PS3 Now Dominant Based On Third Party Publisher Earnings Reports? Not So Fast, Says Analyst

LevelUp writes:

Over the past couple of weeks, several publishers have released their quarterly earnings reports: among them, Electronic Arts, Ubisoft and THQ. Apart from a title slipping its ship date from one quarter to the next, there were few surprises to be found...except for the fact that of the three publishers listed above, two of them declared that the lion's share of their console revenues had been derived from the third-place platform: Playstation 3.

For an answer, we turned to Wedbush Morgan analyst and The Who's number one fan Michael Pachter. Here's what he had to say in our email exchange:

"Two things are at work. First, the way deferred revenue works: EA recognizes revenue on Xbox 360 over six months following the sale, but does NOT do so for PS3. So sales of Xbox 360 games during the last two quarters (Battlefield: Bad Company and Army of Two) are rolling through till December, while sales of PS3 games are booked when sold. Second, some of EA's sales are skewed in Europe, where UEFA Euro 2008 and Battlefield probably sold a little better on PS3, and with Rock Band launching in Europe this year (also skewed PS3). Ubisoft was because of Haze, which was a PS3 exclusive.

I don't think a single quarter represents a trend. EA won't be that way when Madden shows up and when the deferral starts to lap itself."

[Superfragilistic]

Well that clears things up... and proves that Metacritic and hardcore gamers don't matter much to the mainstream (Haze).

But still why have different accounting methods for similar products in the same market?

EDIT: and look at those random disagrees, who can't put their thoughts into words. ;)

[jaysquared]

I was about to say the same thing.. Why different accounting methods on different platform.. Weird

[power of Green]

Nice news post...

"But still why have different accounting methods"

^^Different Companies?????....

Learn something new everday, I was scratching my head before I read any text.

[SixTwoTwo]

The average gamer has never even heard of metacritic.

@1 and 1.1 ...

PS3 game revenues are booked when sold meaning EA gets the full profits of that sale then and there.
360 game revenues are deferred meaning EA gets the profits of that sale over a six month period.

Thats what I got out of it but someone correct me if I'm wrong here.

Pachter's last sentence makes no sense.
"EA won't be that way when Madden shows up and when the deferral starts to lap itself."
EA's revenue system with 360 software is always overlapping itself.

[Superfragilistic]

Bubbles mate, you're the only one in this thread so far that seems to understand simple financial concepts and recognised this has nothing to do with a "console war". Well said and check my example below. :)

[power of Green]

Well after the obvious that was understood when first reading this, does anybody know why?, to anwser #1 and #1.2's questions?.

[mikeslemonade]

EA, Ubisoft, and Activision don't make real exclusives with the exception of Haze and maybe Splinter Cell that's probably going to be multiplatform too. This being said it makes zero difference for which system makes more money out of those companies' games.

[mistertwoturbo]

"recognised this has nothing to do with a "console war"

Yup, this whole console war thing is just made up by fanboys.

Ask any regular non-gamer "who do you think is going to win the console war?" and they'll reply with "huh? there's a console war?" or "hahahaha... wait you serious?"

[Idonthatejustcreate]

EA is getting truckloads of money and they still are pissing out aweful games. The numbers dosn't concern the gamer only the big money driven companies.

[Megatron08]

Ya I have to agree with super here. Its odd that they do that. Only reason I can think of as to why EA would do something like that is that they had to work out 2 different deals with sony and ms on how that is handled.

Oh my thought on Haze is that it sold main to being an exclusive sony fanboys fill a need to buy every ps3 exclusive that comes out for the system.

[kai_h]

I don't really understand the first reason, but the second reason is kind of weird. Earnings are skewed towards the PS3 because games sold better on the PS3 in Europe? Isn't that the way to earn money? To sell games?
Please correct me if I'm wrong though.

[Superfragilistic]

1) Quarterly reports from EA include all sales made in that 3 month period on the PS3. But EA does not total 360 sales on a 3 month basis but rather a 6month basis.

For example:

In Q3, PS3 sells 10 copies, 360 sells 20 copies

But in EA's reports it will show PS = Q3 = 10, whilst defers Q3 results so the 360 = 0.

