But Sony did make a profit on the PS1 product line. And not just a little profit but a big one. PS2 also made Sony a profit and was a succsesfully product. It't not about making an "immediate profit" it's whether or not the actual product makes a profit before the end of it's life.
Did you even read what I was responding to?
It would be rather interesting to see what their endeavor would look like if they were... you know... required to make a profit off it, yeah.
(Not "start making a yearly profit off it 7-8 years down the road, and only get the division in the black 5+ years after that
Basically, "MS should not be allowed to compete because they didn't make a profit soon enough".
My response was: But by what criteria? A completely arbitrary one, which is about as fair as saying, "Sony should not have been allowed to compete either because they did not make a profit immediately either".
The point is simple:
1st, it is fannish to say, "MS should not be allowed to compete because they did not turn a profit in arbitrary time frame I am setting for a single division of MS".
2nd, immediate console profits are only a small part of a bigger equation and market position by Sony and MS.
Of course you are angling the issue as "product line" and divisions, but the bottom line is that Sony had to invest money from elsewhere, and make a significant investment, before they made a quarterly profit from the PS division and before they came into the "black" overall. Was it fair that Sony could leverage their position as a game publisher and CE giant and go into the red, and diminish profitable game makers market share? Of course, because it is free enterprise, it was a vital strategical move for Sony's health, and they eventually have benefited greatly from such.
Considering the number of people who bought a PS2 due to DVD (and Sony's hope the same is true of BluRay) I think it is pretty clear to see how console gains/losses are only one part of the equation.
Xbox1 in contrast put the MS games division so far into the red, that analysts predict that even with strong Xbox360 sales, they will still not be in the black in this console generation. So thats 2 major products lines that produced no positive financial results as far as balance sheets. The only areas where MS has had positive results is in mind share.
Interesting how even if the 360 succeeds you weigh it down with the debt of the Xbox1. I am sure MS, and investors, would call it, "An investment". Just like Sony going into the red to launch the PS1... and then again for the PS2... and now for the PS3.
All gambles to maintain or grow marketshare.
No doubt few companies could do what MS did with the Xbox1, but likewise not many companies could do what Sony did. 3DO, Matsushita/Panasonic, Apple and a host of others were unable to realistically develop finance a platform like Sony. Sony had the money, had experience with CE goods, had co-designed a platform with Nintendo, had the connections with publishers (and bought what they didn't have), and so forth. Sony used their assets to muscle into the market, which has given them an unprecidented position to direct the development of not only the gaming industry but also the movie industry. I don't see many people crying for Toshiba because they don't have a PS3-like device to get an instant 6M user install base in a mere 3 month period--and do so at great losses.
Each of these companies is different, as I expressed, and has different agendas and different products they are protecting and other products they are targetting.
It isn't as simple as who turned a profit in 3 years or 7 years.
Sometimes it costs more to join the party late.
There has been "rumblings" of possibly a new player next time around, namely Samsung. But here is why it won't happen: Too costly at this point in the game. Samsung could deliver the hardware but they have absolutely no software presence or experience, at least not compared to Nintendo, Sony, Microsoft, or Sega. That is where MS really bit the bullet: They are not a HW company, and it cost them dearly last gen. They are just "lucky" enough to have been able to pay a $4B admission fee... kind of like how NFL and NBA owners pay stupid money just to own a team. Which is a good parallel...
- In the 1960's owning a solid team got you into the league (= Nintendo)
- In the 1980's there was an entry fee in the millions of dollars to get into the league (= Sony
- In the 2000's the entry fee is nearly a half billion dollars to jion the league (= MS)
But there are profits to be had, and mindshare/presence to be gained, and for those with the cash for the investment, and appropriate market presences to reap the windfall, it is a solid bet. For others, not so much.
BTW. I don't think Sony could take a net loss over the lifecycle of the PS3 - much less a $1Bil one. The upsides you mentioned are not good enough for that kind of loss. Shareholders will push them to get out of that business. I know I would.
