Playstation 3 Missing Break-Even After Almost 4 Years. How Long Can It Go On?

Bnet: I've often scratched my head over Sony's (SNE) Playstation 3 business strategy - the expectation that it could wait an extended period of time while selling the system at a loss. Some information from December that had missed my attention until now suggests that even after nearly five years, the company is still losing money on every unit out the door. Given the fiscal realities of the division and the company, I wonder if it could - and should - be put on the chopping block.

The research firm iSuppli did a teardown of the 120GB hard drive PS3 last month and calculated a materials and manufacturing/test cost of $336.27. Mind you, this is the unit that the company has been selling for $299. That apparently, though, is an improvement because the previous version sold for almost $50 less than the cost.

[OGharryjoysticks]

There's a saying "don't look a gift horse in the mouth"

So now I'm scatching my head why someone would complain about a good deal for consumers.

Granted the Wii has been making a profit on each system sold since day one, but I don't know about the 360. And even if the 360 is even on production costs or maybe making a little extra with each system sold, the extended warranty they implemented to avoid the lawsuits has cost an absolute fortune making it a moot point.

[Nineball2112]

I agree with you, but I also agree with the author in that fact that it's amazing that Sony can still do this.

The PS3 is apparently a loss leader for them, meaning that they accept losses on every PS3 in order to:

A. Keep/Grow market share
B. Generate revenue from sources related to the PS3 or
C. Enter a new market.

I, obviously, don't think it's C, so it must be A or B OR maybe I'm just missing something.

Anyways, I paid quite a bit more for my PS3 (Got the 80 Gig Motorstorm bundle) and I've always thought it was well worth the money. *shrug*

[Simon_Brezhnev]

dont quote me on this but i remember reading the Playstation family made over 5 billion in 2009

[hay]

I sense a bashing factor here. Customers receive more than they pay for, and it's still bad.
* poke at fanboyish argument that PS3 is a money losing horse *

[hoops]

Even with the warrenty MS is still making a profit from each Xbox360 sold now. Obviously if they did not have to give out the warrenty they would have been in the black a full year sooner

[nycredude]

This guy needs to get a clue of how the business is run. Hardware is only the vehicle. The meat and potatoes of this business is SOFTWARE and content! Cell phone companies don't make any money of their phones giving them away! Cable companies don't make any money of their boxes, Direct tv don't make any money of their dishes and boxes.

[Christopher]

The reason is clear: competition.

It's the exact same reason that Microsoft is losing money on each unit sold as well. I mean, really, $299 for an elite plus two free games? It should be fairly obvious why they're doing this.

[StanLee]

You're right but the software has been underperforming as has hardware sales. That said, who gives a fcuk, we don't work for Sony and they're committed to a life cycle of 10 years. They'll eventually see a return on their investment in the PS3, big time.

[anh_duong]

around 4yrs??? are you sure??

ps3 released in NOVEMBER 11 2006 in us/japan and march in 2007.. so i would say just around 3 yrs..

funny how 5yrs headline suddenly becomes 4yrs and now 3yrs hahahaha..

stupid author.. another update is needed...

[SixTwoTwo]

In EU the PS3 is 299 euros which equates to $420.27
In JP the PS3 is 29990 yen which equates to $328.94
http://www.xe.com/

So if it costs them $336 to manufacture a PS3 then they lose $36 on every PS3 sold in NA. Lose $8 on every PS3 sold in JP. But they earn $84 on every PS3 sold in the EU, their strongest market.

[AssassinHD]

It is hard to take the author seriously. He can't even perform a basic math function. November 2006 to January 2010 is only 3 years and 2 months.

Edit: I see the author updated his timetable to "almost 4 years". Apparently he thinks it is "almost November". So not only is he unable to perform a basic math function, but he also has difficulty reading a calendar. My 6 year old daughter can read a calendar.

[ReBurn]

The PS3 is in its 4th year at retail and Sony were burning through cash in R&D well before launch date. So the author isn't really off with the 4 year number. Sony has been spending cash on the PS3 platform for probably more than 5 years.

The valid point is that sooner or later the payback has to come. I'm sure it will. Profits from the PS2 are helping to offset any hardware loss the PS3 is encountering and at some point equilibrium is reached when the product reaches an economy of scale. As long as software/peripheral/PS2 sales make up any loss on PS3 hardware the PS3 as a platform remains viable until equilibrium is reached.

[anh_duong]

AFTER almost 4yrs is a bit different from INTO its 4th YEAR.

so if the ps3 was launched on the 21st January 2007 you would say that the ps3 is "missing break even after almost 4 years"???

of course not.. stupid author..

[hmmmm]

Yes well that would all be true >IF< Sony received the whole $299 when you buy a PS3..but we all know it is not true, they get much less than $299.

[ThanatosDMC]

Weird... why does he care about how sony does business. Is he the one losing/gaining money???

@ Jammy

They're selling 360s at Japan for less than $10.

[gaffyh]

Over 1000 degrees, easily.

PS3 is doomed, as always...

For success. :)

[JsonHenry]

I see the uses of the PS3 outlasting those of the 360.

Long after gaming has moved on to the next generation I will have ZERO use of my 360. With Netflix, streaming media, internet browser, and a much more open platform for adding new content and uses via the ability to install another OS on the PS3 I see it outlasting the 360 in terms of its overall usefulness.

An example - I will need a Blu-ray player, media streaming device, and internet browsing ability (with the use of a KB+M) in the next 3-4 years when my children are finally old enough to have that sort of thing and know how to use it in their own bedrooms. Games will be dirt cheap for the system and I don't have to pay an online fee to let them use these streaming/online services like I would with the Xbox.

And since I already own a PS3 I have everything my kids "need" to have their own form of entertainment in their bedroom without adding any additional cost to me.

[KingME]

It's funny how this guy writes an article with a lot of good solid points, and since the points can't really be argued, some people are bringing up the 360, the 360 warranty, and other 360 comparisons.

