I've read various figures that teh PS3 has so far cost Sony around $2.5-3Billion, including R and D, marketing, and software development costs. Do you think that it is possible for Sony to ever reach a break-even point, or will they just have to write-off the PS3 as a financial failure. Obviously the PS3 was a significant factor in blu-ray's victory over hd-dvd but has this gamble been worth it, considering that the blu-ray drive was one of the main reasons for the PS3's enormous initial manufacturing cost?
Do you think it is possible for Sony to reach profitabilty with the PS3?
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Not on just selling the hardware, but if we play with the numbers and the PS3 reaches 100M consoles like the PS2 and they actually earn money per console for console #50M to #100M and then add software sales profit, I think they will make money on it.
Now even if the PS3 does not reach the staggering 100M number, we can look at it from a complete Sony Corp picture, it gave them the BlueRay "victory" ie Sony Corp will most likely get more than that back from BlueRay profits, since they are involved in every step of the process of making/selling BlueRay.
Also it seems they are intending to use the PS3 to help their 3D tv push and lets not forget that PSN is now getting expanded to include other devices, ie more pieces of software can be sold.
PSN is probably one of the most important venues for making profit for Sony going forward, the PS3 is the reason they have it and can now evolve it to include new devices.
They can easily add support for Toshiba, LG, Panasonic etc devices if they want, so its a good move for Sony in my opinion. Interesting to see how MS reacts to that part of PSN, if they will include 3rd party devices into Live.
Now even if the PS3 does not reach the staggering 100M number, we can look at it from a complete Sony Corp picture, it gave them the BlueRay "victory" ie Sony Corp will most likely get more than that back from BlueRay profits, since they are involved in every step of the process of making/selling BlueRay.
Also it seems they are intending to use the PS3 to help their 3D tv push and lets not forget that PSN is now getting expanded to include other devices, ie more pieces of software can be sold.
PSN is probably one of the most important venues for making profit for Sony going forward, the PS3 is the reason they have it and can now evolve it to include new devices.
They can easily add support for Toshiba, LG, Panasonic etc devices if they want, so its a good move for Sony in my opinion. Interesting to see how MS reacts to that part of PSN, if they will include 3rd party devices into Live.
Personally I find discussions like these boring and irrelevant.
Mod: Then stay out of them! The business side is legitimate discussion.
They belong on financial discussion forums, not here, where people are interested in 3D gaming and its more technical aspect. Besides, these topics almost always bring out the fanboys in people, causing unneccessary trolling and mudslinging.
Mod: Then stay out of them! The business side is legitimate discussion.
They belong on financial discussion forums, not here, where people are interested in 3D gaming and its more technical aspect. Besides, these topics almost always bring out the fanboys in people, causing unneccessary trolling and mudslinging.
The system has just entered its 3rd year in NTSC regions, soon to be in PAL regions where it's most successful. It's far too late to write it off as a "financial failure", particularly with the strides they've hit with a significant hardware revision in recent months.
It's done well enough that they're projecting profitability by the end of FY 2010:
http://www.gamasutra.com/view/news/26144/Sony_Game_Biz_To_Be_Profitable_By_2011.php
Like always, it's the combination of software, services and hardware revenue that will achieve that. Which is why they're considering upping their PSN revenue by offering premium services.
It's done well enough that they're projecting profitability by the end of FY 2010:
http://www.gamasutra.com/view/news/26144/Sony_Game_Biz_To_Be_Profitable_By_2011.php
Like always, it's the combination of software, services and hardware revenue that will achieve that. Which is why they're considering upping their PSN revenue by offering premium services.
It'll more then likely be a loss, just as the first Xbox has been; but it'll not stop Sony from releasing a PS4 either.
The reason why this discussion is relevant on B3D is that the actual bottom line is going to have serious effects on the PS4's hardware design and general market strategy. Being late to market at the highest price obviously isn't a valid approach, but how much are they going to change? Late to market at competitive price; not late to market but more expensive - or at the same price; compete with Nintendo or compete with Microsoft; backwards compatibility, multiplatform developer strategy...
