Johnny Awesome
Veteran
It's ridiculous that someone would even suggest that the PS3 is profitable. It's absolutely crystal clear from the numbers that the PS2 and PSP are carrying the PS3 until they can get the costs low enough.
Sony FY 2007 Q3 Financials
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orionthehunter
Newcomer
I agree that the comparison is unfair, but MS does have PC games and XboxLive subscription fees. I was reading in another thread where someone said that PC games still do very well around the world, just not so well in the US. If thats true, then that could be a pretty big source of profitability, and since XboxLive is basically a peer to peer service it should have a relatively low overhead, making it also a good source of profits. While, as I said, I think it's an unfair comparison, I don't think it's completely lacking in a basis for one either.
Firstly, PC game sales don't generate money for MS in the same way that console game sales generate money for the platform holder.
Secondly, the OP intimated that the PS3 was profitable, which it is not. That was the problem, which was correctly pointed out (3 times!).
Thirdly, XBOX Live is definitely contributing to the profitability of the E&D division, but XBOX Live is an accessory to the 360, meaning those profits are directly generated by the platform. It is not at all similar to the PS3 which is in no way generating PS2 and PSP sales (though to be fair an argument could be made about the PS3 selling some PSPs), but it is those sales which are enabling the gaming division to be profitable in spite of the losses generated by the PS3.
To be fair MS has it's Windows and Office businesses to offset losses on the Xbox in the same way Sony has PS2 and PSP profits. The only difference is the way each company is organized. Sony happens to have it's most profitable sector in the same division as it's biggest loss generator. One thing that should be said, though, is that Sony's gaming effort overall is profitable. MS is down about 6 billion for its gaming division going back to 2002. Even if it is profitable every quarter going forward it will be a number of years before the Xbox initiative ever shows a net positive.
We've talked a lot about the advantages Sony has with it's previous generations of success. Those include things like brand recognition, experience in cost reduction and strong relationships with publishers and developers all over the world. We are now seeing another advantage. SCE has diversified their interests to the point where the prior generation and portable gaming helps to soften the losses you'd expect when they transition to a new generation of hardware. They talked a lot about making the PS2 a ten year platform, but what that means is they can count on profitability during what otherwise would have been a period of significant loss. MS took another path, cutting off the first Xbox as soon as the next one was ready. They transitioned so sharply that there was no hope for overlap between the generations to offset losses.
We've talked a lot about the advantages Sony has with it's previous generations of success. Those include things like brand recognition, experience in cost reduction and strong relationships with publishers and developers all over the world. We are now seeing another advantage. SCE has diversified their interests to the point where the prior generation and portable gaming helps to soften the losses you'd expect when they transition to a new generation of hardware. They talked a lot about making the PS2 a ten year platform, but what that means is they can count on profitability during what otherwise would have been a period of significant loss. MS took another path, cutting off the first Xbox as soon as the next one was ready. They transitioned so sharply that there was no hope for overlap between the generations to offset losses.
Huh? Where did I intimate PS3 was profitable? It's Rangers who read what's not in the earning release.
It reads "the Game division have a profitable quarter 1 year after the PS3 launch"... I don't see the point of your comment.
Not a real comparison, is this? Sony has very strong and very profitable PS2/PSP sales to bring up the bottom line in the division...
RancidLunchmeat
Veteran
Hmmm....?
What are we trying to figure out here?
Isn't it still relevant that the PS2 and PSP profits combined with reduced losses from the PS3 have made the games division profitable?
Even in terms of just addressing the PS3, it means that the PS3 isn't the drain on Sony's bottom line that many thought it was because even within the division, those losses are not only offset, they are surpassed by the profits from their other lines.
To me, it would seem to indicate that in terms of profitability for the entire division, Sony's pricing strategy with the PS3 is sound.
Sure, they're financing the PS3 with PS2 sales. But that only means that they will recognize a loss in the future if the PS3 doesn't establish itself in the same way and they choose to go the "PS3 route" for the PS4.
If they decide to go the '360 route' with the PS4, they should be able to expect to carry on with a generally profitable outlook for the division.
(Noting of course, that the 360 would have been profitable much sooner if it hadn't been for the costs involved in the design flaws. And assuming that when following the '360 route', Sony doesn't make those same mistakes.)
So.. to summarize.. as long as the division is profitable because the PS3 is eating the PS2 profits and still leaving behind extra snacks, and Sony decides not to make an extremely expensive and over-priced console next generation, then the division can continue with an expectation towards profitability.
I do see good news in this report, and it is far better news than I had actually expected. If I were a Sony Exec, I'd be very happy with these numbers and what they project for the future.
What are we trying to figure out here?
Isn't it still relevant that the PS2 and PSP profits combined with reduced losses from the PS3 have made the games division profitable?
Even in terms of just addressing the PS3, it means that the PS3 isn't the drain on Sony's bottom line that many thought it was because even within the division, those losses are not only offset, they are surpassed by the profits from their other lines.
To me, it would seem to indicate that in terms of profitability for the entire division, Sony's pricing strategy with the PS3 is sound.
Sure, they're financing the PS3 with PS2 sales. But that only means that they will recognize a loss in the future if the PS3 doesn't establish itself in the same way and they choose to go the "PS3 route" for the PS4.
If they decide to go the '360 route' with the PS4, they should be able to expect to carry on with a generally profitable outlook for the division.
(Noting of course, that the 360 would have been profitable much sooner if it hadn't been for the costs involved in the design flaws. And assuming that when following the '360 route', Sony doesn't make those same mistakes.)
So.. to summarize.. as long as the division is profitable because the PS3 is eating the PS2 profits and still leaving behind extra snacks, and Sony decides not to make an extremely expensive and over-priced console next generation, then the division can continue with an expectation towards profitability.
I do see good news in this report, and it is far better news than I had actually expected. If I were a Sony Exec, I'd be very happy with these numbers and what they project for the future.
This doesn't make sense. They made a very tiny profit, one that would be a lot bigger without losses from the PS3. That does not negate the drain in any way. The drain exists, even if overall you make a tiny bit of money.
Sorry, I was unclear there. I was referring to inefficient. In this case OP referred to the poster who started that line of discussion not the thread poster.
I don't think that the economical conditions would have much effect on sales in the post Holidays quarter. The point obviously is that most of the projected FY07 sales should have been done in Q3, so when those figures came in, they knew they weren't going to make the target. The only exception could have been if some big titles hit in Q4, but that's clearly not going to happen - the first big hitters are scheduled for April, i.e. FY08.
Good post. Sony has done a sterling job in its cost-cutting efforts. They need to improve things on the software side, but the hardware isnt the drain that some analysts thought it was.
Johnny Awesome
Veteran
Well Sony's losses are on PS3 are actually not as bad as expected, because their sales have been about half of what they expected. If they'd sold another 10 million units they would have lost another $1 billion.
They sold 5 million units in the relevant quarter; unless you're insinuating that within that quarter the actual target was 10 million units sold, I don't see how that makes sense.
I just think they had an overall good quarter, PS3 still clearly lossy though it is. I definitely don't think the direction to take discussion here is them not selling many consoles, because for the quarter 5 million in three months is no low number no matter who the console maker is.
Johnny Awesome
Veteran
I'm talking overall of course. Now that their costs are in the $400-$500 range, more sales would be good for them.