How about addressing the point at hand...THE ARTICLE. Even if the 360 isn't making that much more of a profit, the point still remains that the PS3 isn't. That what the topic of discussion is about, not the 360.

[Guido]

You have one company that sells a console knowing that it is faulty being made with cheap hardware so that they can make a profit at the expense of upsetting its user base. Next you have a company that sells a gimmick console using last gen graphics and lacks in quality control for the games released all for the sake of profit. Lastly you have Sony, a company that sell the most power packed console using the best tech and hardware and all this at a loss to the company. Now tell me, what company has the consumer in mind when making that sale?

If you have not figured it out, it is Sony. Not MS, not Nintendo. Sony is the only one that sells us a console that has everything and all for a loss to them knowing that in the end, happy consumers will continue to turn to them generation after generation.

[blahgasm]

What good points does the article make? The PS3 has been out for 3 years, not 5 or 4 years. Using the numbers in the article, there are places that the PS3 has broken even or is sold for a profit, notably Europe as both the Pound and the Euro are stronger than the Dollar.

The article is poorly researched and poorly written. Also, the reason people are bringing up the 360 is because the author claims the 360 has been profitable for some time now, which is debatable.

[camachoreloaded8806]

you'd all be laughing and pointing your fingers, saying their business strategy is stupid and whatnot.

[FragGen]

Sometimes it's hard for business analysts to understand a business strategy that doesn't extend further than one quarter out because publicly traded businesses have almost all of their metrics setup as quarterly and communicate everything in those terms...

BUT a really viable megacorp that is going to survive and continue to dominate on a global scale (like Sony or Microsoft is capable of) has to have a more complex long term strategy a lot of times that requires taking a beating on one front to get a position that's going to serve you long term. A lot of people don't get this if they do not understand or share the long term strategy or are not used to thinking that way.

For example, Sony may be (quite rightly) thinking that if PS3 sales can entrench PSN in the home for the future, the losses are more than worth it many times over. They're an investment/subsidy from the company to the consumer to generate brand loyalty, etc, which is going to generate MUCH cash.

Hopefully, the investment will pay off... if it does they will look brilliant in 5-10 years, if not everyone will call it a debacle. Such is the way of competition!

[TotalPS3Fanboy]

And make money back from the softwares, royalties, Home, PSN games, movies, accessories, etc.

[IdleLeeSiuLung]

"So now I'm scatching my head why someone would complain about a good deal for consumers." -DIRTYHAIRYJOYSTICK

Because a business that is in the red (loses money) won't last long and will eventually go bankrupt. Competition is better for consumers than a short term deal!

The good news is that both Sony and especially MS (at this stage) is investing into the brand. Sony had the brand and now lost it, but MS is gaining recognition.

Both though have huge losses, Sony due to the massive cost of their console and MS due to the high failure rate. Seems like Nintendo is the only one with a sensible business strategy.

[SoapShoes]

This guy obviously doesn't work at Sony and has no clue as to how they operate. I distinctly remember Kaz saying that the hardware was still losing some money on the slim, but through other revenue(accessories,games,etc) they would be making money. Plus the PS2 and PSP make them money. I know the gaming division was in the red for awhile after PS3 launched, but have been in the black now.

[RussDeBuss]

from the look of these comments its a stupid article so i won't give it a hit, but the way i see it

- ps3 enabled sony to win the format war and blu-ray is now THE hd format

- having blu ray and hdmi as standard from day 1 encouraged people to upgrade to hd tv's, chance of them being sony

-ps2 is still selling now, and probably making them a load of profit on each one, ps3 is still young and when once the ps4 is out, ps3 will be making profit, and if they get motion control right will be a better upgrade option than a wii2 or wii hd.

-money can be made from software and video store

-many people believe that ps4 will be based on beefed up ps3 tech so costs won't be as high

[edgeofblade]

I don't think this author gets that the point of the PS3 was never to make money on the hardware.

[wicko]

They are not selling 360's for 10$... they are buying them back for 10$ kind of like how EB will buy your console for in-store credit.

Some of you hit the nail on the head: it's about software sales in the end. Also, there is a lot more to cost than just the hardware. Distribution, marketing, software upkeep, etc..

[Highatus]

Here's a crazy thought. Maybe Sony look over the Playstation brand as a whole and derive any losses from that to investors? Sure they may lose some on the PS3 but could easily be made up from PS2, PSP and their exclusive game revenue.

[baum]

The PS3 is not even 3 years old in Europe, and is barely 3 years old in America, not "almost 4". More garbage passing off as journalism.

Whoever wrote this is a dipsh1t.

[masterg]

The PS3 has been out 3 years and 2 months in the US. It has been out 2 years and 10 months in Europe. How in the world is that almost 4 years.. (and he had originally wrote 5 years, my god)

Sony said that the PS3 was profitable over a year ago. Profitable meaning if you take the loss of a PS3 and add the royalties from game sales the console was making profit. That profit is even bigger now with the costs being down and game sales being up.

The $336.27 it is estimated to cost is just that. An estimate. Sony has always been the kings of hardware and who knows it might even cost $50 less.

All in all this article is garbage.

[Arnon]

I guess some of you must think that consoles suddenly pop into existence the day they are sold to retailers :/

There's a LOT of R&D that goes on before a console is sold, and I guarantee you that they started losing money 1-2 years before the PS3 was released to the public.

[Anon1974]

First off, the PS3 is making money as a platform and has been for some time. Kaz already confirmed this. The author asks "Why would Sony do this," and the answer is clearly because "They make money doing it." The rest of the article is rather moot.

Secondly, the only reason that the PS3 isn't making money on the hardware already is due to foreign exchange. Just before the current economic crisis, the Sony games division started churning a profit. Suddenly, everything's in turmoil and the yen appreciates against the Euro and US dollar by 25% at times, and the impact is still felt. That has deeply cut into revenue streams for all Japanese electronics makers.

