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PlayStation Plus Will Be Profitable, Says Pachter

| 2 Aug 2010 14:49
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Michael Pachter believes that Sony's new subscription service will make money, but that it'll take time for PSN to start to pay for itself.

After a lot of speculation and rumor, Sony formally announced its premium online subscription, PlayStation Plus, at E3 earlier this year. Wedbush Morgan analyst Michael Pachter believes that PS Plus will be a good thing for Sony, but it will have to grow before it starts to absorb the cost of Sony's online network.

Speaking on his Pach Attack show on Game Trailers, Pachter was asked if he thought that PS Plus would be profitable. He replied that PS Plus couldn't help but be profitable as it was essentially the same service that Sony already offered, but with a fifty dollar price tag attached. He said that PS Plus didn't require any further outlay by Sony, so that the million subscribers he predicted in early stages of the service would translate into $50 million of incremental profits for the company. He said that he believed that Sony expected PS Plus to drive more movie and game downloads, but that it would take around 2-3 million subscribers to cover the "couple of hundred million dollars" that he estimated the PlayStation Network cost to maintain.

While there are a few nitpick-y points you could make about Pachter's answer - not every penny of the subscription fee is profit, for example - the essence of what he's saying is sound. It seems like much of the infrastructure required to get PS Plus up and running already exists, so the costs involved in the operation of the service can't be much higher than Sony is already paying. You could certainly make the argument that Sony has lost out on revenue from the games and other content that subscribers get access to, but again, the actual cost of delivering that content will be relatively low, and there's no guarantee that a subscriber would otherwise have bought it. It's the difference between definitely getting fifty bucks, versus maybe getting $200 but maybe getting nothing at all.

It also seems pretty likely that the service will get more benefits as time goes on, much like Xbox Live did with things like Netflix and Facebook integration, which will make the service even more attractive, and generate more subscriptions.

Source: Game Trailers

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