Will Sony Have What It Takes to Produce a Successful Playstation 4?

Seekingalpha writes:

This is massive news. As recently as October Sony (SNE) were predicting a profit, now they have made their first loss in 14 years. Already they have an austerity programme in place with company wide redundancies. And their cash shortage has forced them to raise new capital in the middle east and to sell off parts of the company.

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TrevorPhillips3342d ago

Im pretty sure they will succedd with the ps4, depends what kind of hardware they will add to the system and make it much more powerful and get much more exclusive games and also to work on the software

jammy_703342d ago

but i dont wanna see a ps4 till atleast 2015 :)

ps3 has loads left in it!

karlostomy3342d ago (Edited 3342d ago )

Sony is in a spot of trouble.

They have yet to regain the $3.31+ billion spent on the ps3 development.

Worse than this though is that they have lost even more on the ps3 by now, what with the continued $50 lost on every console sold.

If they can't recover the stupendous losses of the ps3, then how can we expect them to once again outlay massive amounts of money to design, produce and market the ps4?
How would Howard Stringer explain that to Sony shareholders?

I am sincerely hoping that Sony can cost reduce its hardware and start making some money again, especially on the ps3.

If Sony can't turn these massive losses and unrealised investments around there might not be a Sony (!) in the future, let alone a ps4.

Competition is imperative to an efficient market.
All Consoles must survive this downturn or else, we - the gamers, suffer.

whoelse3342d ago

Improved Cell (not a completly new engine), more RAM and improved PlayStation Network for just $399 Xmas 2011.

Jdoki3342d ago

Hey karlostomy... You're links have been cut off. (Sounds painful)! :)

As I mentioned in my post (11.0), Sony are taking the pain with the PS3.

But over a 10 year period (or more) the loses will reduce - we're in Y2 of the PS3, with at least 8 to go, and already they are with in 50$ of profitability. And as I think the PS4 will be an evolution of the PS3 (although a very powerful evolution), they'll fill in that hole.

I think Sony may actually have a strategy!! Something I wouldn't have said when the PS3 launched!!

Genesis53342d ago

What a stupid headline. They have only made the 2 top selling consoles in history. Do they have what it takes? Yeah I think they do.

jadenkorri3342d ago

is the fact that they can release a crap console with faulty hardware, as long as there is a 3 year warrenty, people will forgive them...people forgave MS, why shoudln't they forgive them...

karlostomy3342d ago

yes, you are right. the links were cut off.

here they are again:

($3.31 billion losses)

($50 loss per ps3 sold)


Max Power3342d ago (Edited 3342d ago )

by your own theory there should never had been a 360 due the amount of money MS lost on the first xbox, i think around 4 billion.

gametheory3342d ago (Edited 3342d ago )

That was also the amount they earned on PS2 hardware only, not everything that PS2 made in its lifetime as you Xbox guys love to imagine. The profit they made on games and royalties is still there, and it's likely a lot more (that's the point). Also, Sony is still making money off PS2 and PSP. Sony and PS3 are fine. Microsoft has yet to recover the 5 billion dollars they lost on the first Xbox, the billion dollar they lost on "insurance", and the rest of the losses they made since the Xbox 360 came out. They barely start hitting profitability a year ago, and the amount of profit they made is negligible compared to the losses they made.

Karlostomy, if you think you know so much about economics, how come you can't tell that the Xbox division is a failed project? The Xbox 360 is not a failed project, because the amount of losses they made can probably be recouped this generation and then some, in decent amounts of profit. However, they still have a 4-5 billionaire loss to pay for with interests to their stockholders. So basically, if you calculate the actual rate of interest over the years of the first Xbox and Xbox 360, then it's likely that the rate will be very small, even compared to the one that banks give you nowadays.