Is that Sony's fault? Of course not. Of course currency fluctuations are always a consideration, but no one could have predicted what transpired. Once the Euro and US economies start picking up steam again, their currencies will be worth more over seas and those foreign dollars coming into Japan will actually be worth something. Increasing sales, strengthening economy, Blu-ray win and the PS3 at the forefront of 3D tech. The future certainly looks bright.

In contrast, analysts just last Sept commented that Microsoft is still taking a loss on 360's at the current pricing levels and the bulk of their sales come from the US - so fx rates aren't responsible, plus they still have the ongoing costs due to the 3 year warranty/faulty systems. At the current rate that Microsoft Entertainment is making money, it will take another 15-25 years to break even from what they lost since the 360 launched, and 360 sales are slowing.

So who should really be concerned here, Sony or Microsoft?

[LesterCorncrake]

If the PS3 was "PUT ON THE CHOPPING BLOCK" i would consider myself an ex gamer.

i could never go back to that slag of an xbox, once you have had both systems you dont wanna fcuk with a certain machine anymore.....Cough ! xbox ! Cough.

[GarandShooter]

@ Arnon

Money spent on R&D by a company is an investment in the company and its future and is not a loss. It's previously earned PROFITS that are reinvested into a company.

And yet you scoff at other's understanding of business principles...

[vhero]

Well they do make money back from a lot of other revenues and MS are in the same boat every time the break even they lower the cost in order to stay on top of PS3 and it's working for them. As they know they can make the money back from Live and downloads etc..

[Commander TK]

slow people. Sony said back in September that a PS3 costs $240 to manufacture. So they make $59 + dollars on every PS3 sold. Not to mention that the PS3 is more expensive in several countries.

[Anon1974]

Sony corporate CEO Nobuyuki Oneda said in a conference call that the costs of making a PS3 had dropped 70%. It cost $800 to make at launch, so that's roughly $240 today.

So, according to Sony they're making $60 a console.

[Johnny Rotten]

well it feels pretty good to know that the tech I paid $550 for is still worth it's price tag :)

Most companies/manufacturer's rely too heavily on obsolescence rather than trying to make something equally of value and quality.

[Sarick]

You have to realize not all tech cost as much as it sells for. Take for instance in 1990 an 80 megabyte HDD was high tech and apparently cost over $100 to manufacture. Now days you can buy one for next to nothing.

The real stopping block with hardware and software is material cost. Tech prices are often offset to cover future R&D. Prices in tech are regulated to make a profit. So when it comes down to it that $100 item might cost $10 to manufacture.

This is where people get confused. They see hardware being sold at wholesale and assume each piece cost the amount set by the tech industry. Although I do admit some chips and tech do cost a lot to make they are producing them above production cost. The only thing holding these prices down is competition and consumer complacency.

When a manufacture mass produces a product the cost associated with it are reduced. This reduction isn't directly translated into lowering the cost of the items produced. A lot of times the manufactures mitigate overall loses by inflating the prices of tech.

The effect is simple. The demand on the product is high so the price is set high. The actual cost that is associated towards the product is inflated. When the consumer makes a purchase they're buying the set prices of that tech. Since these prices are mostly regulated by supply and demand little is left for actual value.

In these cases the manufacture is making a profit or recovering from R&D losses using inflated prices. In the background most tech cost are so highly inflated that the market becomes disassociated with actual production value. This is why you have people thinking that a product cost $100 when in reality may cost only $10 to produce.

Also, If you take a manufacture that is producing something in house where they make their own chips, lasers and boards the production cost are often lowered even farther. This is because a middle man has been moved from the equation. These benefits also help lower the manufacturing cost.

So the next time you tear down something and attempt to measure it's retail market value. Don't forget to research the true cost of the parts in real value. I can guarantee you most of the time you'll be over estimating individual parts that have inflated values. Basically the manufactures and tech industry for the most control what the customers pay even if it cost much less to produce. Yea, they need to make money too.

The only thing here is the average Joe is oblivious to how much part really cost to produce. As long as the customers perceive value in the product being sold and the competitors allow it, there is little leniency placed towards realistic production cost.

[Johnny Rotten]

Good post and I completely agree. For over half a year now I've been digging into the electronics world and learning how to solder,make circuits, and program some stuff with the use of micro controllers, and in doing so I realized components are dirt cheap! but at the same time it also opens your eyes up just how overpriced most things are.

I can't really say too much about about "set prices" except that if I'm going to pay good dollar for something I want the quality in return. I'm doing alright in life but I need to work hard to get there and harder to stay there, so in other words I can't afford to pay for things twice :)

[Sarick]

That's good to hear, I'm glad you responded. My comment towards you was a positive reinforcement that perceived value often relates to consumer complacency. I'm glad you've experienced the cost of components first hand engineering your own projects.

We both know that most components are very cheap. Even though they're cheap to us they're still inflated. Compared to the large production lines at a factory we still don't have the opportunity to compete with the bulk rates they receive when purchasing or producing their products.

People who are told that this product cost X amount to make normally can't anticipate the true production cost. The reason isn't for the lack of intelligence but for the lack of information. Since tech prices fluctuate, and material cost are very volatile it isn't easy to estimate them. The fact is only the manufacturer of said products knows in detail what the true cost is. They could be getting a product that cost $100 retail for $1 to $150 although, the latter is highly unlikely. I'm sure Sony knows the true profits and loses best.

I also assume it could be a positive to Sony when they hear customers making statements that their console is being sold at a loss. This is especially the case If they're making a profit through the hardware or software. After all it's a always a good sign when consumers perceive higher value in a product that cost much less to produce.

[timotei]

Who's going to save the PS3?

[Karooo]

...

[4point7BillionLoss]

sony thought they could sell the PS3 at a loss in the short term, and that games sales would make up for it in the long term.

Big mistake. no one buys ps3 games.

