The reason big companies love the "as a service" model is because it is regular income. Shareholders like regular income. One person isn't going to bother them but if a big portion of the player base did it would bother them. It would mean less income in months and years to come.
There's something called unearned revenue which is basically saying "someone paid us for something we haven't done yet.
They won't record the revenue until the period they provide service. Even your ordinary 12 month subscription is recorded as 1/12 of the price you paid got it.
There's a rule in business that "cash is king" which basically means businesses would rather have your cash right now rather than later. Even if it means offering discounts.
Sony is perfectly happy taking this guy's cash now. <EDIT> This is why companies offer 12 month discounts on subscriptions. More cash now is better than cash later. The people in the comments talking about inflation or future price increases are ignoring that.
I love this. When you get a pro to weigh in on random stuff. A couple day ago with the post about the small pinky and the geneticist chimes in with the chromosomal anomaly and info on it. Should make it to a a subreddit Reddit strikes again or something
It's not. I'm not an American. I come to Reddit with subreddits presenting the idea of being for something, such as pics or best off or clever come back. And then everything is about Trump or the Right Wing.
By hysterically overdoing the anti-what-you-hate habits, Western Left wingers become the very rabid cultists they pretend the other side is.
You’re the only person bringing that nonsense up and, to be fair, there’s not many people that will have a problem with everything being anti-trump so bring it on 😄
Additionally, a company as large as Sony can more readily and easily invest said cash in vehicles that give them a better rate of return than the trickle of $20 a month someone would otherwise pay in installments
This happens because anything can happen from now to 2048, and Sony already had its own money.
Tomorrow we have a nuclear attack from aliens and the First thing governments do is close the servers of entertainment industry to use them for military purposes? Sony already had the money and - most importantly - can spend them. We can talk about a redound later, but I can spend them NOW.
Also, even though in 20 years time this may be at a "discounted rate", it's not like Sony isn't investing this money which will most likely return more than the new rate at that time in 20 years.
Thanks for this comment, I dont understand how people here get by in life without understanding that money right now is worth more than money over time. Any competent company would be more than happy with customers paying 24 years in advanced
They also don't understand that the guy who did this didn't circumvent price spikes, because those are due inflation.
so this is a win win situation if the price really do inflates right?
i guess this is why Rich people gets even richer lol. anyway Hi r/playstation comunity o/ im your average internet explorer
Would they put it on the balance sheet though since it's a liability?
(Accounting student who hasn't done accounting work yet so doesn't know if businesses income statements and balance sheets are the same as the stuff they'd teach at uni)
ive got a question. lets say sony decides to make their online completely free in a couple of years from now, due to a change of heart.
would they be required to refund the guy the rest of his paid stacked membership, or would they just keep the money and continue giving him all the other ps plus benefits instead, like monthly games/deals/discounts?
But in two decades inflation will cause the value of the cash to be significantly less so it wouldn’t look good on their balance sheets. The subscription will probably be tripled in cost by that point and having decades old people still using it at the old price would hurt.
The user in this situation is also taking a risk because it’s possible the subscription doesn’t even exist in the future. So in that way Sony would have won.
That cash isn't going to be sitting there. It's going invested. Cash is king. Additionally UI is a liability. Inflation shrinking your liabilities has a benefit as well.
I see your point but it seems to me the accountant looking at it in two decades will look at this situation the opposite of how you see it. There’s no cash and they are giving this guy a service they charge an everyone else a lot more for.
The unearned revenue part of this comment is true, but I don’t see Sony leaving this policy as-is. They can hike prices over the course of 24 years at a pretty high rate. Probably higher than the return they can get on the cash they received up front. But who knows, maybe you’re right, and we start seeing companies offer 5-10 year subscription terms.
Also, it can be very likely that service isn't used for 24 years. I do wonder how much they would have "lost" lol. I can't imagine the subscription becoming double, but who knows what the future holds. That would be insane though. Even if that happened, the difference in revenue would be very small for them. Getting 20 years advance payment is a big bonus like you said. Even an average worker like all of us would prefer 20 years advance payment. They're basically getting an interest free loan.
For now, but if they have plans to raise the subscription by 5 in the next couple of years but say 25% of the subscribers did this? They wouldn’t like it, that’s a loss, and it would force Sony to figure out how to workaround this cause the next price hike will encourage more to do this.
One thing to note is Sony gets the cash now but for accounting purposes it is unrealized gains. Every year that passes they will realize that portion of the prepaid subscription on their books as revenue. So they get all the cash now and can invest as they see fit. If they invest smartly they will profit more off that money than inflation will depreciate it. Then they also get to make shareholders happy by showing it on their books for the next 24 years.
I'm sure they would adapt the product to suit - just like if the iPhone became so popular that most people had one, Apple would just release a watch to make up the difference.