There are many complex questions and every single one of them depends on what goes into the box. Yes, it's still about the games, but this generation has clearly demonstrated that hardware has a lot to do with what games you're going to get.
The reason why this discussion is relevant on B3D is that the actual bottom line is going to have serious effects on the PS4's hardware design and general market strategy. Being late to market at the highest price obviously isn't a valid approach, but how much are they going to change? Late to market at competitive price; not late to market but more expensive - or at the same price; compete with Nintendo or compete with Microsoft; backwards compatibility, multiplatform developer strategy...
There are many complex questions and every single one of them depends on what goes into the box. Yes, it's still about the games, but this generation has clearly demonstrated that hardware has a lot to do with what games you're going to get.
I don't think it's a valid simile considering the vastly different dynamics of the original Xbox business, particularly hardware wise. MS was never able to reduce costs significantly or control them, so the hardware kept bleeding money. We've got a different situation here where Sony has been able to reduce manufacturing costs substantially (IIRC 70%).
I think it'll make some profit, but it'll be a tiny drop compared to what they had with the PS2.
However as you said, whatever the case may be, this will or has had a big effect on the next gen hardware design. No more exotic designs methinks.
woundingchaney
Regular
Do we currently have any realistic figures suggesting what this Ps3 undertaking has cost Sony to this point. We have seen some catastrophic figures over the years since its initial launch. We would also need to refine just what we are talking about, primarily because when we start talking about money making possibilities such as PSN and BD then the issue becomes extremely muddled. We need quite a bit of relevant data to really begin to investigate. If we can rely on suggestions of the console becoming "profitable" by the end of 2010 then Im doubting the console itself will be wholly profitable by the time it leaves store shelves.
Ultimately at a guess I would say that in its entirety the PS3 hardware and perhaps software will end up in the negative by the time the product leaves the market, but when factoring in the success of BD and making PSN (Sony online store) a relevant current and future digital download infrastructure then it may end up in the black. It primarily depends on how one wants to view the scenario.
Ultimately at a guess I would say that in its entirety the PS3 hardware and perhaps software will end up in the negative by the time the product leaves the market, but when factoring in the success of BD and making PSN (Sony online store) a relevant current and future digital download infrastructure then it may end up in the black. It primarily depends on how one wants to view the scenario.
woundingchaney
Regular
??
What do you mean "3D power"?? Most of the "decent" BD players on the market are around 150usd and are by no means anywhere near as advanced as the PS3??
Yeah, and laptops with better GPUs than the PS3 cost way, way more than $400.
Code:
[LEFT] Sony Nintendo Microsoft Total
Y/E 1998 $902,811,090 $1,023,333,867 $1,926,144,957
Y/E 1999 $1,102,563,557 $1,301,350,000 $2,403,913,557
Y/E 2000 $722,738,949 $1,368,207,547 $2,090,946,497
Y/E 2001 -$449,776,290 $677,576,000 $227,799,710
Y/E 2002 $629,101,056 $895,872,180 -$1,135,000,000 $389,973,237
Y/E 2003 $935,569,253 $834,333,333 -$1,191,000,000 $578,902,586
Y/E 2004 $627,195,212 $993,161,303 -$1,337,000,000 $283,356,515
Y/E 2005 $419,888,799 $1,056,056,202 -$539,000,000 $936,945,001
Y/E 2006 $69,129,058 $774,478,055 -$1,339,000,000 -$495,392,887
Y/E 2007 -$1,970,923,859 $1,914,666,388 -$1,969,000,000 -$2,025,257,471
Y/E 2008 -$1,079,994,103 $4,322,637,887 $426,000,000 $3,668,643,783
Y/E 2009 -$577,207,240 $5,691,428,301 $169,000,000 $5,283,221,061[/LEFT]
[LEFT]Y/E 10Q1 -$413,541,667 $420,843,750 $312,000,000 $319,302,083
Y/E 10Q2 -$653,333,333 $710,655,556 N/A N/A[/LEFT]
[LEFT]Total
$264,220,482 $21,984,600,371 -$6,532,000,000 $15,659,498,630[/LEFT]
[LEFT]Full Year Average
$110,924,623 $1,737,758,422 -$1,001,857,143 $914,270,499[/LEFT]
[LEFT]Profitable Years
8 12 2 10[/LEFT]
[LEFT]Non Profitable Years
4 0 6 2[/LEFT]
[LEFT]Average in Loss Year
-$1,019,475,373 N/A -$1,251,666,667 -$1,260,325,179[/LEFT]
[LEFT]Average in Profit Year
$676,124,622 $1,737,758,422 $333,000,000 $1,389,625,094[/LEFT]Source: http://neogaf.net/forum/showthread.php?p=18269957#post18269957
Its difficult to see how they are going to drag the PS3 out of the hole they made over just the last 2 quarters and likely the current quarter just ending. They are over $1B in losses for the two reported quarters in this financial year. At this point my guess is that even Microsoft with lower losses is going to be hard pressed to pull itself into positive territory this generation even with profitable quarters from here on out.