[Karooo]

MW2 sold 6.5 million, uncharted 2 now almost 3 million whats that you pathetic liar?

and the ps3 is break even this year so fck off.

[hoops]

Consoles in general lose money on hardware and make it up on accessories, servie (online) and the biggest portion of the profit: SOFTWARE
These companies rely on software sales to offset hardware losses except for Nintendo.
This is why Software sales are more important then hardware sales in general

[hatchimatchi]

I think they'll start to turn a profit on systems sold sometime this year. As far as breaking even, I have no clue. I really doubt sony would ax the SCEA, they know there is money to be made and the ps4 is definitely not coming out for quite sometime.

It seems like they learned from their mistakes with the launch of the ps3 and in 2009 they definitely made an effort to rebrand themselves and it worked wonders if you ask me.

Hopefully sony doesn't pour too much money into 3d tech because I really don't see it taking off like some people think it will. At least not right off the bat. There are too many consumers with fairly new HDTV's and I can't see them running to the store to buy the same tv with 3d capabilities for a higher cost than that of their "old" HDTV.

[hoops]

3D won't take off for a few years....not until we see new consoles.
ALmsot all the HDTV's bought even up until last year do not support this technonlogy. Its not just refresh rates of 120hz, its 120Hz input signal. Many HDTV sets right now do not have that, let along ALL Blu-Ray models not annoucned recently do not support 3d movies (stand alone players)

[nycredude]

Dude FYI there are way more consumers who haven't purchased an HDTV and is waiting on the sidelines to pick one up than there are consumers who have just purchased an HDTV. Hi Def revolution has jsut begun!

[RealityCheck]

@ hatchimatchi

I agree with your sentiment, hopefully Sony doesn't sink too much money pushing 3D so soon. Or else I could see them loosing more money then they did with the PS3 so far.

A lot of enthusiasts already got their HDTV and most are not 3D compatible. On top of that, those that have stayed on the sideline so far have done so mostly because of cost so even if they make the jump to HD soon, they will be getting cheaper models which of course won't support 3D.

Finally there is the issue of content. You thought in the early days of HD there was not enough content? Well there is even less real 3D content now and while they are shooting a bit more it's still a minority.

So for all these reasons the uptake on 3D will be even slower than Blu-ray was.

[Dipso]

The PS3's R.R.P in the EU countries is around 299 euros, they can go for as low as 250. That's an average sale price of around 390 US dollars..not too bad really.

[Dannehkins]

It makes it sound like Sony don't even know their own finances. I'd rather trust the judgement of a company that has more experience working under its belt than a simple journalist who just seems to suggest lame things.

I think Sony are aware that they are not breaking even and I am sure they have a business plan.

[digimau]

5 Years!!???

December 2006/ December 2009 for me is 3 Years! Hahaha

[Karooo]

2006 november to 2007, 2007 to 2008, 2008 to 2009 = 3 years complete.

and its just 1 month into its 4th year.

[Solidus187-SCMilk]

Even the 360 is only 4 years old, I have no Idea where he got 5 years from.

Sony is doing much better now at 299 and with the slim, so it will get better and better for them. The hardest part for them is behind them and ps3 has a bright future.

yea its closer to 3 years then 4 in the US, and almost 3 years in Europe.

[LostDjinn]

It's going to be "one of those" articles is it?
*shakes head*

[Karooo]

its the no 1 format now, they succeded sony is not a foolish company, they are a hardware giant.

[Corrwin]

He's already renamed the Article to "Nearly 4 years" instead of "After 5 years"... and even that's pushing it by 10 months.

But "Just over 3 years" doesn't have quite the alarmist tone, and it's still less time than the original Xbox was selling for, at a loss.

[MGOelite]

it hasnt even been out 3 years in the uk

[dredgewalker]

Sony has a lot of first party studios and that's where they earn it. Its like buying a printer guys, its the ink that makes the money for them.

[liebringer]

First of, It's 3 years and a couple of months, not five, not four, second, Hardware always has loses, that's one of the reason console games cost more than PC games, cause the money comes from software sold. Well unless you're nintendo and release a last-gen console with a new controller with the magical ability to print money.. Anyways I'd not judge a company as successful in the industry as Sony, I think they lost money a lot of time in the PS1 and PS2 as well and, look how that turned out, eh?

[hoops]

You know what will slow adoption of 3d HDTV's? The millions of current LCD HDTV's on the market right now retailers are trying to sell at really awesome prices.
The AVERAGE consumer has NO idea that all of those now cheaper HDTV's will not support 3D. How many HD LCD TV's have you seen lately and in the past 3 months that have slashed their prices 25% or more? Almost all of them.
You can now buy a 50" LCD HD TV for $1000 in many places...and none of those support 3D. Moreover you still need to buy the glasses. Not one mfg. has stated the cost of these glasses and only 1-2 mfgs are bundling ONE inside the box...and those HDTV sets are the premium models costing thousands.I think Panasonic and Sony are the ones.
Btw. 53% of Americans have HDTV's. Thats more then 150+ million consumers that will have to buy a new HDTV
http://www.gamasutra.com/ph...

Add in the cost of glasses...a new Blu-Ray player if you are not a PS3 owner and you have one costly investment. This won't be mainstream for a few years at best. Cost is the biggest enemy here.
All those shiny new HDTV's you see at Best Buy and other Electronic stores now on sale....are not 3d compatible. All those Blu-Ray players glowing on sale at those same stores...are not 3d compatible

http://cnettv.cnet.com/3d-t...

http://news.cnet.com/8301-1...

[spinbot_lv1]

someone tell to this guy that in videogames industry profits (for hardware makers) come from software sales.

[Ares84PS3]

He should lend me his crystal ball so I can check the lottery numbers for Mega Millions.

PS3 was launched in 2006 November. Let's count children:

2007 November - PS3 1 year old
2008 November - PS3 2 years old
2009 November - PS3 3 years old
2010 November - PS3 4 years old
2011 November - PS3 5 years old

Hummm.....so this guy already knows what will happen in the future. Good for him....now give me that crystal ball.

