PS3 costs drive Sony's Q2 profit downwards

[Shifty Geezer]

In the long term, how much profit did PS2 actually make (forgetting for a moment it's still going?). 2-3 billion I guess. Nowhere near as profitable as content like...I dunno, and operating system and office software.

 

[mckmas8808]

<Literally stares with jaw gaping open>

3000 Oku... HOLY FREAKING!!! That's like 2.5 BILLION US!! On the PS2!?!?!?!

DAAYYUUM!! I didn't know the US dollar amount. And they only lost money for 1 and a half years? Well that should speak volumes for what Sony can do with PS3 pricing.

 

[<nu>faust]

Honestly I know some people hate to hear it but, I think if Sony's next quater goes this well then we probably will see a PS3 lower than $400. I mean think about it. If SCE can turn a 73 million dollar profit while launching the PSP and having PS3 R&D wrapped in, then what will they do two years from now?

Two years from now Sony hopes that downloading music, TV shows, and movies will be happening from your PS3 and PSP earning them more dollars. Sony hopes that people keep buying UMDs (which are making them a TON of money) and hopes that they will buy Blu-ray disc too. They also hope more companies buy the CELL processor to do super fast calculations that are shown with PS3 demos, Toshiba demos, and IBM demos.

And I hope people here realize that now for the first time in history Sony will have 2 hardware systems that will sell 2 different fronts on software. The PSP will have games and UMD movies, while the PS3 will have games and Blu-ray movies. People will be crazy not to realize the possibilities that Sony has in their hands. Things can only get like most pplbetter from here. Oh and don't forget that Sony also is selling their own memory sticks that more people are buying due to the PSP. Now that we know the PS3 will accept Pro Duo sticks expect Sony only to make more money on that too.

If UMDs keep selling great and Blu-ray wins a quick victory over HD-DVD then expect the Sony to actually take over the world in 10 more years.

many industry analysts and insiders agree that next-gen are going to be a much closer race than current gen's no matter who is going to be the market leader,so there is a high chance of sony's golden egg laying goose starting lay some silver ones instead.

i do think blu-ray will be the "winner" format but expecting it to be as popular as dvd in just couple of years is just nor realistic .(due to factors such as current format war, low hd-tv penetration in the world..etc)

and even if psp has been a l success so far no one can lets not forget that nintendo still controls %90 of handheld console market(they arehavent released the "true" successor of gameboy yet) ,also companies like apple decided to enter the portable video market so competion is heating up on that front too.

 

[mckmas8808]

many industry analysts and insiders agree that next-gen are going to be a much closer race than current gen's no matter who is going to be the market leader,so there is a high chance of sony's golden egg laying goose starting lay some silver ones instead.

i do think blu-ray will be the "winner" format but expecting it to be as popular as dvd in just couple of years is just nor realistic .(due to factors such as current format war, low hd-tv penetration in the world..etc)

and even if psp has been a l success so far no one can lets not forget that nintendo still controls %90 of handheld console market(they arehavent released the "true" successor of gameboy yet) ,also companies like apple decided to enter the portable video market so competion is heating up on that front too.

Perfectly correct statements but lets not forget that analysts got the retail price of the PS2 and PSP horribly wrong. And could any analysts see in 10 years Sony selling damn near 200 million consoles, while every other console in life including MS, Nintendo, Sega, and the weird others combined sold about the same amount in a 20 year timespan. But your comment is basically correct though.

 

[Nesh]

Some people tend to interpret reduction of profits as losses.

They are still making a profit.Losses are generated below average cost.They are still making profits so things arent that bad.