Lets play that out:
- Sony's game division loses 1B, but maintains market dominance
- Sony's CE division reaps a massive windfall via BluRay market leadership/sales
- Sony's movie division reaps a massive windfall via BluRay media sales
As an investor, if Sony has a net gain, why do I care if the PS3 costs Sony but the side effect is more money in other parts of the company? Not much, especially when I can realize that the PS3 gamble led to an overall healthy Sony (which is a concern in regards to CE goods and movies) and continued presence/dominance in the console arena.
The old, "Sell the lamp at a loss, reap a reward on the oil".
Now apply that philosophy to MS, who in theory has its entire software business at stake, and you may understand why I (and others) believe that the Xbox is a necessary evil for MS for market position. Of course they were already a game publisher and developer, but they have had to broaden that role as the market changes and as they eye new markets and seek to grow and protect their current markets. It is an investment.
Using 6 years of PS3 losses to setup the Cell? In 6 years Cell will be old news and they will be bleeding money setting up some other new technology platform.
Cell is a general architectural concept -- Cell is here to stay. Cell as in a 1 PPE + 8 SPE design will be antiquated in 2012, but I am pretty sure Sony (and STI) plan to build upon Cell for the future as a platform.
And I think MS breaking even is still a pipe dream at this point. I don't think it will actually happen until they manage to push Sony out of the sector. Once they do that they will be able to leverage their leadership position to actually start making money by raising prices and being less agressive with regard to cutting edge technology.
Well they are telling investors 2008. They are looking at 13M-15M console sales (their projections) shipped by the end of June 2007. Famitsu seems to agree, conservatively, with their 17Mish numbers for CY 2007.
Between now and the end of 2008 there is going to be a couple cost-reductions and price reductions that allow MS to hit more consumers. Further MS has solidified their software position with a number of exclusives (Halo, Bioshock, Mass Effect, FM, Banjo, and so forth) that should add distinction to their lineup. They will also have a growing budget library. Software powers console profits and MS appears to be in decent shape with 1) better mindshare than last time 2) better marketshare than last time 3) more developer support and more major exclusives, and maybe most importantly 4) has gained access to "same day release" of games like GTA4 and AC.
MS is not the "one trick pony" they were typecasted with the Xbox1. They have grown, diversified, and the early launch/install base lead guarantees 1) strong developer support and 2) fewer exclusives by default for the competition and 3) a bargin bin that makes it attractive to more gamers.
As for your raising prices comment, prices are going up every gen regardless. Content costs money. Publishers already set the tone for this, not MS or Sony.
As for hardware, eventually there will be a wall. Transistors are leaking more and hitting a point where they cannot be physically made smaller. The PS4/Xbox3 may both suffer in design due to uncertainty of future cost reduction. And at some point there will be diminishing returns where software, and not hardware, will make a platform. At some point hardware does become an abstraction. It may be a decade away, but at some point when fully realized CGI worlds appear the demand for hardware will slow. Sony is already predicting such in many ways. The above article even mentions such a belief:
Enterbrain said:
"But its overwhelmingly realistic graphics will give it a long life span. It will stay competitive even when a game console battle breaks out among a newer generation of machines in 2010. Sales should grow every time Sony cuts prices," he said.
While I don't necessarily agree for the 2010-2011 timeframe, the point is many believe the point of diminishing returns is here, now, and that a console in 2006 can be holding its own competitively, due to its realistic graphics, with machines in 2010.
If that is the case, cutting costs on hardware at some point might be a good idea.
The way MS and Sony is fighting this battle right now, I think there can only be 1 winner. The other will either have to bow out or do something specialized like Nintendo.
The market has held 2 platforms for well over a decade and Nintendo has pretty much "bowed out" as people's second (1st?!) machine and is chasing a different demographic in many cases. As long as MS and Sony have unique content that appeals to consumers, and are able to present experiences that compell consumers to pick a side, there will continue to be room for both companies. If software fails to deliver on the hype and the experience in general fails to meet the expectations of consumers is where I see more room for failure. If MS or Sony fail to offer an experience that consumers want then they will be run out of town.