EDIT: Now they changed the title to 4 years after 5 :D HAHAHAHAHAHAHA

Anyways...it hasn't been 4 years yet either...so I still need that crystal ball!!!!!

OH and one more thing... the PS3 came out in 2007 spring in Europe and Australia! .....so there it's not even 3 years old yet.

[ReBurn]

When did PS3 R&D begin? Because that's the point where Sony started investing cash in the console. It was first announced at E3 2005, so they'd already started spending at that point. So realistically, from the date it was announced:

March 2006 - 1 year
March 2007 - 2 years
March 2008 - 3 years
March 2009 - 4 years
March 2010 - 5 years

Please tell me what you find erroneous in that logic. I'm confused why people don't get it. Sony started booking negative revenue in November 2006. But they were sinking money into the console long before that.

[Ares84PS3]

If you think like that than go back even further t the point where they started development for the PS3.

No that is not the way it is looked at. They start from the time the PS3 launched not when they started talking about it to the press.

You are very wrong sir.

[Corrwin]

Except the article goes by how much it costs to make each PS3. This includes manufacture cost, and the cost of any previous R&D.

It's a bit unfair to criticise SONY for selling at a loss, if you include the R&D years - how are they meant to sell a product that didn't exist?

[mrv321]

Firstly don't round up if it's UNDER 0.5

The PS3 was released in 2006, December 2006 it's been out for 3 years and 2 months... not 4 and CERTAINLY NOT 5

The PS3 has done sony well. Sold many millions of blu-rays and thus Sony blu-ray films and players. Sold many millions of HDTV which some will have came from Sony. Also it recieves royalties from studios which is profit. It's online is going strong and the PS3 will sell millions of HDTV's which will come from Sony in part.

[SuperStrokey1123]

THis is what i am saying, terrible article. Math isnt really that hard is it?

[liebringer]

I noticed the same thing... I wonder how much credibility gets and article about finances from a guy who can't tell how much time has passed since November 2006... He even edited it from 5 years to 4... which is still not right... sigh...

[thief]

When it asks "How Long Can It Go On" the article misses out one key point: its not how much it has lost in the past but how much it can make in the future that is important. Sony can sell the console for 5-7 more years, its future proof (wifi, hard-disc in every console, blu-ray) and its a great deal at 299, which means no more price cuts while the cost keeps going down
And for every console it sells at a $50 loss, on average over the next few years they would sell 10 games a year. Thats some pretty solid cash flows. The years of pain are almost over for Sony, and its about to pay off big time

[SUPREME RULER]

the playstation brand made 5 billion check the link http://www.psu.com/Sony--Pl... true the the playstation 3 is losing on each console sold.

people cost do go down, plus it a well made console. Hand down better then the 360 which is the worst console build ever! name a console you ever had that had so many problems!!!!!!!!!!!!!!!!!!!!!! !!!!

the 360 problems
rrod
e74 error
open tray problem (yes a new problem)
scratching disk

Sad console, good game but sad console overall.

[Sir Ken_Kutaragi_]

;-D

[SuperStrokey1123]

This isnt actually 4 years either i think is it? Didnt it launch in November 2006 so that would make make it literally just entering its 4th year, not finished its 4th year wouldnt it?

[liebringer]

Worse off, he edited it to 4 years... originally he had 5...

[SuperStrokey1123]

Agreed what is this guys issue, does he really not know how to count? What a fool.

[jhani]

Because as i remember just after the introduction of ps3 slim there was news about Sony cutting the production costs with 70% of the newest models. So how much did the first batches of ps3s in 2006 cost Sony to make?

[ReBurn]

$840.35 at launch.

Here's sort of a history of cost vs. price in this Gamespot article.

http://www.gamespot.com/new...

[ApocalypseShadow]

gamers like me that bought ps3 day one got it for a great deal.

bluray players were $1,000.ps3 sold for $500-$600.i have a 60gig ps3($599) that's now a 500gig ps3.so i got a game system and a bluray player that is matching stand alone bluray players for $400 dollars less because ps3 can always be upgraded on bluray.

the price was a STEAL.

i got ps2 playback which i use and everything else.but what the author doesn't mention is that sony said overall,they are profiting on ps3

http://www.google.com/url?s...

{QUOTE}

Kaz: If you're just talking about the hardware alone, the quick answer is yes. That makes good headlines, but I don't actually know that that's the true nature of the business that we're all in, whether it's PlayStation, Xbox or the Wii. I think the better indicator is to look at the business as a whole platform, to ask: are you profitable in terms of the hardware, software and peripherals. And the answer to that question is yes on a gross profit level since the last fiscal year.

{END QUOTE}

if you sell at a loss,but you are PROFITING OVERALL,what does it matter?when ps3's cost breaks even,they make more money.the author is an IDIOT as he can't even get his facts straight just on time on market.now he's worried about ps3 profit as if it matters.

GREAT GAMES MATTER.AND WE ARE GETTING THEM.

the author of this article fails.

[Karooo]

wtf.

[SSCOOLCHEA]

man shoots dog cause he ate his controllers .....

did you see that one ???

[saimcheeda]

3 years on March 23 2010 here in Oman

[cygnuszero]

Sounds like the PS3 is doing really well.

lol?

[Nitrowolf2]

mybe this is why sony release sony many first party games to make up for those losses. Even thought hey lose money for every PS3 sold, don't they generate more for every copy of a first party game sold? This could also be the reason sony plans to have a premuim service to help recover from the losses. If things goes right Sony will be profiting from the ps3 that the losses themselves wouldn't be a issue to them.

i'm sure they are at this point already, if not then the upcoming titles will push that. Also like i said the rumor premuim service will get them allot of money back from thos losses. I wonder how much 360 and Wii cost? kind of strange i'm sure there cost is more then its production, but strange sony is doing this, its like they are giving a deal to its buyer. kind of neat to think about.

