends up being PS4 Pro Pro.

 

[ianpm31]

Just boost the CPU tremendously and all ps4 games are bc. I'll be there day 1 for ps5

 

[Vic Damone Jr.]

This is gonna be another let them dream situation lol

 

[Shock32]

as long as games on the PS5 aren't held back by the PS4, bring it on.

 

[headspawn]

More power to them.

There better be a Bloodborn patch on PS4 Pro X.

 

[Trago]

Oh, so BC is pretty much set in stone. Good.

 

[CHC]

PS4 BC is pretty much guranteed for the PS5, which is great news.

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In an increasingly closed and digital ecosystem, it only helps publishers and console manufacturers. Look at Steam - I mean, just last week I bought a game from 1995. Backwards compatibility through further Playstation iterations ensures sales pretty much forever. Even if they are small, the costs will have been paid long ago. The rest is gravy.

 

[Orayn]

PS5 will definitely be an extension of the PS4 ecosystem. I'm expecting very similar architecture, full PS4 BC, and likely a very similar OS. I could even see some games being forward compatible, basically the same as cross gen games in 2013-2014 but a single SKU.

 

[Monty Mole]

If 'iterative' implies an even weaker generational jump in performance, then it's going to be a problem for me.

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I'd imagine it'll be a perfectly sizeable jump from the OG consoles, but obviously the leap won't seem as significant from the mid-gen iterations.

 

[Wandu]

I still want to see the PS5 branding, even if it ends up being PS4 Pro Pro.

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This. I have always bought PlayStation, but I have always liked their branding every iteration of their consoles.

 

[Blackie]

Sony seems to be on a nice financial upswing from years ago. I just wish they would make their next system portable/modular...

 

[Socrates]

BC is fine, but they must make a big jump in CPU power.

 

[v_iHuGi]

Ps5 won't be a interactive console, Cerny already debunked that and Cerny is the Architect so there you have it.

 

[Heckler456]

Ps5 won't be a interactive console, Cerny already debunked that and Cerny is the Architect so there you have it.

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Interactive meaning?

 

[ContraWars]

Interactive meaning?

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Clearly he means iterative, since it was already mentioned above.

 

[DeuceGamer]

I'm fine with this. I read it as they are just going to continue with what they have built so far. They want to make sure the games will still be compatible with PS5, not that PS5 games will work on a PS4.

I also don't think this means anything in relation to the power of the PS5, though that's less of a concern for me personally.

 

[Mass Effect]

Sony (and MS, Nintendo, and Valve, etc.) grab 30% off MTX too, correct?

 

[Heckler456]

Clearly he means iterative, since it was already mentioned above.

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Wasn't clear to me, but hey, alright.

That's good to hear. If the only think the article is saying is that we'll remain in the same ecosystem, and have backwards compatibility - that's amazing! Staying shackled to 2013 hardware sounds not that great, for the people playing the games at least.

 

[ContraWars]

The whole legacy of playstation is huge, and I don't want to reset my collection again. I'm on PC platforms with thousands of games I can play anywhere on my hardware choices, I'm on Xbox now with hundreds of games going back 2 generations.

I have PSN games I can't play anymore, and I want to play all of them again on a new piece of hardware. Without this paradigm shift, Nintendo is losing me, Playstation is losing me.

 

[Shpeshal Nick]

If PS5 is just an iterative console I don't think that will go well for many people.

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No one outside gaming forums will know the difference. It's perfectly fine and it's probably better for devs.

 

[kiguel182]

It makes a lot of sense to move to a platform that keeps people engaged instead of keeping things hardware locked.

People want to play games for longer times and the platform has to be more flexible. An hard reset every x years makes no sense in the current climate because you want to keep serving content to your costumers for as long as you can.

 

[Sanctuary]

Until every new release takes full advantage of the Pro's power, I have no idea how any of you could support yet another iterative upgrade, especially since the current iteration's support has been questionable so far.

 

[Venom]

Since these things are now so important that the "axis of the console" is shifting, this tells me the new PS5 may be another iterative system and not a full reset to ensure Sony doesn't disrupt the platform it's created, nor the current trajectory of the industry.

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They've already confirmed that PS5 will be a completely new generation though. It's been confirmed multiple times. Like they can't say it any clearer yet people still go off on tangents and interpret what they're saying to mean something else.

You're taking a short snippet of info and literally running away with it.