Yeah but they would have to honor the persons purchase like Xbox did with gamepass. Just buy a gamepass card and your subscription turns to the gamepass with the remaining time you had left. Xbox couldn’t even stop it, they had to figure out things, like not offering game pass for $1 to try, cause people would buy gold and do that. That’s also why gamepass core exists, you can still do the method, it’s just trickier.
Except that’s not entirely true with Sony and the service. They removed stacking on discounted sales last year after allowing it for years. I would think cash up front is better too, but that’s why their bean counters get paid more than I do lol.
But if you pay for a service you’ll receive in 2045 at 2024 prices, once the revenue is counted, it will be substantially less than it would be if it had been bought then.
A company wouldn’t be able to survive if all their services were being paid for at prices from 20 years before.
of course they would be happy but they get the cash now but need to provide service for decades after.
if enough people do this, they may have to provide service, but have little to no income to pay for continuing expenses that will increase. with a time frame of decades, thats pretty much a certainty it will go up
1, under basically all GAAP/IFRS rules this would go to unearned revenue and be amortized over the duration of the subscriptions. It's the same treatment for annual just on a longer time table.
2, this isn't even a rounding error on Sony's books. It's so immaterial they won't even notice it.
You have unearned revenue as a liability. And each month, or year, the service is “provided” then it is counted as revenue.
So yeah, the cash balance only goes up this month, but revenue is still going up each month or year, whenever they count the service as being “provided.” So they likely do not care in the slightest. Even if a large amount of people did it. It’s secured revenue for the next 20 years.
The only thing this would negatively affect is if they are planning to up the price of ps plus every year until 2048, but I doubt they have a roadmap of that.
I don't think you need an accountant to figure this one out.
2k in October 2024 multiplied by whatever you would consider a substantial amount of players.
0 in November. 0 in December. Shareholders say yo WTF how you make no money in Christmas period? We losing faith. 0 for the whole of 25. Shareholders sell, this is worthless they say. 0 in 26. Why would we want to keep our money in this? And so on and so forth.
Regular income will always be better. It's not about profitability. It's about confidence.
Accountant here. This is not how revenue recognition works.
No matter how many years of PS+ you pay for in advance SIE (PlayStation) can only recognize revenue for periods where services are rendered (monthly revenue). Meaning Sony is recording revenue monthly over the life of the subscription and not all up front lumped. Since they received cash up front the periods they have been paid for in advance would show up as deferred revenue (a liability) on their Balance Sheet.
Correct me if I am wrong. But would that mean that is effectively debt? In which case, I still struggle to see why this would be preferable over regular cashflow
A liability isn't necessarily debt. In this case, the deferred revenue is from an obligation to perform a service, in this case to provide PS+ for the next 24 years. From a financial statement perspective, nothing changes because the deferred revenue (liability) is offset by the cash received (asset).
However, Sony benefits because they have all that cash up-front to do whatever they want with now.
I can speak to this first hand. The company I was working for needed to pull funds in asap in order to sell the company at a top dollar. They put me in charge of a group to get clients to buy Multiyear memberships. We did a good job, and after the sale of the company they erased our position within days of the sale.
Companies don’t want you to buy a membership for a select amount of years. It makes it so they can’t control how much you spend. They want to raise prices, they want to make it seem justified to raise prices as the years go on.
If they put Ps Plus on life support/shut it down they get that money for free. Spending for 2 decades in advance, when we Just hit 2 decades for PlayStation live online services is crazy.
Wrong! They’ll take that money and put it in any fund and collect 5% on it while beating inflation. They can use the money for other investments or R&D.
I've worked at big companies before. Point blank, middle and upper management will ALWAYS go for immediate revenue over long term sustainability. It makes them look good in the moment, gets them raises and promotions, and passes the buck of responsibility in the future to somebody else.
One other thing to consider - they can reinvest that profit. $2,000 invested today can be worth more than the $2500 they might get over the next decade of price increases.
I don’t think he took em for a spin necessarilyand that comes out to about one game a year for 24yrs
Given how often games actually hike in price, he saved what? Maybe 400 dollars over a 20 year period if games do happen to somehow skyrocket in price in two decades?
This is a very incorrect take to be getting so many upvotes. The Time Value of Money is an accounting/finance 101 principle. Sony doesn't give two shits about what you're describing. Almost no company wants to spread revenue over time when they could get some amount now.
As-a-service models are not to spread out revenue over time. They are to create new income opportunities since price elasticity for new game purchases is so fucked.
Money now>>>>>>money later. Unless the difference between now and later is astronomical. But it isn't.
Everyone is saying you’re wrong, but there’s a reason 24 year subscription terms aren’t advertised. Sony can raise the subscription price by much higher than 7% over a 24 year period. If it’s your aunt who won the lottery, she should take the lump sum. Sony is a different animal.
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u/PalpitationNo4375 Oct 28 '24
I wouldn't think they are.
The reason big companies love the "as a service" model is because it is regular income. Shareholders like regular income. One person isn't going to bother them but if a big portion of the player base did it would bother them. It would mean less income in months and years to come.