The Xbox project may never reach a point in time where its interest rate is above the acceptable rate for investors. Well, that is, for the investors that were there before Microsoft decided to enter the console arena. They could have invested intelligently, but instead they chose the Microsoft way and used brute force, as usual. Anyway, for investors that came after, then Xbox 360 might just be a successful project, but for those before, the Xbox division might forever be a failed project unless they somehow manage to turn the Xbox 720 into a console that sells better than the Wii, makes more profit per unit than the Wii does, it is a reliable console, has more games than the PS2, and has a higher attach rate than the Xbox 360 everywhere in the world, especially in places where the dollar is *not* the local currency (unless the dollar manages to regain its position as the strongest global currency, but as of now a game sale in Europe and a game sale in Japan is worth more than a game sale in America).

"They have yet to regain the $3.31+ billion spent on the ps3 development. "

Reading comprehension FTW, huh? Read your own links. That's not PS3 development, those losses were reported in 2007 and 2008, so unless Sony reports all the costs of PS3 development from 2000 to 2006 in 2007 and 2008 (which is idiotic) and not in their respective years, they are operative costs of the Playstation Division, and probably net losses (or close).

PS3 development was financed during the PS2 era, so that's why the profit amounts were similar to Nintendo's game division. Not because Nintendo was such an excellent business with its gamecube, but because Nintendo chose not to spend anything on R&D when compared to what Sony spent on PS3 and PSP (and that's why you got such a mediocre console named the Wii, but that's another story).

Anyway, the PlayStation project is actually doing fine. Even though Sony in general hasn't been doing so well, it's the PlayStation brand which kept it afloat. It's now Sony's turn to maintain the PS brand while it "struggles", even though its losses have been more than necessary for it to succeed as it has been with every other traditional console cycle.

Also, it's not like those operative losses on PS3 haven't paid off. Blu-ray won the format war, and the PS3, the most expensive (mainstream) console to date, has been selling better than its main competitor which launched earlier and cheaper on a year to year basis. Who says Sony needs to catch up immediately? As long as the PS3 has a lifecycle as long as that of 360 (if not longer) and manages to sell as much, or hell, not in terms of units or revenue, but make as much profit for them if not a lot more thanks to Blu-ray winning the format war, then it's a successful project. Its consumers are very satisfied anyway so everyone is winning.

As for the PS3 and Sony being doomed, I really doubt it. Your own link proves how Sony's game division is incurring in less losses every year. It was 2+ billion dollars in 2007, 1+ billion in 2008, and this year it is projected to be 0.3 billion, even after the economical situation had an impact on Sony due to changes in the value of foreign currency and a decrease in sales (something Sony can't be entirely blamed for; I think that's why they initially projected profit for this year because they didn't forecast the current economical events). So even if they are losing, it's getting better, but considering that Sony is indeed expecting to lose 0.3 billion dollars, then either Sony is going to drop the price relatively soon, or Sony is indeed still losing money on PS3 as your links say (because those numbers are speculation anyway and nothing confirmed), but if the later is the case then we shouldn't expect a price cut until after the fiscal year ends. By then, Sony might be able to cut the Price. My guess is Fall 2009.

Anyhow, If you recall correctly, Sony also lost money on PS1 and PS2 the first and/or the second years. While Sony is going to lose money a third year on PS3, you can see then trend: The losses are decreasing. Also, Sony had a lot more to gain from PS3's success (regardless of its "place" in the console wars) in comparison to PS2's success or PS1's success, and considerably more than whatever Microsoft attempted to gain with the first Xbox considering it didn't have mainstream products to offer other than gaming, so PS3's losses are pretty much justified, since they not only made another successful platform (it's already sold, in less than half the time, nearly the same amount of consoles that the gamecube sold, even when PS3 is *still* in its early adopter phase).

Also, I'm not sure if they are reporting in terms of the playstation division or not the sale of its cell and RSX factories to Toshiba or if it is being reported under Sony Corp's statements, so if they didn't report it under the PlayStation division then Sony is in an even better position. If they did, then they are still in not a bad position, as they managed to find a strategy to keep the PS3 losses in line with the forecasts and with what happens in any traditional console cycle. Also, Sony is in a reestructuring phase, so they have also sold holdings in japanese financial institutions and other unnecessary assets. Basically, Sony is optimizing itself, and whatever losses they are incurring on now should be mostly blamed on the economic situation and not on the PS3.

