Sony plays hardball - Will all of its moves ultimately be worth it?

Variety's Paul Sweeting writes in Video Business, 11/30/2007

"Is Sony finally getting it's PlayStation 3 game on?

Whether out of desperation or strategic planning, the company finally seems to be taking bold steps to reclaim some of its lost stature-not to mention market share-in the videogame console business after falling to a humiliating third place against rivals Nintendo and Microsoft."

Paul Sweeting reviews the recent series of Sony's strategic and tactical moves designed to raise and conserve cash - and fund the turnaround for the PS3.

[HarryEtTubMan]

Although the amount is believed to represent less than 5% of Sony, keeping it under the disclosure threshold for Japanese companies, Sony has a current market-cap of $54 billion, so even a 1% stake would represent a cash infusion of more than $500 million. I knew they were rich but man not in the 54 billions rich lol

Let the console speak for itself. PS3 will do fine

[gamesblow]

I love how "even if" it is out of desperation like it would matter... Who wins there? We do. that's who. I love when idiots say "oh, they're only doing this or that out of desperation" So what!!! They're still doing it and had they been doing incredibly well and still did this... then what? It would have the same ressult.

People are morons. Simple and clean.

[Gina-get-u]

The article is not about whether you win or not. Not every article about the PS3 will be about whether you win or not. The article is also not written from a gamer's perspective. Not very article about the PS3 has to be written through a gamer's viewpoint. Making and selling the PS3, after all, is a business, so naturally, business people will talk about it from a business perspective. If you broaden your perspective just a bit, you will appreciate that the article presents several recent financial moves by Sony in context to make it easy for you to see that all these financial moves by Sony, which you may not at first have connected to each other, may actually be closely related for the purpose of turning around Sony's struggling PS3 division. And once you make that connection, you may finally appreciate how seriously Sony is taking the current situation.

[SmokeyMcBear]

so why exactly do we care about how the business aspect to these console makers is run?

[Xi]

the ps3 is really the core for sony's complete lineup, and will lead to their superiority during the next generation of tv's, movies, and games. If the ps3 gains popularity, people will be more likely to upgrade to a high def tv(bravia), a new dvd format(already got blu-ray) and will make money on games.

[pacman615]

will only get better from here on out...warp speed factor 7 approaching

[goldenzealot]

the sad thing is...no one will buy a ps3 when the 360 is out and noone uses blu ray when hd dvd is out. sony just fighting a losing battle

[whoelse]

I 100% disagree. PS3 sales have increased alot since the price cut and 40GB. In Japan and Europe, the PS3 is selling better than the 360. Just North America where the 360 is more popular. Blu-ray is winning around 2:1 against HD DVD so obvivously more people are buying BD than HD DVD.

[hondakidus]

That statement was pure ignorance

[Chaos Striker]

"no one will buy a ps3 when the 360 is out"-->then why are people buying them still? Why are there sales for ps3 when 360's are selling as well?

"no(space)one uses Blu-ray when HD-DVD is out"-->again, why are there Blu-ray sales when HD-DVD is coexisting?

Basically everything you say is unsupported and ignorant of the actual statistics.

[snoopgg]

Ps3 will own 2008

1 They have some very Key exclusives
2 Lower prices
3 Blu Ray sales 2 to 1 to hd
4 Hardware is more reliable
5 The release of home
These are the 5 things that will propel the ps3 ahead in 2008

[kydrice]

PS3 is outselling the 360 is most of Europe and Asia, the only place 360 is winning is in America. HD-DVD winning over Blu-Ray? LOL Get off the internet... I won't even argue with that. That statement was purely grabbed out of your own a$$.

[Vizion26]

or at least it's on its deathbed waiting to die.

Okay Sony Fanboys, before getting all worked up take a few deep breaths and try to think objectively for a moment.

The Playstation 3 is bleeding Sony badly as they are selling every unit at a loss. Their game division reported a loss of over 800 million last quarter. But they took into account the massive profits they are still getting from the PS2 (if you didn't know the PS2 is still selling well). If you discout the profits from the PS2, Sony's game division would have had at least a 2 billion dollar loss. And that's being really, really conservative.

The question is not how long CAN sony support the PS3 line, the question is how long they will support the PS3 line. Sony has a lot of money but it wouldn't make much business sense to keep investing in something that is draining them financially and has no hope in ever turning a profit for them. According to the article, even a Sony exec said he thinks they can turn profitable by 2009 but admits thats being optimistic.

Never in gaming history has a console come back from last place to take the number one spot after 13 months of launch. As a matter of fact at the current rate the PS3 is selling slower than the Gamecube. Also take into account that many third parties have abandoned the PS3 or suspended development for it, I seriously doubt things will turn around for the PS3.

I expect Sony to start fresh with PS4 coming out in 2010. Sony made a mistake of making the PS3 expensive to produce and with a price point out of the reach of the mass market. They also made a big mistake by focusing on core gamers as opposed to both like they did with the PS2. I expect Sony to copy Nintendo's business model next time around -- that means making a profit on every unit sold and targeting everybody. I also expect the PS4 to have some kind of Wii-like controller.

[kydrice]

So is that why it's stock is rising? Is that why that one investor from Dubai is investing 500 million shares in Sony's stock? Why would Sony's stock be rising if The PS3 is dead? And how exactly is the PS3 selling "slower than the gamecube"? It sold nearly 5-6 million in it's first year the 360 sold double that in two years so how is it selling worst than the GC when the 360 sold just as much in 1 year? AGAIN the 360 has been out for TWO YEARS quit putting the PS3 and the 360 on the same rail. The PS3 is now at $399 which is just as expensive as an XBOX360 Elite which you still get more with the PS3 than with the Elite so how is it that the PS3 is still too expensive?

Oh and before you go into "it has no gameslol" mode quit thinking that 2007 will live on forever. 2008 is where all it's big titles came out and yes that happened for the 360 as well.

[jorellpogi]

The only thing that is dead is your 360 :)

[Vizion26]

Sony as a whole is making money, Sony's game division is losing tons of money. Get it? If you have read the article you would know that PS3 is in no position to fund its own turnaround and that Sony is anxiously trying to raise money conserve cash to fund the PS3.

And who ever said the 360 was successful in terms of turning a profit? Microsoft has had a loss of billions dollars with their Xbox line. They only had profitable quarters when Halo 2 and Halo 3 were released. However, Microsoft with the 360, at this point, is not losing as much money as Sony is with the PS3. Sony which was compelled to drop the price of the PS3 are losing even more money on every console sold.

It's not really about sales, it's about turning a profit. The N64 and Gamecube had relatively small user base but Nintendo still generated profit straight out of the box because the console was cheaper to produce than what they sold it for. That's the opposite Microsoft and Sony are doing, but Sony to a greater extent. They hope to establish a large user base to recoup the loss but every rational person knows that's not going to happen.

And Yes, the PS3 is way too expensive for the MASS MARKET. PS3 will never reach 1/5 of the userbase of the PS2 with a $400 dollar price point.