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Hirai: PS4 can earn more profit than PS2

Hirai: PS4 can earn more profit than PS2

Fri 23 May 2014 7:06am GMT / 3:06am EDT / 12:06am PDT
HardwarePublishing

Sony CEO claims that new console is "likely" to outperform its hugely popular antecedent

Sony CEO Kaz Hirai chose to accentuate the positive at a recent corporate strategy meeting, backing the PlayStation 4 to earn more profits than the PlayStation 2.

At a time when Sony is losing money at a rate that is alarming investors, the PlayStation 2 era looks like a golden age. At a corporate strategy meeting today - attended by Impress Watch - CEO Kaz Hirai claimed that the PlayStation 4 could be even more fruitful for the company.

"It is likely that PS4 will become the platform which exceeds the profits earned with PS2," he said, according to Eurogamer. Hirai also stressed the importance of both unit sales and PlayStation Network services in achieving that goal.

The PS4 has sold more than 7 million units worldwide since it launched last year, but the PS2 was the best-selling console of all time, shifting around 155 million units in a 12-year lifecycle.

It seems unlikely that the PS4 will top that record, but the online aspects of the console have allowed Sony to unlock revenue streams that simply didn't exist when the PS2 launched in 2000.

The larger question is what will happen to Sony as a whole between now and the end of the PS4's useful life. Sony Corp. lost $1.24 billion last year, with many of its core businesses struggling to find stability after periods of upheaval.

Sony expects further losses (around $500 million) next year, and it may have to endure further pressure to break up the company, just as it did in May last year.

13 Comments

Christian Keichel
Journalist

643 880 1.4
It seems unlikely that the PS4 will top that record, but the online aspects of the console have allowed Sony to unlock revenue streams that simply didn't exist when the PS2 launched in 2000.
And on the other side the about 1.5 billion games were sold for the PS2, this won't be achieved by any console in the future and as online aspects don't come for free, running an online infrastructure costs a lot of money, I doubt that the additional revenues from digital services can make up the shrinking software sales (even more if compared to the PS2 times).
PS+ is nice, but Sony has show me how they want to make money, by giving month after month several games away for free to everyone who is willing to tpay hem $5 every 30 days or $50 a year. If you would even buy only 25% of the games you get on PS+ it would cost you several hundred dollars per year. But maybe that's just another aspect of the race to the bottom that was discussed here recently.

Edited 1 times. Last edit by Christian Keichel on 23rd May 2014 9:38am

Posted:3 months ago

#1

Jakub Mikyska
CEO

199 1,091 5.5
Popular Comment
@ Christian:
It goes like this:

Everybody: Console manufacturers need to change their strategy and introduce new business models, or they are dead.

Sony and Microsoft change their strategies, introduce new business models.

Everybody: You have changed and that is bad. We want back the good old consoles we knew!

Posted:3 months ago

#2

Christian Keichel
Journalist

643 880 1.4
@ Jakub

Everybody: How do you want to make money by giving games away for free, won't this lead to lower sales?

Console Manufacturers: Don't worry, people will buy more games, if they get games for free!

Everybody: Why

Console Manufacturers: Don't worry, everything is fine

Everybody: But there are fewer games released every year, then the year before. How do you want to make more money then before with people just paying you an additional fee of $50 per year? Because this is not even the price of 1 new AAA game and you have to pay the costs of your online services with that money too.

Console Manufacturers: Don't worry, everything is fine

Edited 2 times. Last edit by Christian Keichel on 23rd May 2014 10:02am

Posted:3 months ago

#3

Jakub Mikyska
CEO

199 1,091 5.5
Popular Comment
Let's not turn this into an argument. I was just feeling funny today :-) The thing is, we had several games for free in the PS Plus and it made us money. We had games in PS Plus discounts and it boosted sales. We have games outside of the PS Plus ecosystem and they keep making money. PS Plus works.

I won't argue about the race to the bottom. That is a plague and perhaps the biggest danger to the whole industry, a shortcut to another meltdown. But PS Plus is not part of it. It's like subscribing to a cable TV.

Posted:3 months ago

#4

Christian Keichel
Journalist

643 880 1.4
Don't wont to argue with you, no problem :-) I believe you, when you say, having games for free in the PS Plus made you money, no doubt about it, the question is, does it make Sony any money ;-)

I don't think that it can be compared with a cable TV subscription, because the cable stations don't try to sell me individual movies besides the subscription fee.

Edited 2 times. Last edit by Christian Keichel on 23rd May 2014 10:23am

Posted:3 months ago

#5

Jakub Mikyska
CEO

199 1,091 5.5
Oh Sony does make money on Plus. There's over 7 million PS4s and nearly everybody has PS Plus (according to Sony). Then we have subscribers on the PS3 and Vita. So, let's say that there are ten million PS Plus subscribers. At $50 a year (more, if you pay quarterly), Sony banks half a billion dollars on PS Plus, give or take.

