The games business model is to make the hardware and sell it at a loss on first release. As components decline in cost over time – 50% a year is about right as a rough guess – then the hardware moves into profit until the next upgrade stage of the cycle. The aim is to have something of a wash to a bit of a profit over that lifecycle.
The profit comes from collecting a share of the software revenues that then plays on the hardware. That’s just what the business model is:
Sony is facing a £5bn law suit over claims it has “ripped off” PlayStation customers by charging a 30pc commission on online video games.
The collective legal claim against the Japanese firm is being brought by former Which? director and consumer rights expert Alex Neill, who said nearly nine million gamers could be owed as much as £562 each.
The claim was filed with the Competition Appeal Tribunal on Friday.
With physical game cartridges this was enforced via the IP on the chip that allowed the game to be played. This is about online.
But the same task exists. This case is trying to show that the entire business model – hardware cheap, make it up on a software margin – is an illegal business model. As if giving away razors to sell blades were illegal.
So, what are the chances here?
Sounds to me like it could be related to the lawsuits against the OEM app stores. So there is probably some legal theory to the attempt but no idea how tenuous.
Same case with selling ink jet printers at a massive loss but making tons of profit on the inks
Sounds like the Net Neutrality debate. Should software people get to use other people’s hardware for free?
I don’t understand why people buy consoles. It’s easy to set up PC gaming, you can buy a PC for similar money, and your PC gets you more choice of games, lower priced gaming, plus you can watch porn, write a novel, file your taxes, watch porn, compose music, edit a movie, do a math simulation and watch porn.
I’m assuming the comparison case here is Epic Games (developers of Fortnite) vs Apple, which was similarly about monopoly abuse of a platforms App Store.
The Epic-Apple app case reveals monopoly power and the need for new regulatory oversight
In that case, 9 out of 10 charges against Apple were essentially dismissed and only the remaining charge of “Steerage” resulted in any worthwhile action.
TL/DR – This is a typical fishing expedition by former Which? director and consumer rights expert Alex Neill, hoping to gain enough bad PR and traction to get a settlement. If it ends up in court (and I doubt it ever will) it will mostly get rejected.
and the need for new regulatory oversight
And the Will Roper who wrote the article is just the man to do it.
@BIND – Net Neutrality is about equal rights to space in the bandwidth. So, for example, ISP’s having to treat Timmy.com and Spudda.com the same, rather than letting one or t’other pay them to speed up one and/or slow down t’other. It’s nothing to do with using stuff for free.
This case is, as Onlong reckons, on the same train as the suits against App stores. They are mainly commercially driven (we don’t want Apple making dollars that we think we could make) though they are getting traction in the anti-monopoly space… it certainly being the case that platform power and network effects, unchecked, can lead to consumers getting a bad deal. Of course, Apple’s garden is immeasurably bigger and more important than that of any console maker, so even if there is some merit in those suits (I am not persuaded either way) it’s a stretch to argue the same thinking should be applied to PlayStations. There are loads of ways to play games and none of them are necessary.. whereas it is increasingly difficult to participate in ordinary society without signing up to one of the two competing mobile OS’.
Of course, Apple make money on the hardware AND on the services. Maybe Sony should try that?
I don’t understand why people buy consoles. It’s easy to set up PC gaming, you can buy a PC for similar money, and your PC gets you more choice of games, lower priced gaming, plus you can watch porn, write a novel, file your taxes, watch porn, compose music, edit a movie, do a math simulation and watch porn.
You won’t get much gaming PC for £450 inc VAT, but you can get a PS5 for that price which will run current gen AAA titles for the next several years without you needing to upgrade anything.
Publishers prefer console and multiplatform games are often worse on PC due to fewer resources dedicated to optimisation and bug fixes (Rockstar is notorious for this).
The online multiplayer experience is often better on console, with dedicated servers in-region, matchmaking and far fewer Chinese or Russian kids with massive pings running cheats.
Your console probably won’t try to trick you into installing Windows 11 when you boot it up.
Consoles are typically hooked up to the big telly in the living room, so they’re inherently more social and a more natural platform to watch Netflix or Blu Ray on.
Because they are simple to use and tend to be living room based, consoles are great for entertaining kids on a rainy Sunday afternoon, whilst maintaining parental supervision in case Guardianistas try to groom them into supporting Sir Keir Starmer.
PC games have very little resale value these days, but you can still trade in console games for cash, and buy secondhand, at high street games retailers (sadly dying out tho)
And finally, sophisticated gentlemen prefer to masturbate on their smartphones these days. Unless they have a dedicated blog for this purpose (Tax Research UK).
If you don’t like a company’s business model why not just decline to do business with it?
Unless it’s a problem with a monopoly or cartel, of course.
@Dearieme – As with most class action lawsuits, this is just a grift which will benefit no-one but the lawyers.
I cannot for the life of me understand why anyone thinks the retailer collecting 30% of the price is anything unusual. How do people think retail works? I sell my products into supermarkets, specialised retailers and hospitality, the supermarkets apply between 25-42% GPM, other stores typically 50-60%, hospitality at least 100%.
Model is what Gillette etc have been doing since 1960/70s and as @SadButMadLad says Inkjets. Also photcopier lease and more
I hope court refuses to hear
Electric toothbrushes as well, replacement heads cost a fortune
People who rail against energy and water companies making 5% on revenue, would suffer a fainting fit if they knew what Tesco pay for a tube of Signal.
@Chris MIller
Is that an attack on Tesco? They, like other supermarkets, have net profit of 2% – 4%
Very low profit for great nationwide purveyors of almost all needed at low prices open 12 – 24 hrs pd