But as the year continues we may have:

In Q4, PS3 sells 20 copies, 360 sells 20 copies

So in EA's half year report at end of December PS = Q3+Q4 = 30 and 360 = Q3+Q4 = 40.

2) EA games sell better in Europe on PS3, and since they are reported per quarter as opposed to the 360 the difference can appear even greater.

Taking the example above:

In Q3, PS3 sells 10 copies (5 in Europe), 360 sells 10 copies (0 in Europe)

So whilst EA's reports will show PS = Q3 = 10, whilst defers Q3 results so the 360 = 0. If you subtract Europe the difference is less marked with PS = Q3 - 5 = 5, versus 360 = 0.

The December results will still look the same as the example in 1) and the PS3 will still win in Europe, but the appearance in the quarterly results is distorted towards the PS3, until we reach the end of December where it would still be PS3 = 30, 360 = 40.

------------------

It's just some silly financial accounting and the numbers are simply made up to illustrate the point better. But I hope that helped! :)

[Superfragilistic]

Lol at the disagrees who can't express themselves cohesively or provide a counter explanation. I go to the trouble of explaining some financial concepts when a member asks and all you can do is click a button! lol

[Sez]

becuase what you explained. means that the ps3 isn't the higher game seller as EA,ubisoft,THQ lead us to believe. and rather than debate your claim. must fanboys will disagree with you rather than except the fact that company rate their revenue from both companys diffrent.

[MikeGdaGod]

i appreciate your effort

+bubbles

[kai_h]

Oh, okay I get the earnings reports now. Thanks for your help.

[GarandShooter]

'becuase what you explained. means that the ps3 isn't the higher game seller'

It means no such thing. It means the answer is impossible to discern from this data, due to the different reporting methods.

[Superfragilistic]

Exactly. We won't know the answer until half yearly reports come December/January. The numbers I used were simply for the purpose of illustration... last time I checked EA sold more than 10 copies per quarter! :)

[Chris Hansen]

Michael Pachter
Is he the guy that always gets his predictions wrong?

[morganfell]

Always. Between chatting up teens online and buying alcohol for the underaged, erred game industry predictions are his other failing. Maybe he should have a seat.

This is nothing more than damage control as MS is getting hit in the face.

[Superfragilistic]

Remind me to make a silly damage control claim when the accounting system shifts its bias to the 360 come December! ;)

EDIT @ below

I have no idea how I provoked that rant morganfell, and really I couldn't give two sh!ts about who "wins" because I enjoy both consoles and as far as I'm concerned, strong competition means all gamers win in the end... except of course those sad individuals who lack real meaning in their lives and emotionally attach themselves to a branded piece of metal and plastic!

All I was doing in the above comment was addressing your inability to understand the thrust of the article and labelling it as damage control when it had nothing to do with MS and was really about the difference in financial accounting and reporting methods used by EA for the respective consoles.

[morganfell]

You are going to have to make one big fat excuse for the 360.

HD is going into overdrive. So are Bluray disk sales. With the game lineup Sony has this fall, Killzone 2 just after that, HD hardware gathering more steam, the PS3 is going to continue it's climb.

The 360 is going to be flat on it's face this fall. One game won't save the day. This isn't Gears of War releasing this fall pal. They got lucky with that first game as there was no competition out, not even other 360 games. It's a whole new ball game this fall. No running down the field alone as Marcus will get flattened by the likes of Sack boy and Nathan Hale. Not to mention SOCOM. The 360 is going to get royally wailed on.

It isn't just about games, especially this year. As a wannabe media hub, with no next gen disc ability and only Media Center as any type of interface, MS has already had their last hurrah. Game over. So don't you worry about the PS3. They should be sweating buckets over the 360 though. :)

[InMyOpinion]

It's his job to get things wrong. That's what he gets paid for.

[mistertwoturbo]

What I like is that random fanboys on the internet makes more accurate guesses than Michael Pachter. lol

[morganfell]

Uhm, do you know what a rant is? Trust me that wasn't one. That was 30 seconds for me, no more. I think you are the one investing too much. Too much in some random comments made on the internet by someone you do not know and obviously do not understand.

[sunnygrg]

Patcher talking gibberish.

[power of Green]

He said Sony beat MSFT when companies reported their earnings but the delayed reports on the 360 side falsely provides the status of these companies.