Sony makes allot from the ps3 even though it losses money for each sold console. think about it you buy a ps3 that is the only part of money that sony losses, then the person buys a game sony gains more money and then some people buy blu-ray wich is becoming very popular wich sony takes more money. And lets not forget about psn. I don't think sony would sell a system less then its production if it knew the system wa doomed. They have other ways to get the dough through ps3. Home,PSN store,Games, Blu-ray movies, soon to come Premuim service, ect

[artsaber]

Has everyone forgotten, that Sony can spend this kinda money on the PS3 because it was the investment vehicle to take over this HD generation. The PS3 is SINGLE-HANDEDLY responsible for the adoption of Bluray over HD-DVD. I believe we can all agree to that. Sony has made so much money hand over fist as a direct result of this PS3 Win that it is sickening.

Sony quietly rakes in this cash because of the PS3 trojan horse method. So while Microsoft pays out billions in repair costs, Sony secretly rakes in Bluray revenue, takes a upfront loss on the hardware, and makes money back via software sales. While all of it is not theirs to collect, they get a decent share being at the helm. Wish I had this kinda income with residuals. The PS3 was Bluray's adoption vehicle, which is why the loss is acceptable for them. Sony has always said they are in it for the longhaul. PS2 still around, so it is believable.

http://www.blu-raystats.com...

EDIT: Stealth disagree already? Another N4Ger who can't read, or a Sony hater is in full swing today?

[hoops]

Art this site is comical. You state facts and provide stats and you get disagrees. LOL
This site is a even bigger joke then Gamepro LOL

[Nineball2112]

I agree with you Artsaber. You gotta look at the overall picture. Sony took a calculated risk with the PS3 and blu-ray and it's paying off for them.

[Ares84PS3]

that it is amazing to be how far people would go to bash the PS3 and Sony. Now their major problem is that they are giving a good deal to their costumers and Sony is not making money on it :D

Unbelievable.

[ktchong]

Blu-ray was able to defeat HD DVD because of the PS3.

Sony earns a revenue every time a movie studios put contents on a Blu-ray and every time a Blu-ray disc is sold, and the revenue adds up.

If you look at the PS3 as a loss leader to cement Sony's stranglehold on the hi-def DVD market, the console is already a winner for Sony.

[Treyb3yond]

Even though the PS3 is smashing it out of the ball park now, I thought we hadn't had one of these "teh PS3 is dooooomed" aticles in a while.

Will they ever give up and just enjoy one of the best systems ever??

Probably not.

[catchnvampire]

I normally don't post that much. But I had to when I saw this part of the story. I'm surprised that some journalists don't even think of getting their facts righ.....sigh. I mean , this quote is preposterous

"Sony’s financial standing has taken a beating, including the games-selling division, which hasn’t seen a profit since this side of the PS2 era."

And it has been in black ever since 2008:

http://www.gamespot.com/new...

The PS3 maybe losing a bit of money, but Sony really won't care as long as the overall Games Division as a whole makes a profit. If you dig deeper you will also find, that it also is one of the primary reasons, the PS2 is still around. Given that the PS2 is still going decently strong, it contributes to profits for the PS Brand as a whole.

And that is not counting the impact has had on the Sony's media / movies divisions i.e from the movies and also royalties for the Blu-Rays sold for the games / movies.

But guess what, most people here are just going to keep saying that the PS3 is losing money, Sony is doomed etc.....Just like what I have been hearing from day one of the PS3 launch that "It has no games".

[divideby0]

look at Sony's history...consoles life span and software sales will make it up.

I look at my launch 360 and my launch PS3 and you have to be an idiot to think the PS3 higher launch price didnt bring that much more value than I paid for my 360....deny it you are just in denial.

my launch 360 is gimped (no HD disk drive, tiny 20G disk to small for digital downlaods) and crippled.
my launch PS3 will bring me through this entire console cycle (BR and now 3d capable)
Sony ushered this gen. of consoles with a new DVD standard and reaping the perks and sales of that. Now they are pushing a 3D standard (with NOTHING needed for my launch PS3 hardware), hence driving sales for the TV line.

got to look at the big picture which the author just is to myopic to see

so Sony knows how to build a console with all the features needed to bring you through its cycle, hence it costs more...

[hoops]

"so Sony knows how to build a console with all the features needed to bring you through its cycle, hence it costs more.."

I guess that excluded the PS2 without Standard HDD LOL

[divideby0]

^ If I recall the PS2 was released in 2000 or at least a year before Xbox and had and expansion slot for a hard drive, which I put a HD drive in..
and if you look it up PS2 was the "previous generation", so you are not even comparing similar generations, if thats you minor point.

So Sony had foresight of an cheap way (unlike my launch Xbox or my launch 360) to do it economically.

and look at the life cycle of my launch PS2 and my launch Xbox...MS dumped the Xbox before its time and I keep playing AAA games on my PS2.

[shikwan]

No company wants to be in the negative...even for 1 quarter of the year so whether it's 5/4/3 years - it's VERY bad.

After reading the comments here (and N4G) in general, it is easy to see that Sony fans have got more spin than hurricane KATRINA!!!

[ForROME]

I guess your reply would make sense, if you were an objective person but all your post point to being one sided which almost completely makes anything you say void.

your a one step pony, not a gamer

I call it like I see it, SONY longterm strategy will make them more money than MS will on 360.

However MS has made its foot hold in the ONLINE console market in the future that will be their major source of funding, but with companies like Apple and Google on their heels who knows what will happen

I think SONY wins this gen over all by a 7% margin and they make profit by the end and make more than MS.

[KILLnFOOLz]

I'm not surprised that the PS3 isn't making any money.

Lets start off with the fact Sony invested $400 million dollars in the research and development of 1 working cell processor ( http://en.wikipedia.org/wik... Add $1.6 billion into the cost of building a new plant just to mass produce the cell ( http://news.cnet.com/2100-1...