 

[<nu>faust]

Perfectly correct statements but lets not forget that analysts got the retail price of the PS2 and PSP horribly wrong. And could any analysts see in 10 years Sony selling damn near 200 million consoles, while every other console in life including MS, Nintendo, Sega, and the weird others combined sold about the same amount in a 20 year timespan. But your comment is basically correct though.

the thing is i belive that sony gotta step up its game cos' no matter what kinda market they are in the competiton is heating up. I can remember how "cool" was my first walkman, how our sony tv was top quality, how good sony customer service was..sadly they are not the old sony aymore. Other than playstation(which came at a point when competition decided to hand the leadership on a silver platter with their stupid management ) they havent had a leader product in last 10 years, as far as im concerned they havent come up with any kind of technology that is visonary or ground breaking(i know iuknow there has been some exception but all minor imo), where is the company that made millions of ppl admire the japanese engineering and design? Lately samsung has been making better tv's, apple's been making better portable music players,ms had better online strategy...what's going on

 

[Carl B]

I think Sony'll come back on the CE front soon enough. They just have to get their TV and MP3 player acts together - and I already have reason to believe the TV's are starting to shift for the better. A trip to a Sony Style store recently left me pretty impressed with some of their newer TV's, and I know it's only going to get better. And on the side, I think their cell phone joint venture is going great; SonyEricsson phones are some desirable phones!

 

[mckmas8808]

the thing is i belive that sony gotta step up its game cos' no matter what kinda market they are in the competiton is heating up. I can remember how "cool" was my first walkman, how our sony tv was top quality, how good sony customer service was..sadly they are not the old sony aymore. Other than playstation(which came at a point when competition decided to hand the leadership on a silver platter with their stupid management )

Well first of all the competitors DID NOT give Sony the leadership with the Playstation. Sony earned every bit of it. Secondly, besides that I agree 100% of everything else that you said.:smile:

 

[<nu>faust]

Well first of all the competitors DID NOT give Sony the leadership with the Playstation. Sony earned every bit of it. Secondly, besides that I agree 100% of everything else that you said.:smile:

well you are right; the way i said "giving the leadership" is not appropriate to describe what happened during the transtion period of videogames from 16 to 32 bit.First of all i must say;I agree that sony did an excellent job with ps1(a good powerful system,easy developent tools,excellent marketing,supporting securing quality software) but at the same time i belive that if sega's(loosing customer trust prior with sub-par products like segacd&32x, relasing saturn $100 more expensive than its competiton,creating the hardest to develop machine in the history of gaming,not being able to support the hardware properly software wise) and nintendo's(not supporting cd format thus losing some of the biggest gaming franchises that were previously exclusive to big n to its competitor,pissing every 3rd party outhere and limiting console's capabilities result of it,delaying the launch of the system for about 2 years , promising cg qulaity graphics and delivering subpar expensive games) mistakes weren't that big, sony wouldnt be able to capture the leadership of the market on their first try,their disadvantages were too big at the time.

 

[TrungGap]

Well first of all the competitors DID NOT give Sony the leadership with the Playstation. Sony earned every bit of it. Secondly, besides that I agree 100% of everything else that you said.:smile:

I agree 100% of what you saying... Sony didn't get to be #1 in game console and consumer electronics because it was given that title. Sony worked hard at it. But unfortunately what <nu>faust said true, regarding that Sony been slacking off. Their (CE) product is not inovated. It's not head and shoulder above others anymore. And isn't price competitive. Samsung and LG are brands I'm starting to look for when I want quality and reliability. I went out of my way to buy a Samsung's VCR, just because all the Sony's mid/low-ends suck so bad.

Sony CE loosing money isn't fatal for Sony, all it means is they don't have the flexibility they might want. And to what degree PS3 will senergize their CE? I don't see much beside BR. Com'on show us some cool stuff you could do with PSP and PS3 interface. Don't talk about pie in sky stuff...show us some stuff.

MS gotten really good using one product to sell another. For an example, MS consulting. Sometimes they're offer that service at cost so they can sell more MS products. And you see that all the MS consultants really pushing MS products. Look at x360 trying to push MS MCE. Look at how the 360 interact with mp3 players (pimping out PlayEnsure). Look at the interaction between 360 and Live, and see how Live touches other aspect of MS technologies. Somehow, to me MS seems to have a concert plan. I hope Sony got one too.

 

[thatdude90210]

Sounds like the PS3 launch would be the perfect time for MS to get Sony into a price war.

 

[Xenus]

No it wouldn't the PS3 will sell out on launch unless it is around $1000. Starting a price war then would only hurt Microsoft.

 

[mckmas8808]

No it wouldn't the PS3 will sell out on launch unless it is around $1000. Starting a price war then would only hurt Microsoft.