Is Sony in a position to launch PS4? Not now of course. But I don't doubt that they are pursuing development of PS4. They are a hardware company, and they are continuously spending money on the next thing. Will the PS4 be the same leap from PS3 as we saw from PS2 to PS3? Who knows, but I do agree they might end up spending less on R&D (but still spend on it), and I don't inferr that just because of the losses Sony is incurring in (after all, they are relatively normal for a console that is giving Sony more oportunities to win money other than gaming), but also from the fact that Kutaragi was fired.

He was fired not because he did a bad job, not because he made the PlayStation division take a big hit (because that's always expected in a console cycle), but probably because this project was very risky. Even though eventually Sony could end up thanking Kutaragi for this, such amount of risk is probably intolerable in any project for any company. Had the PS3 and/or Blu-ray failed, PS3 might have failed and it would have been a catastrophe as it might have ended up sinking the entire company or significantly reducing its size. THAT was most likely the reason for him being fired, not because of the present but because of what could have been.

Anyway, I do agree that competition is a good thing for us as gamers, and I think that all three companies will be able to launch new consoles in 2012. And hopefully, all consoles will be great.

pain777pas3342d ago

the PS4 will succeed they've learned alot this gen and first party development will be the key to their success. However things are far from over this gen seriously Sony is not that far behind and the console is very good to say the least so I expect them to bounce back this gen in a big way. M$ is in second and they came out first they are in this by price alone. Sony will get that price point right and then dominate as usual.

karlostomy3342d ago (Edited 3342d ago )

yeah guys. I didn't mean to offend you, so chill out a bit, huh?

All i meant to highlight is that:

1. the ps3 has lost over $3.31 billion in development and production.
2. the ps3 loss is *still* growing
3. The world is in a recession and Sony is going backwards.
4. I find this troubling, because I want Sony to stick around and compete to make the gaming market efficient

I did not want this to be flamebait, so I have no idea why you guys started going on about MS losses with xbox1? This story is about the ps3/4 right?
Shouldn't we, as gamers, be happy that MS has turned the xbox1 around and is now making profits with the 360?

yeah, so... i am not sure all of that warranted the defensive replies and damage control. Come on guys... i am not your enemy!

@ gamebait:
congrats on your 1500 word essay above.
bubbles up!
My only criticism is that you wrote a lot of your opinion without reference to any kind of evidence.

but i will give you a bubble for taking the time.

3342d ago
MNicholas3341d ago (Edited 3341d ago )

Still as confused as ever.

gametheory3341d ago (Edited 3341d ago )

"1. the ps3 has lost over $3.31 billion in development and production. "

Hey hitler, you evidently didn't read anything I wrote, because if you had, you'd realize that my evidence is the data you actually used, except I interpreted the right way, I didn't spin it out of control like you did. The losses you are talking about are not about "PS3 development and production", the losses you are talking about are strictly about production as development costs have already been covered. Of course they have to be recouped in time, but they aren't growing anymore, unless you don't know the definition of product development.

"2. the ps3 loss is *still* growing "

And as I pointed out, the losses are decreasing. In 2007 2+ billion were reported to be lost, in 2008 it was 1+ billion, and in 2009 it is being forecasted to be 0.3 billion (these are recent news, look it up). It was actually going to be profit until recession hit.

"3. The world is in a recession and Sony is going backwards. "

Everyone knows that but that's the only thing you failed to state until everyone had to remind you, and that makes us question your age since you are either oblivious to the global economic situation and makes you seem like you're not paying for it, i.e. you're being supported by your parents, or you're trolling. Unless you're being genuine as you say, which would make us doubt your intelligence as you're overlooking a monstruous white elephant in the room, the state of the economy.