That's 2 billion dollars right from the start, minus the interest in loans that it took from the 20 japanese banks for borrowing $700 million over 10 years ( http://www.bloomberg.com/ap...

OK, so now we're up to 2.7 billion minus what it cost to research and develop Blu Ray discs, players, plants ............ see where this is all going?

It doesn't take a genius to figure out that Sony owes a ton of money. But what's really hurting Sony is that while their hardware sales are "ok" their game software sales are terrible and blu ray movies aren't picking up the slack.

[shikwan]

But be prepared to lose bubbles now...! <Oh the agony of stating the facts on N4G!> <--sarcasm

[ForROME]

I disagree, companies invest more money in LONG TERM goals all the time,

2 things to note in what you said

A: a horrible economy
B: Long term not only will it profit, it will surpass, because of a bad economy life cycles will bring in far more revenue, in turn the economy both hurt and will help SONY

Not to mention Blu Ray adoption slow? Really? This christmas proved notion completely false, go look at sales year over year BR is dominating, if there wasn't profit you would not see Studios putting BR first and DVD 2nd, DVD still has its hold but its shrinking yr over yr

Again, SONY , is a LONG term investor, Nin is a quick cash investor, and MS doesn't know what their doing, when it comes to hardware, that is apparent in their entire company not just the gaming division. MS company is shrinking market, google and apple are just slapping MS around at this point in revenue.

But I backed MS last gen, and I never looked back was not a PS2 fan however this gen they flip flopped in ideas it seems.

So if you plan to talk about why they are losing money, put all cards on the table in comparison is how you know what shape they are in, if I just talked about one company and never compared, I could make anyone sound rich or poor

[ForROME]

Agreed, even with the loss, SONY has always out smarted its competitors on one front, LONG term goals, the PS3 will saturate for years to come, and even at a hard ware loss, the PS2 sales make up the loss, and by the time the PS2 is flat, the PS3 will be at cost.

The main source is the periphs and games and extras

SONY is fine, they have been in this business long before our ideas, not to mention, they can afford a bad gen even though I think the PS3 was close to that they pulled it out, and will pull ahead, key word folks

LONG TERM

[hiyaku]

Another day, another 'SONY ISH DOOMED OH NOESSSS!' article.

This guy needs a degree in Business before he starts sprouting crap.

[KILLnFOOLz]

Oh and I wouldn't have changed the title. I wouldn't let Sony off the hook so soon after that year long delay. When added in it's closer to five years. They had to pay a years worth of interest on BILLIONS of dollars that just added to their now total debt without a product to subsidize that particlular part of their loans.

[TwistedMetal]

they get profit fromuk and australi ps3 consoles. they only lose money from certain NA and japan ps3 consoles. sonys blueray and Hdtvs get a boost in sales just becuase of the ps3 and they get royalties on all those as well. The ps3 made blueray succesful so any losses is justified. I didnt even go into the money they make off psn with home and othere things.

[Socomer 1979]

Oh trust me guys , Sony makes thier money back & thensome with home & psn.
That's just a given.

: )

[Ma1nframe]

LOL funny how the Xbox and Xbox360 has not even turned 1 cent in profit YET.

[keysy420]

every system sells at a loss and makes up for it on games, its probably good for ms that sony isnt at break even because you'll probably start seeing more advertisment.Sony is fine and are doing a great job with the ps3.they did sell it at $600 for a long time thats crazy, the company im sure has already invested in the next gen and seemed to be gain market share overall in there company. plus sony is ranking in cash from movies and 3d taking to movies. dont be sureprised if 2011 is the best year for sony yet 2010 will probably be but 2011 will be incredible.

I had a arguement with my cousin that the ps3 has been lagging in sales. this is complete bull and i dont know why journalist ever put it out there. since launch the ps3 has sold faster than the 360 at a higher price. people say that the ps3 wasnt selling but compared to what? it was all expectations, there was never anything to compare it too. cant say 360 because like i said the ps3 has sold more in a shorter amount of time. SO really compared to what has the ps3 ever sold bad?

[KILLnFOOLz]

You Sony fans want to believe that last year didn't even exist.

"Sony’s net profit down 94.8 percent in October-December period"
( http://gadgetophilia.com/so...

"Sony's Net Profit Plummets 95%, Games Division In Particular Disappoints"
( http://www.dmwmedia.com/new...

And you want the rest of us to believe in a bad economy Sony has turned it around in a year?

(chuckle)

[Karooo]

ps division is just one thing, bravia tvs and other electronics are also suffering due to the yen.

panasonic lost 5 billion, whats that?

[bjornbear]

Sony's a gaming-only company.

Listen, Sony makes many other products, and like said above, their losses also effect the over all economy of the company.

It's part of the fact that Sony iz from Japan and Japan was struck bad from this economic crisis =/

but ok, fire away the numbers =D they mean squat to me I don't have any Sony shares.

[Sprudling]

The cheapest PS3 I could find in Norway right now was at 466$. 130$ more than the estimated manufacturing cost. Also, the PS3 hasn't even been out for 3 years in Europe.

[bjornbear]

the write considers 2010 as "the 4th year" ? is he like...time travelling? its only the 21st o.O

[DJ]

They're basically selling at a $30 loss for the 120 GB SKU, and making a slight profit on the 250 GB SKU. But this is after the PS3's price reduced 50%!

It launched at $600, for crying out loud. They've done a great job of reducing production costs. Besides the PS2 was sold at a loss for 5 years, yet generated a LOT of profit.

[Enigma_2099]

Oh wait, no they're not. They're also making money with the PS2 and PSP.

[Halo3 MLG Pro]

Good Read. Well it's not surprising seeing how bad Sony's finances currently are. They're stock was at an all time low a few months ago. Not sure about today.

