My stance on game streaming services has been well known for some time now but for the uninitiated let me sum it up for you: I think they’re rubbish. The investment in capital required to get them to work well at scale seems incompatible with the number of potential users who’d want such a service and nearly all offerings in this space priced the games similarly to their full blooded, non-streamed cousins. Sony doesn’t share my view on this however having invested several hundred million dollars into buying game streaming service Gaikai and committing to providing a sort-of backwards compatibility service using that platform. Since I wasn’t entirely interested in the idea I hadn’t looked into it much further but at a tech level it’s quite interesting, even if I think the service won’t be the cash cow I’m sure Sony thinks it’ll be.
I’ve mentioned in the past that there weren’t too many ways for backwards compatibility to make it’s way onto current generation consoles even if some form of streaming service was going to be offered. I postulated around the potential ways of doing it, either by running a whole bunch of old consoles in a data center or developing an emulation framework, neither of which I felt was going to be particularly scalable due to my percieved lack of demand for the service. As it turns out Sony has gone with the former option for their streaming service, opting to run a bunch of PlayStation3s in the cloud and providing access to them through their new PlayStation Now service. However they’re not consoles as you’d recognise them, they’re in fact all new hardware.
Sony has developed a custom motherboard that contains on it 8 PlayStation3 chips allowing them to achieve a pretty incredible amount of density when compared to simply racking consumer units. Some back of the napkin calculations puts this at about 384 PlayStation 3s per rack, quite a decent number although I’m sure the cost of that hardware is going to be non-trivial. This custom solution does have its benefits though like them being able to throw in a new network interface and hardware video encoder, reducing the latency between the customer and their PlayStation3 in the cloud. This might not be enough to make the service feasible but it’ll do a lot to make the majority of games on their far more playable than they would be otherwise.
Right now the service offers up about 200 titles for individual rent or an all you can eat subscription that has a selection of 100 titles for $15 per month at the cheapest option. That’s a damn sight better than pretty much every other game streaming service I’ve seen before but it still suffers from the same restricted availability (only select US and Canada areas currently) issues which hamstrung other services. The one thing the service does have going for it though is the veritable cornucopia of devices that PlayStation Now can run on, including Sony’s recent range of TVs and even DVD players. That’s definitely an advantage that other competitors didn’t have since they all required another hardware purchase but I’m still not sure there’ll be enough demand even if the barrier to entry is low for Sony’s more loyal customers.
With the average cost of producing a PS3 apparently down around the $280 mark (which I’ll assume is relatively similar for the custom solution) it will take Sony around 18 months to recoup the costs invested in hardware based on the current subscription fees which doesn’t take into account the licensing arrangements for streaming. There’s potential for them to make up a bit more margin with the single rentals which appear to be quite a bit more pricey but it still seems like a long time for the investment to pay off. That being said with the life of consoles now getting dangerously close to 10 years there’s potential for it to work but I still think it’s a bit of a gamble on the part of Sony.
I see a lot of people these days claim that they’ll never buy a house because it’s a bad idea, usually using the past year of economic turmoil as an excuse for their actions. Similarly with Australia’s housing market in an apparent bubble (that’s been meaning to burst for years if you believe the doom and gloomers) it would seem that it’s impossible for the first home owner to get into the market without ruining themselves financially. As someone who bought his first house 2 years ago when interest rates were rocketing up to 10 year highs and bought the second just this year I know exactly how the market is functioning and what the causes of this so called “affordability” crisis are. Today I want to step through some of the insights I’ve gained into market and why the media reports are, as always, misleading.
Hitting up the ABS for some data on house prices I found that they haven’t updated the price data in almost a year, leaving me with real figures that don’t accurately reflect the current situation. Still I’d hazard a guess that the swing couldn’t be more than 5% either way, otherwise we’d be hearing about it in the news. Taking that all into consideration here’s the median house price for the eight capital cities of Australia (in 1000’s):
You can see there’s a wild amount of swing between the different cities and that’s with good reason. Canberra for instance is filled with public servants who all have steady, above average incomes and this is reflected in the housing prices. Places like Hobart and Adelaide owe their lower prices to the lower population and hence lower average incomes. So what do these figures tell us? Well typically one city or state will be reported on and you can see how that would lead you to believe that all of Australia is unaffordable, especially when you look at say Sydney. Secondly the median figure tells us that 50% of the houses sold in that quarter were below that price, and the other 50% above. So whilst the median price might look rather scary it is in fact far from it and this is why reporting like this which is using the average price can make things look far more scary than they really are. It only takes a few outliers to completely ruin the average price as an indicator of affordability.
I’ve often talked with friends about the house prices in Australia being a crisis of desire and not affordability. Todays generation Y grew up predominately in suburbs with an easy going lifestyle and are seeking the same thing for themselves when they move out. The problem is those closer in suburbs now attract a premium as the urban sprawl has made them far more central than they were when the gen Y’s parents bought into the market. Taking this into consideration the first home buyer should not be looking at median priced homes and should be looking to the mortgage belts if they want to step into the market. It might not be what they want and so they choose to rent seeking to keep their lifestyle. There’s nothing wrong with this, the issue I have is that most of them throw their arms up in the air and call houses unaffordable when really they’re being unreasonable with their demands.
There are also some more financially inclined among us who believe that renting is more financially sound than owning. Now this is a complicated idea and the answer can vary greatly depending on someone’s situation. However there’s a little bit of comparison we can do to get a feel for how right or wrong this idea might be.
Having a quick look through Allhomes I found I could acquire a typical 3 bedroom house for anywhere from $350,000 to $400,000+, but there were quite a few homes available for somewhere in the middle. Checking the rental market for the same area (I’m using Holt as an example) a 3 bedroom place could be expected to rent for $380 per week. Now the one assumption I’m going to use is that property price as a general rule of thumb increases by about 7% annually, or it doubles every 10 years (see here for some data on the matter). So in the buying vs renting argument over 10 years you’d have:
Looking at that it comes out to a difference of around $100,000 over 10 years to own rather than rent which works out at about $200/week. The question is if you are renting, could you use that $100,000 to invest and beat the return gained on the house. If the theory holds true the house you bought is now worth around $750,000 or a capital gain of $375,000. If we knock off the $100,000 of extra money you had to spend since you bought there’s a difference of around $275,000 so the question then becomes, could you do this if you didn’t buy? For most people the answer is no, since Australians aren’t particularly good at saving money. Renting makes fiscal sense if you use the difference in what you spend on a house and what you’d spend on renting to make a return of approximately 7% per annum and don’t spend it. Suddenly the extra $200 per week might not seem so unaffordable.
When you take certain figures being reported by the media it’s always easy to get caught up in the hype. The problem with using a single figure to report on these things is that the real situation is hidden under a layer of equations and interpretations. If you go out there, do your research and curtail your desire you will see that the Australian housing market is no where near as bad as the media makes it out to be. I bought a house at a time of sky rocketing interest rates and everyone screaming that the housing market was about to go bust. Here I am 2 years later and the bubble has yet to burst and they’re all still saying the same thing.
Don’t believe everything you read kids.