Other Threads:

Moneyhatting – CASH - http://www.vgchartz.com/forum/thread.php?id=37195&start=0

Moneyhatting – Payment of Costs - http://www.vgchartz.com/forum/thread.php?id=37227&start=0

Moneyhatting – Loan - http://vgchartz.com/forum/thread.php?id=37399

As always, please let me know if you have any comments or suggestions.  Thank you for reading.

Guaranteed Purchase of Games

In theory, this is very possible and does not distort financial statements at all.

For example, if Sony guaranteed the purchase of MGS4, then nothing irregular will show up in their financial statements.

If Sony guaranteed to purchase 2 million units of MGS4 and bundles them up with the console, it is not uncommon. Therefore, the financial statements won’t show any irregularities.

Below is a simple analysis.

Sony purchases 2 million units @ $25
Sony bundles 2 million units with 2 million consoles. The cost of the console is $350.
Sony sells 2 million bundles to their customers and sells it for $400

Revenue:
Consoles = $800 miillion
Less:
Game Purchase = $50 million
Cost of Console = $700 million

Gross Margin = $50 million
These types of costs for the console maker can be represented in marketing expenses and/or cost of goods sold. One can argue that either is a valid accounting argument as to where you can put the expense of the games that were purchased for the bundle.

On the game developer side, it is fairly transparent as well.

Revenue = $50 million

In both cases, there are no extraordinary items, nor interest expense or income, nor any balance sheet adjustments to show any “special arrangements”.

Since the majority of new game sales occur fairly early in their lifecycle, it is not strange for a game developer to report a large number of games sold during the launch period.

Therefore, this type of moneyhatting MAY be fairly common in the world of videogames, especially for the console makers – due to its simplicity and non-effect on financial statements.

Pay attention people, this is good stuff right here.

Interesting thx.

Bumidan, I'm going to offer you a VGC tag, if you want it. You can petition fksumot here if you would rather have an 'official' tag:

Bumidan: The best financial reports analysis no one reads

---

This type of moneyhat, I don't even really consider a moneyhat. That's not to say it isn't, but it differs from what I at least think moneyhatting is. Mainly in that it is completely transparent.

The bundle is out there, it's being sold, etc. In essence, it's not being hidden, unlike many other kinds of moneyhats. Now, I suppose you could look at it as not needing to actually sell the bundle, but then you're basically looking at a direct cash infusion, minus production costs to make it legal, with a large disparity between tracking services and official shipment numbers. That kind of disparity will only get investors and possibly SEC folks curious; how can your internal numbers be so far off of what is reported externally?

Thats not to say it doesn't happen, but it's either completely transparent or it would invite unwanted scrutiny onto you. Either way, that doesn't correlate with what I consider moneyhats.

i actually found this quite interesting to read...so maybe this might explain how sony got MGS4 exclusive then.instead flatout paying for it,they guarenteed a purchase.anyway,bundled games equal win win for both companies involved.

This is pretty interesting, thanks!

Yes, very interesting. Best financial analysis I've seen in awhile.

@alpha_dk

What is a "tag", and what is an official one?

Is it a signature?

If I remember correctly, in MSFT's last quarter, Sales & Marketing (also R&D), increased quite dramatically.

That is the quarter starting Apr 1 to June 30, 2008.

Was there any big games released during that period? And or anybody notice MORE MARKETING than normal?

That could be a bit of evidence for "moneyhatting"...??

Though I'm not sure if the other divisions had more marketing than usual.