State of the Console War: Sony Outsells Microsoft, but is the PS4 Really Ahead?
Here it is, your latest news for the greatest console war in the last twenty years. This is the first of a series of posts I’ll be leaving each week that will document any on-going changes that may turn the tide of battle between the Xbox One and rival PS4, ultimately deciding who currently resides in the lead.
And for those of you wondering, my criteria for who’s, “in the lead” is simple. It will be who ever is profiting the most from their console’s success. Notice the key word there, profiting. This isn’t about who sells the most consoles or brings in the most money, contrary to popular opinion. It’s about who’s making the most money. As a man who invests $1,000,000 and brings in $1,000,0001 is bringing in more physical money, but increasing his value less than a kid who invests 50 cents and brings in one dollar and 51 cents.
Each week we’ll take a company’s cost to make a console and subtract it from all revenue they’ve earned in the process, resulting in their documented net-profit. I realize that there are articles sprouting up all over the Internet with, “Microsoft reportedly sells x amount of consoles in the Philippines” and, “Sony claims to have sold x amount of PS4′s on the dark side of the moon last quarter”, but these stories, while interesting are useless to me until they’ve been verified.
Also, I’ll be keeping track of past data with line-graphs that will hopefully allow us to analyze trends, determining if a winner is emerging over time. So for you graphic whores out there, you’re welcome.
And without further adieu, let’s head to the front lines and see what’s taking place.
Cost to Make
A recent teardown of both consoles revealed that the Xbox One costs 90 more dollars to make than its Sony counterpart, with the Microsoft console requiring $471 to construct vs the PS4′s $381 worth of hardware. This is crucial in determining who’s profiting the most with their console’s success, as it means that Microsoft is making $28 per-sale vs Sony’s $18, a difference that may haunt the gaming company going forward.
Going back to what I said earlier, I’m going to stick with the current information that has been verified, namely, that Microsoft sold 3 million consoles world-wide through 2013 vs an impressive 4.2 million units sold for its staunch rival. These numbers are telling, but not quite as much as every article across the Internet would have you believe (mine excluded, of course!).
While selling a unit is imperative if one is to make any money for all their hard work, it’s not as simple as that. An analogy, getting shot with 4,000 nerf gun bullets isn’t quite as damaging as getting hit with 1 real one. It’s all about the impact that each sale makes, and the Xbox is bringing in $10 more in profit than every PS4 united sold ($28 vs $18). So, with this information in place, it’s a simple matter of crunching the numbers.
Knowing that Microsoft sold 3 million units through December, at $499 a piece, we can quickly calculate that they brought in a total of $1,497,000,000, trailing the PS4′s 4.2 million total which, when multiplied by their own cost comes in at $1,675,800,000. While this seems to put Sony in the lead, it simply isn’t the case. Reiterating what was said before, this number is irrelevant. It’s impressive, but from a competitive standpoint it means nothing, as the net-profit is what will reveal who’s increasing their company’s worth (and therefore power within the industry) the most.
So, given that Microsoft is making $28 per-sale, we can quickly see that they’ve profited an impressive $84,000,000 for their investment, with Sony improving their worth by $75,600,000.
So there you have it, folks, Microsoft currently holds an $8,400,000 lead over Sony in-terms of money made. While Sony leads their rival in units sold, it doesn’t really matter, as they’re profiting a substantially lower amount per-sale.
Trends Through December 2013
Sony will have to out-sell Microsoft by 64% if they’re to take a financial lead, given the 64% less money they’re bringing in for each console sold. This is a tough hill to climb, but the old-school powerhouse has a reputation for coming out on top whenever their backs are against the wall. Don’t forget, it was Sony who managed to sweep the rug out from former Undisputed Console Champion Nintendo in the late 90′s with their innovative discs that Nintendo said wouldn’t catch on. So, before anyone starts making predictions as to who’s going to win or lose this ongoing struggle, sit back and shut up. This war’s just getting started.