Its a financial mess people, theres no way out of that hole they've dug and they need a LOT of kickbacks from PSN and Blu Ray to justify such gross expenditure. I doubt they consider the past losses relevant and maybe they just count the current financial year forward and the PS3 slim as a reboot of their fortunes with the past losses relagated as the cost for the Cell + PSN + Blu Ray architectures and their potential future fortunes coming from them.
True, but the kcikbacks are hard to measure and are set to be ongoing past this generation. If PSN becomes as successful as iTunes, and BRD as DVD, over the next 5+ years it'll have justified the investment. If PSN remains very niche and BRD doesn't generate that much revenue for Sony, then their PS3 choices will have been poor.
I doubt anyone speculating in this thread is doing so with actual reference to the financials of these markets, and instead is just taking wild guesses!
Silent_Buddha
Legend
It is pretty valid. When most people talk about the cost, they are also taking into account R&D expenditures which cannot be ignored from a business and planning standpoint.
It's quite likely that PS3 will be able to reach yearly profitability but PS3 overall won't ever recoup the sales losses + R&D already sunk into it.
That will in turn affect future planning, projection, and R&D for the next playstation, especially if the worldwide economy continues to stay in a funk. The tech sector is starting to show signs of increase, but it's hard to tell if it'll lead to anything meaningful yet or not. And considering other segments aren't showing as much rebound isn't promising.
And those things will have a much larger bearing on Sony than MS when considering their overall cash reserves and business outlook.
At the end of the day, there WILL be another PS4, I just can't see things go so badly that Sony would abandon the PS brand. The question is, how much will they be able to sink into the R&D, and how much risk are they willing to take. Especially when they look at how PS3 has performed relative to their investment in it.
On the plus side, BRD looks like it might finally be making great strides in overtaking DVD. Such that there may eventually be enough licensing revenue from that to help offset the R&D and subsidizing costs of the PS3, but even with that it won't make PS3 overall profitable.
And then the other side of the ball, online media portal portion of the console while in much better shape now is still in a state of limbo. Although we keep hearing news of them having some kind of plan to make use of it. How this performs may also influence just how much risk (money) they are willing to invest in R&D for the PS4.
If they have already started significant developement of PS4, I'd be pretty pessimistic about how many resources they are investing into it looking at the trend over the past few years.
A year or two from now, if things improve greatly, I'd be a little more up on how much risk they'd be willing to take.
About the only things I'd be willing to predict at this point based on past performance + economy + Sony business position.
PS4 will probably have a cheaper and more conventional CPU. Will continue to have a conventional GPU. IE - It'll move more towards X360 than PS3. Not only would that lower overall costs for the platform it'll greatly lower dev related costs. While true existing devs will be able to leverage what they have learned so far, bringing in new devs/new hires with existing devs will still have a higher learning curve (more money) than a new dev/new hire moving to something that's more similar to traditional PC developement.
Then again they could be stubborn and go for another obtuse and difficult to program for system... But I find that unlikely as Sony is in need of cost control methods to maintain viability of the corporation overall.