"4. I find this troubling, because I want Sony to stick around and compete to make the gaming market efficient "

And as I stated before, Sony is doing fine and their losses aren't unwarranted. Sony lost money on the PS2 during the first two years of production. It lost less money than PS3 did, about half of that, but it also didn't push any format that would bring Sony more profit. It also didn't push new TVs as PS3 is doing, and didn't put Sony in the market of delivery of digital entertaiment like PS3 is doing. It also didn't represent as much revenue in terms of ads as Home will. It is taking more to start up the PS3 but it is paying off in way more ways than just gaming, and considering PS3 is gonna have a lifespan as long as that of the PS2 just as it also happened with the PS1, then people should stop whinning.

Here's proof for most of my statements:

Xbox 360 Losses:

Xbox 1 Losses:

PS2 games sold:

With more than a billion games sold and counting in 2007 solely for PS2, do you honestly think Sony only made 3 billion dollars (or less) on PS3? If Sony only broke even on PS2 (i.e. what they won over time was lost when it launched on hardware), then the 3 billionaire profit was only made on games, i.e. you're basically saying that Sony only made 3 dollars per game sold and that's it, which sounds too low.

If PS3 game sales are an indication, then 20% of game sales on PS2 were on Sony games, but hey let's assume it's half of that, only 10%. Then Sony sold 100 million games themselves (which is not too crazy when you consider that GT3 A-Spec alone sold 15 million), many of them at a price of 50, which would make the profit about 5 billion on software alone from Sony (less development costs, but PS2 games were cheap compared to next-gen games); let's say they sold half of them at $19.99 and the other half at $49.99 (a conservative estimate considering that most sales of most games are done when they barely release); then the profit made was about 3.5 billion on software just from them. Here's the list of PS2 games they made, which is about 96 total:

The average cost per PS2 game was also close to 0.8 million dollars


Let's say it was 1 million to give a conservative estimate. So 3.5 billion minus 100 million in dev costs = 3.4 billion in profit for their own software alone and that's a conservative estimate.

The other 900 million units must have made them a lot of money in royalties from 3rd party publishers. If they only charged a buck per game sold, then they made an additional 0.9 billion but I doubt it was so little. That would add up to 4.3 billion, but again consider these are conservative estimates because they assume that only a buck was made per 3rd party game, half of the games sony sold were sold @ 19.99, and that the PS2 never made any profit.

Also, that would mean that they only made 30 dollars per console sold (or less) including all the software sold, which is ridiculously little. If you want a more realistic estimate I'd say $5 bucks per 3rd party game sold and significantly more for other first party games; also, Sony dropped the price of its PS2 after two years and was supposedly making a profit, even today they are making a profit and that's why they're still selling it. It has been said before, that consoles don't make a profit, they only break even, but again the PS2 has been selling at a profit for so long now that it's possible that they have made profit on it already.

But again, let's analyze the veracity of your statement. "Sony has lost more money on PS3 than they made on PS2", lmao. First of all, you ask for links but you don't provide the link for your main claim. Second, you're talking about a last year quote from Shiny Entertainment's Dave Perry, not financial statement proof. Since Dave Perry doesn't work for Sony and even if he did he wouldn't be in charge of Sony's finances anyway, so the best he did was speculate and that's it. It's doubtful that he meant that Sony lost all the profit made on software and hardware, but rather, that they lost all the money that was made by the PS2 on hardware.

That would mean Sony made about 30 bucks per PS2 sold in the long run but lost it on PS3 hardware, which would make sense and be consistent with the foundation that consoles are meant to break even in the long run. But again, Dave Perry was most likely clueless and following everyone's tune of Sony Doom and Gloom (not necessarily on purpose), because as I said, even in worst case scenarios Sony made more profit on PS2 hardware + software than what was lost on PS3, but they likely made a lot more.