If PS4's lifetime sales will be somewhere between 70 and 100 million and just half of those people will have PS Plus... well, that's a lot of money every year. And that's just a part of the PS4 ecosystem.

Posted:3 months ago

#6

Christian Keichel
Journalist

643 880 1.4
Sure, but these $500 million dollars are revenues not profits, from this revenues they have to pay the free games and the online infrastructure they provide. And as it is more then likely that people buy fewer games, if they get games for free, it has to be seen, if it's $500 million additional revenues, or only $500 million revenues that have to compensate lower games sales revenues in general.

Edited 1 times. Last edit by Christian Keichel on 23rd May 2014 12:24pm

Posted:3 months ago

#7
I think the trick towards a successful platform this generation is sheerly about accessible popular stable platform, where a majpority of your friends are easily found, to share and game experiences on either solo or together. So whether it involves some element of freebies, or a 2 for 1 (but really shaving only 20p off) - its generating that good feel good factor, that can help steer the platform into a win for the longhaul.

Posted:3 months ago

#8

Christian Keichel
Journalist

643 880 1.4
There's over 7 million PS4s and nearly everybody has PS Plus (according to Sony).
Just looked up the numbers, it's not nearly everybody, it's only half of the PS4 users
The network functions that are possible with PS4 continue to evolve by the day. Approximately half of PS4 users are registered to the PlayStation Plus subscription service, while the number of active users on the PlayStation Network and Sony Entertainment Network exceeds 52 million worldwide.
http://www.sony.net/SonyInfo/IR/info/strategy2014/pdf/speechE.pdf

As most PS4 owners are coming from the PS3 it's unlikely this number will grow significantly over the coming years, but right now Sony isn't making a profit with it's games division, regardless of the 52 million PS Plus users paying $50-$60 every year, generating revenues of more than $2.5 billion in 12 months.

Edited 3 times. Last edit by Christian Keichel on 23rd May 2014 2:27pm

Posted:3 months ago

#9

Jeff Kleist
Writer, Marketing, Licensing

306 171 0.6
This is obvious. The PS3 was sold at a tremendous loss the first few years. Launch systems were about $800 each to roll off the line, $100 of that being the Blu-ray laser, which had abysmal yields. On top,of that, huge numbers of those PS3s never saw a game as it was the cheapest Blu-ray player on the market.

So given the bath they took, I think it's a foregone conclusion since PS4 is sold close enough to cost Fromm the get-go

Posted:3 months ago

#10

Payton Liu
Production Support Analyst

15 23 1.5
IMO, Sony's main problem is - fighting in too many industries.

Let me see - household electronics (major product line - TV), personal musical electronics, professional audio device, personal computers (laptops), console gaming (shining gold here), insurance (Japan), music publishing, movie studios (recent James Bond movies are good examples), mobile device (smart phones & tablets), etc.

Sony has to compete with every industry leading (or major) companies, such as Sennheiser (audio), Samsung (another multi-industry company), Apple (personal musical device and music publishing; Sony's smart phones are too small to be considered as a competitor to iPhone, I'm afraid.), Microsoft & Nintendo, Times Warner (movie), Lenovo (PC), etc. To name a few...

Glad to know that Sony is planning to sell off PC devision, which has been a profit loss operation for years.

As for PS4, just keep those exclusive games coming from Sony's 1st party studios. (The PS2 era of 3rd party exclusive games has long gone, most are multi-platform now.) In addition, provide supports to 3rd party studios for PS VITA. (All Nintendo's handhelds built on the success of 3rd party games, I think the same can be applied to VITA.)

Edited 1 times. Last edit by Payton Liu on 23rd May 2014 6:12pm

Posted:3 months ago

#11

Rodrigo Almeida
Organizer/Editor

2 0 0.0
Its shame the VITA hasn't been very succesful in the west, its a wondeful handheld. Lately i feel more interest for Vita games than AAA releases for home consoles. Maybe the rumored upcoming bundle of Ps4+Vita will increase the interest in handhelds in the west.

Posted:3 months ago

#12

Jeff Kleist
Writer, Marketing, Licensing

306 171 0.6
"Adult" handhelds are done in the west, and the DS market is shrinking.

Nintendo is a $249 ruggedized iPad. Mini away from disaster. Without drastic changes, their future like a lot,like the Vita

Vita is a beautiful piece of hardware, but it's a product five years too late. Ironically just like iOS GamePad support. Had that come in with the iOad, and the controllers priced competitively, instead of double console equivalents, they might have had something.

Posted:3 months ago

#13

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