Reply
I Only Post Everything
Registered: 10/20/2011
Offline
1006 posts
 

Re: Home: hand over fist - raking in the dough

Jun 12, 2013

There's no doubt that Home is a profit for Sony, but its relevance to gaming is lacking, and there's much more potential for it if you take in a different direction. I think Sony will be smart enough to realize this soon enough.


"There are no atheists in the 85th minute" - Teju Cole
Message 31 of 122 (490 Views)
Fender Bender
Registered: 02/14/2010
Offline
2518 posts
 

Re: Home: hand over fist - raking in the dough

Jun 12, 2013

EdwCarnby wrote:
Well they must make enough money to break even, and for a small dev that's fine. It keeps them in work.

Sustaining at a break even pace is something most businesses will do if they see a future of growth and profit. However, if they sense that the foundation is crumbling, most will jump ship before it's too late. I believe the devs know the truth, because if there were to be a PS4 version they would need to be developing content already.

Message 32 of 122 (483 Views)
0 Likes
Highlighted
Treasure Hunter
Registered: 10/01/2009
Offline
5310 posts
 

Re: Home: hand over fist - raking in the dough

Jun 12, 2013

Here are some facts I've been able to gather through the years. I can't be more specific, and I'm probably saying a tiny bit more than I should.

 

Sony gets approximately 30% of every virtual item sale from developers. "Most of the money" does not go to Sony, it goes to the devs.

 

Approximately 22% of the userbase has bought something. Approximately 12% buys on a regular basis. Approximately 8% spends significantly.

 

So per 1,000 users, 220 have made at least one purchase in home.

 

Of those 220 users, 24 buy something regularly, which is defined broadly as more than once in a year.

 

Of those 220 users, 18 buy weekly.

 

This is very easy math to scale. Home is not a "cash cow," and nobody's laughing to the bank. People are working very hard to break even and item costs are rising to keep pace with higher development expenses.

 

Sony has the benefit of amortizing its web infrastructure services across all aspects of the PSN, so it can recoup operating costs from Home, movie downloads, Vita and PS3 game sales through the PSN Store and Plus. It's likely a break even for them, with a potential minor upside in profit.

 

In a previous life, I ran a website that played the amortization game with content. It's a very thin-margin business. 80% of what gets published will never be profitable, but the 20% that is pays for the rest. Under that model, I need to publish five pieces of content and hope that one is successful enough to cover the costs of the other four. The model ultimately favors lots of quick-hit content rather than focused development on a single product. Look at the types of content we see in Home these days, and you can see that model playing out.

 

This also answers some pretty basic questions about Home content. Why can't we recolor things? Because if I make five colors and the blue one sells 10,000 units while the others sell 1,000 each, I'm ahead of the game. That user who buys more than one of a particular item is exceptionally valuable under this model. I have a financial incentive to reskin things rather than give users choice.

 

Note that this does break down a bit for certain types of content. Personal spaces likely perform a bit better than other kinds of content, because they're interactive, and games will sink or swim based on the quality of the game itself.

 

The other area where this breaks down is tokens/coins/points used to buy things. As a content developer, the money is mine if you just buy the virtual currency. That's the most straightforward path to profitability. Once you've bought the gift card, I don't care if you shop in my store. I'd actually prefer that you don't, and buy another gift card instead.

Follow me on Twitter:
twitter.com/hearitwow

Watch past episodes:
HomeCast at HomeStation Magazine

Message 33 of 122 (470 Views)
Fender Bender
Registered: 07/15/2010
Offline
2651 posts
 

Re: Home: hand over fist - raking in the dough

Jun 12, 2013
Nice post, HIW. It still doesn't explain what you need to do to get some arcade cabinets though.
castle3
Message 34 of 122 (451 Views)
Treasure Hunter
Registered: 10/01/2009
Offline
5310 posts
 

Re: Home: hand over fist - raking in the dough

Jun 12, 2013

I need 50,000 people to sign a petition for some Galaxian, I think.

Follow me on Twitter:
twitter.com/hearitwow

Watch past episodes:
HomeCast at HomeStation Magazine

Message 35 of 122 (432 Views)
Fender Bender
Registered: 03/31/2010
Offline
2040 posts
 

Re: Home: hand over fist - raking in the dough

Jun 12, 2013

What is missing from these profit estimates is the number of users cycling through Home, and the number of users that actually spend money in Home.

 

Sony has reported the sale of over 77 million PS3 consoles since they were released in 2006. How many of those 77 million PS3 owners have actually a) logged into Home and b) spent money in Home?

 

We can only guess since Sony has never released those figures.

 

To estimate the number of people that have downloaded Home and logged in I'd look at Digital Leisure's announcement earlier this year that the Casino had received it's 1,000,000th visitor. That was about a year after the Casino was originally released. So it took about one year for one million accounts to visit the Casino at least once.

 

Since the Casino is one of the most heavily promoted spaces in Home I think that is a good indication of the number of visitors to Home itself.

 

OK, so of the 1 million, how many are duplicate accounts? How many actually spent money? We don't know the answers to either of those questions so we'll have to guess.

 

We can estimate that only one in 70 of the people that purchased PS3s downloaded Home, logged in and then looked around enough to hit the Casino. At least in the first year it was released.

 

I think that the people that think that Home is a big cash cow for Sony, or that Home is even breaking even are probably overestimating how much money it's actually bringing in.