Hell here is a chart I just found, the amount that Sony, Nintendo and Microsoft have been making. Here:

Microsoft has yet to recover another 7 billion in profit. Sony's division is still fine. Here's where Dave Perry's statement might have some, though he failed to factor PSP and PS3 development costs, and PSP initial losses. PS3 alone didn't eat all of PS2 profit, and the reason it may appear to have done so is because PS2 financed PS3 development and also PSP development which is why we can't see how lucrative PS2 was to Sony (Nintendo probably manages to always make a profit since they are the ones that sell the most software on their own machines, not to mention that Gameboy kept them afloat during the tough gamecube and N64 times). But again, to blame PS3 alone for Sony's woes is utter non-sense, as these losses were expected and PS3 has made in-roads for Sony into several markets to pay for eventually, not to mention that the PSP also hit Sony's bottomline though you can hardly see it as PSP was launched when PS2 was making a lot of profit (but you can see how Sony's game division profit took a hit in 2004 and 2005, which is nothing to wonder at since that was when PSP was launched). That is why Dave Perry probably thought that the PS3 sales alone ate all of PS2's profit when in reality it was PSP development costs, PS3 development costs, PSP manufacturing and PS3 manufacturing, NOT PS3 manufacturing alone.

The playstation project is still profitable if you include PS1 profits as you can see with the charts, and in April it's likely to be the last year of losses of PS3 as the PS3 has rapidly dropped in cost and it just keeps going down. PSP already makes a profit and once the PS2 stops being profitable enough it's likely that PS3 will be more profitable by then as the trends indicate.

Sony is not including Blu-ray movie sales and royalties in their game division which have also been growing, so there is really nothing to worry about and it's likely that Sony's game division won't report profit that they will be responsible for in the future (like additional TV sales, sales of Blu-ray movies, and sales of Sony Pictures through the PSN Store). Sony's game division will likely remain on track being a profitable project, and even though the interest rate reported will take a minor step back, the interest rate reported by other divisions (like the divisions that make HDTVs, Blu-ray players, HD cameras, and movies) will probably raise or has raised already by the indirect help of the PS3. Eventually the ones that will grow more aside of the gaming division will be Sony pictures and those related with HD-related products. I can't say the same for Microsoft though, as the Xbox 360 doesn't really help them in selling more of their products like office, hotmail, windows, MSN Messenger, MSN LIVE, Internet Explorer, etcetera. Xbox 360 has only made in-roads for digital delivery but again the amount of money made there is negligible when compared to optical disc related sales of money and especially when compared to the amount they lost on the Xbox project.

At Microsoft, these losses have yet to be made back and it's likely that they will not recover until next generation, but if they want to recover then they better cut spending in R&D or in other areas and considering the amount of layoffs they made then I guess that's where R&D for the next box is coming from. Also, they need the 720 to become as popular as the Wii if not more, sell as much 1st party software as Nintendo if not more, have more profitable and reliable hardware, and keep selling as much third party software as they are if not more, but not just in America, but also in the rest of the world. I honestly doubt Microsoft's ability to pull a Wii+ off.

Anyway, we didn't really take you very seriously to begin with Karlos, but it was worth noting that your interpretation of facts was wrong. Not that we considered you our enemy or important to "hurt" our feelings as you think you did, it was simply worth noting that you're wrong on a website that thrives on opinion. Also, we realize that it's apparently not worth discussing anything with you rationally, as you'll simply disregard it when you're being contradicted, and not even bother to read as if it was somehow a very hard task for you.

Congratulations son, bubbles down for you.

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L Ronald Hubbard3342d ago

Can I enjoy this gen without even thinking about next gen?

I guess not...

GWAVE3342d ago

If anything, we should be asking ourselves if Microsoft can produce a successful Xbox 720 (though people will have varying opinions of what "success" means). Sony has proved their mettle with two 100+ million consoles, 23 successful game studios (that are still alive and kicking), and the PS3 which has sold more in its first two years than the 360 sold (funny how people neglect to remember that). Microsoft has proven that they know how to create a deficit of billions of dollars in their gaming division.

3341d ago
TrevorPhillips3342d ago

well next gen is coming up soon so i think u can think about both

burbulla3342d ago

I don't care about the next gen. I am damn happy with my ps3, and honestly how much better can the PS4 possibly be? I mean Killzone 2 barely uses 65% of the ps3's power. I honestly don't think there will be a next gen PlayStation, there will probably be a next gen Xbox, but I am not too sure about the next PlayStation.

Hiruma Youchi3342d ago

people should focus on this gen ...

Why dis3342d ago

I would get a PS4 if it looked like that.

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