Regards,
SB
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The issue I have with PSN is not related to the success of the actual service in terms of driving revenue per console, its in relation to getting consoles on the ground to actually make use of the service and drive up adoption. To the winner go the spoils and profit from such a service seems to be an almost exponential function vs the number of users using the service. More usage over fewer servers per user average and more content means more revenue and lower cost to deliver said content.
If the losses were justified by the profit going forward then their payoff in terms of losses vs consoles on the ground seems very poor indeed. That HDD in every PS3 must be a killer because if half their users never make any appreciable use of the service then over the lifetime of the console its 60M /2 = 30M * $35-40 (I supply estimate??) or $1-1.2B bill of materials for something which made little positive revenue impact aside from annoying a few with mandatory installs.
In regards to Blu Ray its a messier picture as they have revenue shooting off to different divisions and the actual drive itself is part of the reason why they can sell the PS3 for a higher price than the Xbox 360 and still drive good unit sales. With the drive theres a direct and implied link to revenue to pay back their expenditure between royalties and higher PS3 hardware revenues.
With both Blu Ray and PSN you want high console sales, but the rest of their strategy is the anti-thesis of this as high costs complicates the process of getting the units on the ground make your revenue payoff. High costs but also high losses and low console sales is the recipe for digging a hole and not getting out of it. Neither PSN nor Blu Ray required them to break the bank, I think you have to point your finger somewhere else to figure where they went wrong.
PSN isn't just about PS3's and PS4s though. It's a Sony-wide service, on TVs, PCs, portables etc. That was the original plan, and though Sony have taken their sweet time about implementing it, they're supposed to be rolling out broad device support early this year. PS3 was just necessary in spearheading it. Or at least, it seems Sony felt the PS brand was needed.
With BluRay they only needed enough console sales to see of HD-DVD. That done, if PS3 never sells another unit, BRD players will conitnue to sell and Sony will see whatever returns the will from that. With PSN, high console sales helps, but if they get it on PC and mobile devices etc., PS3 console sales won't be the limiting factor.
As a console, PS3 is almost bound to be a financial flop. As a trojan horse to establish these two other large earners, it may pay-off.
corduroygt
Banned
How many of you don't buy a second controller when you buy a PS3? The slim should make profit or break even with just one extra controller purchase, since I remember Sony execs saying the loss is in "tens of $" and would go to single digits just with an exchange rate fluctuation. A $55 controller costs less than half that to make. Then you'll buy software for it and Sony makes more money, since people don't buy a PS3 just as a blu-ray player anymore when players are $100 or less.
corduroygt
Banned
Which laptops would these be? Please bear in mind the inefficiencies of a game designed for PC where it will have to run on multiple configurations, and subject to same heat/power constraints. I don't think you'll find a good one under $1k.
For Sony as a whole ? I think their recent cost cutting measures are already large enough to match those multi-billion PS3 investment. e.g., http://www.ps3attitude.com/new/2009/06/sony-on-track/
Don't know how much upside PS3 will contribute to Sony until Blu-ray is mainstream.
Looking at their Network Product Division alone, it will be more difficult since there are continual investments (e.g., the new Sony Network Entertainment company, new natural interface hardware, 3D gaming, etc.), plus on-going PS3 first party development.
Don't know how much upside PS3 will contribute to Sony until Blu-ray is mainstream.
Looking at their Network Product Division alone, it will be more difficult since there are continual investments (e.g., the new Sony Network Entertainment company, new natural interface hardware, 3D gaming, etc.), plus on-going PS3 first party development.
I can't see the PS3 as the trojan horse for getting PSN adopted for their other products as its simply taken too much time for them to even implement it outside of the PS3. Now you have other manufacturers rolling their own service or even contemplating using Live or equivalent from their competition. It would be like having the PS3 as the first Blu Ray player and only releasing a standalone a year after. The limiting factor I guess wasn't PS3 sell through rates it was the time to disperse their service amongst their other products.
I can't see Blu Ray in PS3 as a spearhead for Blu Ray adoption as they could have simply written a cheque to the content houses sooner and it would have been cheaper in the end. Was the PS3 the best medium to promote PSN when the other platforms aren't compatible with the games and a strict movie/music content delivery service is what they needed all along?
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