He said Sony NOW...MSFT LATER, when it comes to reported sales/earnings.

Don't try to pick on Patcher, you know deep down even if there was not an explanation attached to the earnings side of this news, you could never believe it.

[Atomic]

don't feel threatened by this news , just accept it , the 360 is no longer the software juggernaut that it used to be.

[Zerodin]

Patcher predicting PS3 does good = Gospel.
Patcher predicting PS3 not doing so good = LOL! WHAT A NOOB!
Am I doing it right?

[Playstation Man]

Just like you Zerodin, you're teh suck. 360 is teh suck.

[Dragunov]

This is strange, some love for PS3.. sure i didn't understand something, my english is so poor

[power of Green]

It is like Someone getting payed from their job every day and not every month.

Like somebody claiming they have fatter pockets because they always have money although the person getting payed every month makes more money.

[badz149]

profits are still profits! no matter how you want to turn it around, they're still PROFITS! aside from predicting sales, this guy is doing this now??

[Shaka2K6]

Sony PS3 has MGS4.
From Konami > exclusive > third party > AAAA.

[Skadoosh]

Earnings reports? Are you serious? What is this news for gamers or news for stock holders? Seriously man who cares?

[Meresin]

Fanboys care. This isn't News 4 Gamers anymore. This is News 4 Fanboys. :/

[pow3r of t3h c3ll]

someone needs to calculate the game attach rate again for consoles cus I think xbots will find that the PS3 attach rate is now much higher since PS3 software sales for the first quarter of this year are something like 325% higher this year than last year.

This article is just stupid comfort food for xbots cus their consoles is starting to slip software and hardware wise.

[power of Green]

Some people like news in general.

[ginganinja]

Not saying I doubt the chaps analytical skills, but....
I don't think Rock Band played much of a part in EAs PS3 game sales in Europe. I know it's a small, trivial, detail, but...
it's a timed 360 exclusive over here and isn't even out on PS3 yet.

[mistertwoturbo]

I thought it looked a little too fishy.

But even if the PS3 does not sell more software than the 360, it's a no brainer. The 360 has the bigger install base and consist of a lot of hardcore gamers.

Still, it shows the PS3 has a lot of growth and is still trending upwards which is a good thing for Sony and the publishers. Now when they release a multiplatform game, it will sell good on both consoles and in turn hopefully they make better games for everyone.

[kenjix]

it doesn't seem that the PS3 and the 360 have any discrepancies in terms of hardware and software sales. The PS3 is outselling the 360 in hardware and software every month, so whenever they add up their quaters the PS3 will be ahead. Now in the US it's been going back and forth so there is a chance that it might change based on their US revenues but I wouldn't say it' guaranteed based on software.

[Raoh]

i can only a assume that with a larger install base you can base funding on projected/expected sales.

with a smaller install base you base projections on factual sales trend to justify costs.

so looking at the EA document that shows ps3 with large sales.. shows a projected PS3 lead in the future based on its currently larger install base compared to last year...

[beavis4play]

why do earnings reports mean anything to gamers? we need more games stories and less of this stuff.

[supahbad]

i wish these analysts had names instead of just quotes

[Superfragilistic]

I wish people would read articles before posting an opinion. ;)

[Kratos Spartan]

That's it! You hit the nail on the head! Who needs T.V. when there is N4G for all your entertainment needs. Drama, comedy, action, love stories, Horror, all in one post!!

[RAM MAGNUMS]

all xbots have a ps3! They just like arguing with strangers thats why they are on n4g.
duh?
how else is a xbot gonna play mgo or watch a bluray or use a USB flash drive with movies &
music? They use the xbox360 as a expensive instant messenger with thier racist friends, they surely
dont play multiplat games on it for fear of the rrod.
Xbots just talk crap all the time because they lonely & nobody likes them. Xbutts stink as friends.

[Product]

i swear some articles are posted on here just so fanboys can try to change each others opinions.

[Masko]

this is just flame bait. go find some news on some games thats gonna be released next year , and come back. when will people learn that both consoles can produce the same graphics. i just play games..im sorry. im not interested in how much a company makes. i just wanna know if they will be delivering some good games