Sony’s Perfect Playstation Plus Trifecta
It’s abundantly clear that Playstaion Plus offers ridiculously good value to the consumer but generally speaking; a gain on the one hand is a loss on another. In this article we take a look at who, if anyone, is taking the knock for Playstation Plus. Is it possible that Sony has created a win-win-win scenario?
When Sony first announced Playstation Plus the first thing that came to mind was concern; concern over another useless, money making, limp subscription service. When it launched however it was clear that Sony meant serious business. The games being given away were high quality, well known and highly regarded titles. Still, doubt lingered and the general feeling was that it was a showy start and would fade quickly with lesser titles to follow. However this did not happen; month after month Sony have been offering major titles for Playstation Plus subscribers.
Then came the launch of the Playstation Vita. What was this we were hearing? Our Playstation Plus subscription includes monthly offerings for the PS3 and Vita, this was too good to be true. But again Sony shut out the doubts with excellent offerings each and every month for the Vita as well. And now they are doing it again with the PS4, sure its titles are smaller ones but given the number of games available it’s totally understandable.
From the disbelief came confusion. How can Sony be offering a service like this and not be losing a small fortune each month? Why are developers giving over their games to Sony for them to give away for free? How much is Sony paying these developers if anything? Is this actually one big con that the subscribers have not yet cottoned onto?
The answer, dear readers, is that Sony have in fact created the ultimate WIN-WIN-WIN situation; it simply boils down to numbers, timing and economies of scale.
A WIN for the subscriber:
Let’s be blunt here; if you have a PS3, Vita or PS4 and don’t have Playstation Plus you are a fool. The value proposition is insane even with a single device, if you have all three then it’s simply off the chart. For $50 a year the sheer amount of titles you will receive could easily approach $1000 worth. Since getting my Vita I have not purchased a single game for it and yet I’ve gone through many titles I would have bought anyway. Uncharted GA, Gravity Rush, Guacamelee, Soul Sacrifice, Touch My Katamari, Unit 13 and many others.
For PS3 things just get better with the only downside being that the backlog has gone from “tower of shame” to “uncontrollable stockpile”. And for February 2014 Sony is giving away Bioshock: Infinite, certainly one of games of the generation. So good is the value of Playstation Plus that I have decided not to sell my PS3 after buying a PS4, I will download every free game on Playstation Plus and simply give the device to my kids to play on. Talk about a low cost entry into excellent gaming for them.
Offerings on the PS4 will start off much slower naturally due to the newness of the console and the lower number of software titles available. Yet having said that I rank Resogun as one of the best games I’ve played in a while, Don’t Starve is quite quirky and Outlast looks like an absolute winner. PS4 has the additional downside\need that without Plus you cannot play online. Overall however the consumer is scoring immensely with Plus, $50 will get you a single game from retail.
A WIN for the developers:
Giving away anything for free is never an attractive proposition, especially when it’s a product that has high costs and long development times. It has been confirmed by Sony and certain studios that money does indeed change hands, how much money however remains a mystery. So the developers lose out on potential sales but make something on a once off sale to Sony instead. Naturally there are bean-counters on each side working out how to balance the numbers in their favour but from a laid-back look at the numbers we can at least state the following:
Sony offers games that have been on sale for a decent period of time. Games are very front loaded with sales, possibly to the tune of 80%-90% of total sales happening in the first year. Of course there are exceptions; consider the initial launch of a platform’s titles like Resogun which had zero time at retail and certain games with longer legs in sales like Gran Turismo. However we are sure that the Resogun developers got a much bigger payout than others and we have not seen Gran Turismo out on Plus yet.
We have to generalize a bit but we feel that for the vast majority the rules hold. What this means is that these developers enjoy their majority of sales at retail and then receive a final lump-sum payout from Sony when sales are falling off. In addition to that they get a much bigger pool of consumers enjoying their product than they would have, which is as good as free advertising. Lastly they get into Sony’s good books, which is never a bad thing.
A WIN for Sony:
Sony have built an infrastructure at their cost for Playstation Plus and maintain and advertise it. Sony pay developers for titles for Playstation Plus. The only avenue for Sony to recoup the costs and to make money is through the subscription fee and the attraction of players to their platforms because of Playstation Plus.
Unfortunately we have to go into a bigger pit of guess work due to a lack of numbers regarding Playstation Plus subscribers. We are going to take a very conservative road here for the sake of proving a point, we are not going to total up device sales. Instead we will assume that the PS3 total sales is the highest number Sony can possibly attain. The PS3 currently sits at 80 million units. Even if only 10% of those owners have purchased Plus Sony are looking at taking in $400,000,000 per annum. Assuming two free game offerings per month per console it means that annually Sony have to compensate developers for a total on 72 games (some of whom are first party and thus Sony would be compensating themselves). If we level the playing field by assuming the selling price of the games after a year or more at retail would average $25 (also considering some are Indie and\or PSN only titles), Sony would be able to effectively “purchase” roughly 100,000 units of each game at a total cost of $2.5 million.
A $2.5 million dollar payment for a developer after a title has attained 80%-90% sell-through seems like an attractive offer. Along with userbase expansion and getting on Sony’s good side we fail to see how this offer would be turned down. For Sony the payouts amount to $180 million leaving them with $220 million. A very big chunk of change.
The Numbers Conundrum:
Everything written above regarding numbers is of course complete conjecture, Sony has not released numbers but we can still give our best guess. We cite a number of 8 million subscribers and the numbers seem pretty good all round. The numbers could of course be double or even triple that. Over at Forbes an analyst has predicted the annual income generation for Playstation Plus to be at $1.2 Billion, way above our paltry estimates. You can read that article here
In conclusion it’s fairly evident that Sony have succeeded in creating the ultimate WIN-WIN-WIN scenario. Playstation Plus is no gimmick, it’s not a lure and it’s not a short term offering. Plus offers exceptional value to subscribers, it offers a cash injection to the developers and free advertising and it makes Sony money. This is how business should be done.