Yeah MS can't afford to just charge whatever they want. I'm sure MS would want to sell their next-gen system at normal price for at least one year.

 

[wco81]

I saw on Yahoo Finance I think it was that the lower profits were attributed to lower TV and digital camera sales.

 

[Deepak]

http://news.yahoo.com/s/nm/20051027/tc_nm/sony_targets_dc

 

[PARANOiA]

Yeah MS can't afford to just charge whatever they want. I'm sure MS would want to sell their next-gen system at normal price for at least one year.

I agree that they want to, but I actually think people underplay MS's shrewdness. They've taken over a lot of industries by undercutting the competition at a loss, then recouping once they have a monopoly.You also shouldn't underestimate the amount they've spent on the Xbox project as a whole (both the first and the 360). Rather that seeing it as a black hole, I see it as a big red cross on the balance-sheet they have "invested", and expect to make back. Big companies make money through huge investment in seemingly silly losses, only to win it back big time. That's how they win - the little guys can't fight back!

Now, Sony on the other hand obviously have a hell of a lot here to play with too. I'm actually really enjoying the console race from a number of different angles, most critically "out-MSing" Microsoft at their own game (being market dominance).

Thanks for the slide above to the poster. Very interesting, but I'd love to see it updated with losses on the PS3 so far. From what I understand, Sony has a taken very, very big risk on it and Cell, much more that they have in the past. Anyone know approximate costs (and anyone interesting in charting it for my sake ) ?

 

[ihamoitc2005]

CELL development cost

God you people are hopeless. R&D costs are just a drop in the buckect compared to what they stand to gain if the PS3 and Cell see broad acceptance. Oh and SCE's revenues are up 79%. The money being lost is from the other divisions.

According to IBM powerpoint presentation, CELL development cost = $400Million

Sony is investing additional $350M for development of 65nm CELL manufacturing process by IBM.

 

[Nesh]

No it wouldn't the PS3 will sell out on launch unless it is around $1000. Starting a price war then would only hurt Microsoft.

I disagree.MS has huge capital reserves.Not only X360 could be a lot cheaper to manufacture but they have huge reserves so they can still operate with X360 generating losses or less profit (or even not affecting at all their profitability).
Sony doesnt have the reserves MS has.PS3 is most likely to be very very costy to manufacture.
A price war will force Sony to have losses that will be hard to cover.Something similar happened with the Sega Saturn and the Sony PS1.
The sega saturn was a very expensive hardware for Sega.On the other hand PS1 was cheaper to manufacture and Sony had more capital reserves under their disposal.Sony could easily reduce its price, while Sega was forced to reduce its price to remain competitive but that created many problems to them.Higher price generated less losses per console sold, but being less competitive ment less sales so it was harder to cover the losses per games sold with each console.Having a more competitive price ment more sales but at the same time more loss per console sold so it was harder to cover the losses with capital reserves.

 

[hey69]

if MS really really wants, (if everything is possible and pigs fly... ) MS could release the valupack xbox360 with 3 extra wireless controllers + a 27" hdtv +20 games for only 49US$ and swallow the costs. (wooww) from day one, fuck Sony and Nintendo in the a$$ .and when Sony and Nintend are dead they can start clean over with xbox720 for full price.


But somehow.. i dont see this going to happen

 

[Druga Runda]

Which is, more or less, true. After all if every other Sony division losses money, the company will be reliant on SCE to make enough profit to keep the company as a whole going. If the movie and CE divisions continually lose money, without the PS brand Sony would disappear. Hence it's the success of PS3 that'll the company going if they can't fix their other problems, and if they can sell the PS3 for more money without negatively impacting the sales and growth of PS3, they'll do it to fill the coffers.

With Harrison's talk it's unlikely divisions will be doing whatever they want regardless of impact on other Sony divisions, and will act in supprt of the greater good of the company.

well if all other divisions are loss makers they need to sell off and focus on the working core of the company which in theis case would be SCE. Relatively simple way to satisfy the shareholders and to make the company healthy again. Sell off other "bad" parts to chineze/taiwanese who will be able to compete on cost in commodity markets, in a similar way IBM sold of HDD and PC divisions.