In the past, the video game industry has generally relied on selling consoles during their initial first few years on the market at a loss while retaining some profits from license fees on each software sold. Eventually with enough consoles in consumer hands, not only would the intake from licensing fees dramatically increase, but money could finally be made from each sold console due to component costs decreasing as well. This scenario played especially true during the PS3 era where the console launched at $599, a price seen as too high for many gamers and Sony was still losing north of $300 on each unit it pushed out.
Unsurprisingly, it turned out to be quite the turbulent time for PlayStation during that console’s lifespan and things didn’t really get better till PS4’s launch, when Sony vowed to make a profit on each unit sold from day one. This is notably important for Sony because unlike Microsoft, they don’t have a cash cow like Windows and Office that they sell to tens of millions of people a year and in turn, can help float their gaming division.
Some might wonder why they should care about Sony making a profit from day one outside of the obvious reason that an unprofitable company or division is eventually shuttered. By making a profit (and hopefully a healthy one on each console sold), Sony has been able to invest in things they couldn’t do before like PlayStation VR which in many ways is like a new console. On top of PS VR which just launched with a massive 30 games (many which were backed financially by Sony), we’re getting the PS4 Pro in just a months time and Sony has been able to aggressively provide services like PS Vue and PS Now. Without a healthy profit margin, none of that would be possible because there would be no money to invest into additional ventures.
So luckily for you and I (and of course Sony), PS VR will be profitable from day one. Brian Crecente writing for Polygon about his time with Shawn Layden, chairman of Worldwide Studios at Sony Interactive Entertainment and president of Sony Interactive Entertainment America:
Layden declined to say if PlayStation was considering an upgrade path for the PSVR to match the PS4 and its upcoming PS4 Pro release. Though he did note that Sony is making money on each PSVR headset sold, seemingly lessening the need for a redesign in the near future.
It’s likely that the profits on PS VR are nothing close to that of PS4 but the fact that there is some profits is a healthy sign for Sony. This shows not only a clear focus from management that is executing aggressively and smartly on how products are engineered and ultimately made, but it’s also a testament to the talented team that’s helped bring PS VR to life. Another way to think about it is this: PS VR not only costs less than its competitors, but is profitable (meaning wiggle room on the price though I suspect it to be less than $50) and more importantly, is more comfortable than the Rift and Vive. It takes far less engineering effort to create something that’s better (read: more comfortable, in this scenario) and have it be more expensive than to create something that costs less, yet beats out its more expensive rivals.
That’s a testament to the management and engineering team behind PS VR and cannot be achieved once the product is done where it must now be ‘made comfortable.’ Instead, the design from the beginning had to take comfort and cost restraints into consideration and Sony has clearly achieved that. I know many readers are at times worried about the reliance of Sony on PlayStation but all these things that might seem small or trivial only reaffirm my belief that what’s happening at PlayStation is one of the best things that could have happened to Sony. After all, it wasn’t that long ago when Kaz Hirai, now Sony CEO, led PlayStation and his move to lead the entire company has helped them transition out of some rough times as he’s made some tough, but correct decisions to shutter or sell divisions that weren’t working, like VAIO.
If anything, I hope that these types of successes set the precedence for more people from PlayStation to eventually graduate to take on other roles at Sony, because their kind of thinking is what the company needs. Ultimately, the more profitable any division at Sony is, the more able they are to invest and bring better talent on board which translates to better products for you and me.
Do you think the PlayStation of today is very different than the PlayStation we saw during the PS3 era?