One thing is for sure that the ps3 will not see the same financial success as the ps2. Sony's gaming division is a disaster while Microsoft's gaming division is a success. :)

[Argento-Nox]

Sure, just like Bing is the best search engine, Internet explorer 8 is the best browser and Zunes is the leading mp3 player. Every company takes losses at one point in time, the better ones will weather the financial storm and bring themselves back to viability eventually. Are you forgetting the billions of dollars lost to RROD, will never be made back this gen for MS game divisions and LIVE fees? I'm not one to forget that MS slyly swept that RROD debt under the fiscal rug in 2007.

Seriously, when's the last time you listened to a singer with a contract under Sony BMG music? Have you watched any movies by Columbia Tristar, Sony pictures or MGM Lionsgate; like James Bond, Spiderman, Hellboy, Rocky etc.? Have you watched any Sony TV shows like King of Queens, Seinfeld etc.?

My point is, you've probably given Sony money the same way most of us have given MS money with computer software. Both are big companies that don't need people like us defending them or defining their level of success. I think you're missing the significance of the blu-ray format as a whole. The 360 is doing just fine with the DVD format now, but you can't seriously think that it'll be around next gen with HD gaming now settled in place.

Sony and MS are both doing fine when it comes to hardware and software sales, so why care about the rest? Neither company is going away next gen and that's all that matters to gamers.

[Argento-Nox]

I think people are missing the bigger picture. The PS2 pushed the DVD format to success, just like PS3 is pushing blu-ray into households every time a PS3 is sold. Blu-ray is increasing it's sharehold ever year. With 3D movies like Avatar pushing to the forefront with an imminent future release of 3D TV's, PS3 and blu-ray could be on the cusp of success they've been looking for. Even if 3D TV's fail, I highly doubt anything less than blu-ray will be acceptable for next gen gaming consoles.

[karan8624]

The money is in software sales, companies like Sony and Microsoft know that

Do you guys honestly think that these companies are stupid? They wouldnt be where they are today if they were. Any losses made in hardware the PS brand is making up with software sales, same with both other consoles

[KILLnFOOLz]

Argento if you insist on bringing other parts of the Sony product lines into the mix you might as well be honest and tell all of the facts. Such as the fact that Sony is broken up in individual divisions with their own budgets that do not cross over to subsidize the others. In other words "IF" Sony gaming division doesn't pull out of their financial mess and has to declare bankruptcy the creditors that borrowed money to Sony gaming can't demand Sony TV, Sony Music, Sony Motion Pictures etc. to pay from their division profits. That's for Sonys own protection so one division doesn't collapse the whole company. In most of these cases it's standard policy that clauses are made that if one division tries to bailout the other then the lenders that are owed money can raid that division for money lost.

So in other words it doesn't really matter if other divisions of the Sony family makes a profit does it?

I'm sure Microsoft is set up the same way. But the only difference is that Bill Gates personal wealth as a billionaire is a great hedge against his own company losses. But even as rich as he is he would never risk his personal wealth to save a division of his company and would rather restructure it through bankruptcy.

LOL. If you really want to bring up RROD in 2007. Why don't you also bring up the fact that in late 2006 MS started to turn a profit on 360 hardware sales ( http://www.techspot.com/new... By 2008 Xbox's Entertainment and Devices Division as a whole started to make a profit ( http://www.joystiq.com/2008... So in fact while true MS lost money fixing RROD it was still making money and not in the hole like Sony in less than 4 years.

[Argento-Nox]

You're still missing the bigger picture. I'm trying to point out that blu-ray media is pushing into households via the PS3 which is the real winning situation for Sony games and Sony as a whole. The further blu-ray entrenches itself this gen; not only with games but movies, the less likely DVD will make it to the next gen, especially with HD gaming taking hold.

Assuming blu-ray is the defacto media format next gen (b/c I don't think a medialess game console is the best option), who do you think will have to pay Sony royalties next gen, if that's the case? Sony may have separate divisions, but they still work off eachother when you consider that Sony's 3 movie studios relied on the PS3 to move blu-ray/HD movies into households. A lot of Sony TV's and mp3 players even use the same XMB interface as the PS3 as well. If you look at the big picture, you'll see that Sony is slyly integrating their entertainment divisions (music, movies and games) together for more efficiency.

Regardless of whether or not 3D TV's does well, the PS3 will be 3D ready with a simple software upgrade. I'm certain Sony's game division will ultimately end up in the black by the end of this gen, when the cost of manufacturing the hardware evens out or becomes profitable. PS2 wasn't exactly in the black until the slim came out either. This gen is like the previous 2 for Sony, it's a marathon, not a race; hence Sony's 10 year cycle. Consider that the PS2/psp hardware profits negate a large portion of the PS3 losses as well and the picture doesn't look quite as scary either.

Secondly, though the PS3 hardware may not be in the black yet, the software division is. MS may be in the black for hardware sales now, but taking into consideration the cost of RROD, that doesn't nullify the fact that no amount of software/LIVE sales will make that RROD loss back. Looking at MS gaming divisions net profit at the end of this gen (the way I see it) and you'll still see red. If it's a positive you're looking for MS, it's that they've made themselves more marketshare this gen and a much better picture for their next gen console.

[horndog]

but but but teh bloorayz

but but teh cell

but but teh ps2 generation

but but the God of Kratoz
Lol!

Sony is hurting bad. A loss for every console and not a profit in the near future. It will take years for them to break even this gen if even. OUCH!

[showtimefolks]

when ps3 was launched it took a loss on hardware but overall PLAYSTATION brand still made money,,,,

its funny people talk ps3 has to pay royalties but they forget xbox360 and wii also have to....

what about software sony bought all these studios and IPs last gen now they making money and crazy money almost every ps3 exclusive has sold over a million world wide and now we are stating to see more ps3's exclusives going for 2-4 million

psp
ps2
ps3
software lineup on each console
all the accs sold on each console

now only in the us but worldwide now think about about it i believe playstation brand is making a huge profit and consider this

in some other countries ps3 is not 299 its more and that means more money and ps2 is still selling strong