Message 36 of 122 (425 Views)
Treasure Hunter
Registered: 03/12/2007
Online
4495 posts
 

Re: Home: hand over fist - raking in the dough

[ Edited ]
Jun 19, 2013

@ HearItWow

 

Very informative post, although the data most needed to make an accurate assessment is what the user base is right now - which by appearances is much smaller than two years ago... Which is also about the time when Sony declared Home was no longer a priority, they stopped most advertising and promotions for Home, and cut way back on development of content for Home.

 

Of course, the most meaningful data that you left out, is actual P&L reports from Sony and the various Home developers.  In a time where Sony has been desperately searching for good news to report on any of their business ventures and releasing that in quarterly press releases, the fact that they have not mentioned Home once, is likely a very significant indicator of just how little of a cash cow Home really is, and may very well be the opposite, and instead it's been a money pit for them, thus the decision to largely stop advertising and promoting it.

 

Now some will claim that the mere fact that Home is still running (for now) is proof that Sony is making a profit on Home - yet that would be a terribly false impression.  There are many reasons why a company will continue to make and or support a product or service even when it is losing money.  However, at some point those reasons are no longer valid and that's when products and services that are not profitable get shutdown.  In Home's case, it likely has to do with the contractual agreements many of the developers have with Sony, that insure that Sony will support Home for as long as they are under contract to do so.

 

There is one thing though that HIW said that I strongly disagree with:


HearItWow wrote:

This is very easy math to scale. Home is not a "cash cow," and nobody's laughing to the bank. People are working very hard to break even and item costs are rising to keep pace with higher development expenses.

Since when did development costs for Home go up?

I'm sorry, but when LKWD sells a re-skinned LMO mount (gold motorcycle) that they developed long ago for close to $5 - in no way does that represent increased development cost.  That's as much as many PSN games that took thousands of hours of development time.

 

The reality is that whether we wish to believe it or not, clearly the active user base for Home that are still willing to spend money on Home has shrunk considerably.  I suspect there are many factors that have caused this like

 

  • Sony's minimal support of the service.
  • Plethora of long outstanding issues with the service that make using it unnecessarily difficult.
  • Numerous issues with item management that already make it much more difficult to use items we buy than should be necessary.
  • Terrible customer relations and communication.
  • Lack of a decent marketing plan to bring in new users.

 

This ever decreasing number of active users still willing to spend money in Home (yes I am one of them, although even I am FAR more selective in what I purchase now) means that even if they charged $1 for an LMO, they likely would not sell five times as many as there simply isn't a large enough of a market that would allow them to lower prices and make up for it in volume.

 

I suspect it is because of this, we are seeing many 'new' items (even cheap re-skinned ones) selling for ridiculous prices as the devs are simply trying to make up for the ever shrinking market that is Home.

 

The only reasonable solution for this is for Sony to grow a pair, take responsibility for this project, bring in new leadership, fix the issues that can be fixed at a reasonable cost, communicate with their customers, ask (neigh, beg) for patience while they work on these outstanding issues, and develop a reasonable and sustainable marketing plan.  

 

If management showed even a hint of humility and admitted to their past mistakes (somethign we rarely if ever saw from past management), and offered even just a verbal commitment to make things better (and kept us informed so we aren't left specualting) - I suspect MANY of us would rally behind them and go out of our way to support Home with more purchases and help them by saying positive things about the service and promoting it with all our friends.

 

I know for a fact there are MANY users of Home that are on the verge or who have already given up on Home that would gladly jump back on board and support Home if they felt the people in charge cared and communicated that to their customers.  Instead, Sony continues to give their customers the silent treatment... And look how that's worked out for them...

Sony's PlayStation Home updated mission statement...


"Like it never happened"


- Stand for something better than mediocrity and don't disguise it as adequate, when clearly it is far from that to anyone willing to be objective and unbiased. -

Message 37 of 122 (379 Views)
Game Mechanics Developer
Registered: 11/09/2012
Offline
193 posts
 

Re: Home: hand over fist - raking in the dough

Jun 19, 2013

HearItWow wrote:

I need 50,000 people to sign a petition for some Galaxian, I think.


Do a Kickstarter. That will get it made.

Message 38 of 122 (304 Views)
Limit Breaker
Registered: 08/15/2007
Offline
16565 posts
 

Re: Home: hand over fist - raking in the dough

Jun 19, 2013

GameMechanics wrote:

HearItWow wrote:

I need 50,000 people to sign a petition for some Galaxian, I think.


Do a Kickstarter. That will get it made.


Galaga> Galaxian but he knows this already Smiley Wink

Hearitwow would die if they sprung Gyrus, Star Castle or Zaxxon.

HomeStationMagazine
Message 39 of 122 (247 Views)
Limit Breaker
Registered: 08/15/2007
Offline
16565 posts
 

Re: Home: hand over fist - raking in the dough

Jun 19, 2013

D-Nitrate wrote:


I'm sorry, but when LKWD sells a re-skinned LMO mount (gold motorcycle) that they developed long ago for close to $5 - in no way does that represent increased development cost.  


D-Nitrate. There is no such thing as re-skinned. I have heard this about estates also. ''They just re-skinned it'' not as simple as just picking a color.

HomeStationMagazine
Message 40 of 122 (240 Views)
0 Likes