Archive for November, 2006

Casual Games Biz Article

Monday, November 27th, 2006

A pretty lengthy, and solid, article on the casual games biz, here.

Some interesting excerpts:

The sequel to one of PopCap’s popular word puzzles, “Bookworm Adventures,” is expected to be the most expensive title produced for the casual game genre. PopCap, which has offices in San Francisco, Seattle and Ireland, spent $700,000 over 2 1/2 years developing the game. It’s set to debut online Tuesday at $30 per download.

$700K is a lot to develop a casual game. I’m anxious to take a look at this one when it comes out. (I don’t see it on PopCap’s site yet – sometimes they do limited releases a week or so before doing a general release to the public…)

Research group DFC Intelligence estimates that revenues from casual games worldwide will grow to $953 million this year, from $713 million last year. They were $228 million in 2002. Those numbers don’t include casual games played on handheld devices.

That’s pretty significant – a quadrupling in revenue in 4 years. Also, the last time I saw, traditional (non-casual, non-subscription) PC games were at about $800-900 million annually, in the US. You can probably assume the world-wide totals for traditional PC games are about twice that (probably a bit under $2 billion). Taking the analyst’s estimate and my guesswork at face value, casual games are now about half as big as traditional PC games, and growing much faster.

Of course, console gaming dwarfs both of the above sectors…

Is Sony Losing Their Shirt On Each PS3?

Friday, November 17th, 2006

There’s been a lot of industry speculation that Sony is losing a lot of money with each PS/3 sold.

This article claims the the total cost of the main unit alone, EXCLUDING controllers, cables, packaging and any profit margin for the retailers (i.e. Wal-Mart’s gotta make money to sell these things), is $805 to $840 (for the low and high end PS/3’s respectively). Shipping cost to the retailers is also apparently excluded. Adding in these costs, (even with a very modest assumed retailer markup) and you get to about $900-$950, which, with the current retail prices at $499 and $599, implies a $300-350 loss per unit.

I’m not an expert in component pricing and manufacturing costs, but still, I’m skeptical.

Let’s look at some specific prices in that cost estimate:

Manufacturing Costs: $40
Really? Assuming the components come pre-assembled as modules (very likely), then assembling the parts is sort of like putting a Lego toy together – plug everything together, screw a few things together, and done. I’d make a wild guess that a trained worker could assemble 2 units an hour – that’s probably very conservative. The units are apparently being manufactured by a Taiwanese company (Asustek). By my wild guess, that would seem to imply labor costs of about $10/hour, or roughly $5/unit. If Asustek in turn pushes the manufacturing to a plant in South China, it would be even less. Note that in the second table, they estimate XBox 360’s manufacturing cost at only $6.10 per unit. No explanation is given for the enormous discrepency between the systems.

Enclosure: $31-33
Really? The plastic/alloy box around the PS/3 costs $31 in million unit bulk order pricing? I doubt it. Considering you can buy computer cases, at quantity 1, at retail price of $15 after rebate from NewEgg, I doubt Sony is paying more than $10-15 for the enclosure

Power Supply: $37.50
Hello, I’d like to order 5 million power supplies – how much will that be, per? $37.50? Wait a sec – I can buy a SINGLE 400 watt power supply at NewEgg for $20. You’re telling me my five million unit order is at almost twice that, per unit? Yes, I know the unit in the PS/3 is a ‘slim line’ power supply, but I hardly think that accounts for this price estimate. Thanks, but I’ll find a different supplier.

Other Components and Manufacturing: $148

Weren’t we already charged for manufacturing? What are these ‘other components’? The table already appears to list all the major chips, memory, hardware, optical and hard drive…

Combined price of 4 primary chips (graphics, CPU, I/O, ‘Reality Synthesizer’): $305
OK, here’s the deal with technology – I think it applies well to these chips, and to a lesser extent to the other items above.

Chipmaking has 3 main costs:
1) R & D – How much to invent it? This is basically a single large lump sum invested up front.
2) Manufacturing ramp-up – Initial yields are low and it takes time and money to figure out how to manufacture items in bulk. Again, this is basically a single large lump sum invested up front.
3) Per unit costs – Once you’ve got it developed and you have your manufacturing going, how much does it cost to stamp out each chip? This cost declines slowly over the life of manufacturing, but is much more stable (per unit) than the first two costs.

Now, a chipmaker has to make a profit per chip. Clearly, that entails charging more than the per-unit cost in item 3, but it also involves making enough money over the life of the chip run to recoup (and hopefully make a profit on), items 1 and 2.

I have no doubt that it cost Sony and their partners an enormous sum to develop these chips and their manufacturing processes. But I really doubt the true per-unit cost (i.e. item 3) is anywhere near $300 for the lot of them. Perhaps whoever created the table in question tried to amortize a significant chunk of items 1 and 2 against the first few hundred thousand chips off the line. But that just seems wrong to me – Sony, internally, is probably amortizing those costs against a projected run of 50-100 million PS/3s, lifetime (maybe more). Taking a very wild guess, I’d say the $305 figure is off by a factor of 2 or so.

To repeat, I am NOT an expert in these things, and may be wildly wrong. But it seems that analysts are applying cost pricing roughly equivalent to building a single machine with parts from NewEgg or Fry’s, rather than bulk pricing, bulk manufacturing, and amortizing R & D cost over 50-100 million PS/3s that will likely be built, lifetime.

How much money is Sony really losing, per unit? I don’t know, and perhaps Sony doesn’t really know either. Computing a per unit cost on the first batch of PS/3s is a bit of a silly exercise anyways. They’ll probably lose money in the PS/3’s first year, due to all that R&D, low software sales to a small initial base of PS/3 owners, and declining PS/2 sales. But my wild guess is that Sony will make a lot of money over the course of the PS/3 generation, and also will likely make more money than Microsoft.

Ticket To Ride Updated

Thursday, November 9th, 2006

For a bit over a year, I’ve been addicted to the online version of Ticket To Ride (from Days of Wonder), which was originally a popular railroad board game, but has a free online version as well.

While you can play the web version for free, you get certain additional perks by buying a 1 year ‘web card’ for ~$20, and also by buying the CD-ROM version (also ~$20, though they sent me one free last year as an early purchaser of a web card).

Anyways, they’ve just updated the CD-ROM version to include several new variants, based on their board game expansion pack ‘USA 1910′. If by chance you have the CD-ROM version of the game, you can now download the updates, and even if you’re only playing the web version, you can play the new variants, if someone with the CD-ROM version starts a 1910 game.

And, for the ~95% of you who don’t know what I’m talking about, I strongly encourage you to try the game – again, it’s free to try. I’ve possibly spent more time playing this game in the last year than any other computer game I’ve played, including Civilization and SimCity.

Windows Vista Goes Gold

Thursday, November 9th, 2006

Well, I guess I was wrong a couple weeks ago in thinking Vista was not that close to going gold. It’s been announced on the Vista Blog (link via Slashdot) that Vista has been released to manufacturing – aka gone gold.

Congrats to the Vista team.