 

[Deleted member 5764]

Yeah, it sounds like the expectation of PS5 being a PS4 Pro Pro is right. Not that I necessarily mind that.

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Yep! I'm pretty ok with that idea as well. Expecting a generational leap from PS4 Pro's current position seems like a tech fantasy.

 

[Deleted member 249]

They've already confirmed that PS5 will be a completely new generation though. It's been confirmed multiple times. Like they can't say it any clearer yet people still go off on tangents and interpret what they're saying to mean something else.

You're taking a short snippet of info and literally running away with it.

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I mean, a new generation can still build on an existing generation, there is no law stopping that from happening.

 

[UnNamed]

It's clear that PS5 will have a lot in common with PS4.
If we see previous console, every time was a different architecture:
PS1:MIPS
PS2:MIPS/In House Architecture (IHA)
PS3:Power/IHA
PS4: X86
Since IBM is no longer feasible, MIPS is too old, in-house-arch is basically impossibile, X86 is the only way.
Also, even with those weak jaguar cores, APU it was a good choice as a CPU and GPU, i don't think they want to have separate CPU and GPU for the next gen.
For those reason, i think PS5 will not differ to PS4 in terms of architecture.

 

[StrikeFirst117]

If the PS5 is an iterative console and just has increased specs but not at a generational level then it won't be a problem. Though I'm a little concerned because the support for the PS4 Pro up to now has been OK at best.
Would developers really be able to handle yet another varying spec sku for optimisation? I suppose if it runs the same OS with a similar architecture most developers would be able to work with it, though this time it needs BC with the PS4 to keep them inline with each other.

 

[Venom]

I mean, a new generation can still build on an existing generation, there is no law stopping that from happening.

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What? Obviously it'll build on from the Generation prior. That's the whole point of generations and literally the point of what the conference call was about. They've realised there making more money in PS+ and digital game sales than they are from hardware and physical sales. They want to make sure that when the next console comes they can retain customers to PS+ and PlayStation store.

I advise people to read the associated article before jumping on the crazy train the OP has needlessly created.

This gen was about making money on hardware sales from the start (3 months in and PS4 was profitable). In this call they are saying that the focus on making money from hardware isn't that important anymore because they are making more on PS+ than on the hardware itself. They want to focus on retaining PS+ customers to continue making money that way.

That's literally what the article and call say. Nothing more nothing less. There's nothing to interpret, no hidden secrets.

 

[Deleted member 249]

What? Obviously it'll build on from the Generation prior. That's the whole point of generations and literally the point of what the conference call was about.

I advise people to read the associated article before jumping on the crazy train the OP has needlessly created.

This gen was about making money on hardware sales from the start (3 months in and PS4 was profitable). In this call they are saying that the focus on making money from hardware isn't that important anymore because they are making more on PS+ than on the hardware itself. They want to focus on retaining PS+ customers to continue making money that way.

That's literally what the article and call say. Nothing more nothing less. There's nothing to interpret, no hidden secrets.

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Sorry, my point is, there is no reason the PS5 hardware can't iterate on the PS4 hardware, and still be a new generation (GCN->Wii->Wii U is a good instance of this happening before)

 

[LordofPwn]

iterative is the smart way to move forward. should cost less R&D and be easier for devs to transition between gens knowing that if they're building a project for PS4 they can easily move it onto the PS5 without major issues. though I'm sure there are a few devs already working with those benchmarks now

 

[Dezzy]

I thought to myself how cool would it be if instead of calling the next console PlayStation 5, they went with PlayStation V (PSV), but then I remembered the PS Vita... Bad idea.

I think that Sony going with a new system that uses the same architecture as the PS4/Pro but with vastly improved hardware specs would be a great move. You could have PS5 only games that took full advantage of the hardware, but still keep PS4 games fully compatible.

 

[GillianSeed79]

This is cool but for someone on the fence about buying a Pro it makes me want to wait for a PS5 since realistically PS4's lifespan will at the absolute most only be another 3 years.

 

[Venom]

Sorry, my point is, there is no reason the PS5 hardware can't iterate on the PS4 hardware, and still be a new generation (GCN->Wii->Wii U is a good instance of this happening before)

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Nah and look at what happened when Devs eventually got fed up with the lack of power in the WII U. It failed big time. If that happened to Sony do you think they'd have the capital to try and reset a whole generation as quick as possible.

What I meant is this, the conference call had nothing to do with the PS5, it's about the online ecosystem they've built and want to expand in the future due to the amount of money being made.