"Sony has no chance of making money on the PS3" - Acclaim Boss

[eastmen]

Mods I thought this was interesting , if you feel it will start to much trouble please lock the thread or if you feel it shoudl be merged with an existing thread please do so.

http://play.tm/story/20523

Speaking at Games Convention Developer Conference yesterday Acclaim boss David Perry has said that Sony stands little chance of making a profit from it's Playstation 3 platform.

The respected industry veteran said that the PS3 has lost more money for Sony than the previous PS2 brought in during its sales peak. A bold claim given the substantial sales the old console produced.

"Because of the cost of making the PlayStation 3 and because they sold it at a loss, Sony basically has pretty much no chance of making money on the PS3, because it's lost more money than they made during the entire peak of the PlayStation 2" said Perry, "it's not going to happen again for Sony".

Meanwhile back at the Sony camp, they are persisting with their 2008 is the year of the PS3 line, touting releases such as LittleBigPlanet and PlayStation Home as drivers of future success.

This is interesting to me , I wonder how much it actually lost and if its still loosing money. I'm pretty suer sony said the 40 gig units were aproaching $400 but perhaps its really moer than that ?

 

[Gradthrawn]

Some "versions" of the story are reporting that they're referring specifically to hardware and not software. Which would seem rather strange given SCE's strategy.

While these figures seem rather bleak, one has to note the careful language used in the report is specifically about hardware, not software.

 

[hero17]

I trust what he is saying in this statement. If anyone knows about not making money, it's Acclaim.

 

[tirminyl]

Surely he is not thinking that Sony has to make and exceed what the PS3 lost to make money off it? Isn't the money they lost on it thus far already written off? I don't play well with numbers but it would seem to me Sony has more opportunities than they did last generation. They have PSN, upcoming HOME (if they can utilize it right), and BR. If the PS3 helps their internal strategy then they should be good to go. That is just my amateur opinion

 

[Arwin]

If the comment is limited to hardware only, then perhaps, yes.

 

[eastmen]

Surely he is not thinking that Sony has to make and exceed what the PS3 lost to make money off it? Isn't the money they lost on it thus far already written off? I don't play well with numbers but it would seem to me Sony has more opportunities than they did last generation. They have PSN, upcoming HOME (if they can utilize it right), and BR. If the PS3 helps their internal strategy then they should be good to go. That is just my amateur opinion

I think he means that The ps3 (r&d and hardware losses) will / have amounted to so much that the ps3 software will never be profitable compared to those looses. We know the game devision made money last year but that includes profits from the ps2/ psp. Ps3 taken by itself is a whole nother story we know nothing about.

If its in the billions then they may be in the same situation that MS was in with the xbox. In the long run it may not matter for the company like with MS the money was recouped by other revenue streams. Its jsut interesting to see how much the ps3 is costing sony

 

[obonicus]

We've already had this discussion. I don't think Dave Perry has said anything not considered so far in the Sony financials thread. Any minute now, we're going to have a 20+ post on BD: yea or nay.

 

[Florin]

I trust what he is saying in this statement. If anyone knows about not making money, it's Acclaim.

 

[tirminyl]

I think he means that The ps3 (r&d and hardware losses) will / have amounted to so much that the ps3 software will never be profitable compared to those looses. We know the game devision made money last year but that includes profits from the ps2/ psp. Ps3 taken by itself is a whole nother story we know nothing about.

If its in the billions then they may be in the same situation that MS was in with the xbox. In the long run it may not matter for the company like with MS the money was recouped by other revenue streams. Its jsut interesting to see how much the ps3 is costing sony

Granted they lost billions on the PS3 with the combination of R&D and selling at a lost but that money lost in my mind would be written off. Manufacturing costs should drop more this fall and them moving to a single sku should help with the PS3 hardware no longer losing money. Last I heard the 40gb model was close to breaking even. Is that not true? Maybe I am just not getting it.

 

[ShaidarHaran]

Wait, wasn't it Acclaim that went out of business due to lack of profitability, whose name was then bought out and resurrected?

I don't think I'd trust their opinion on any financial matters

 

[SG79]

I trust what he is saying in this statement. If anyone knows about not making money, it's Acclaim.

... lead by David Perry.

What he said has been common knowledge for a while, but I'm not sure he should be talking.

 

[eastmen]

Granted they lost billions on the PS3 with the combination of R&D and selling at a lost but that money lost in my mind would be written off. Manufacturing costs should drop more this fall and them moving to a single sku should help with the PS3 hardware no longer losing money. Last I heard the 40gb model was close to breaking even. Is that not true? Maybe I am just not getting it.

It could be written off but it was still money lost or not made. Just like with the xbox 1 , MS itself was making billions each quarter but they still lost that money with the xbox 1.

As for the ps3 ... I don't know , If ms does drop price it may force sony to drop again soon after. We also don't know if Sony is still loosing money on the system. The 1 sku may actually hurt. If for instance the ps3 cost 420 bucks to make. With 1 sku they are now loosing $20 but with the second $500 sku they would have made $80. Which means they would have only had to sell 1 $500 sku for every 4 $400 sku they sold.

Its the same with MS. If they drop price to 200/300/400 and the system costs $250 to make they would loose $50 on each arcade . However They would make $50 on the premium and $150 on the elite. So for every 3 arcades sold they would only need to sell 1 elite to make a profit. The pro units which are currently the most popular would make $50 per unit sold.

So multiple skus could be a good thing.

 

[patsu]

What was the title of David Perry's talk ?

Surely he is not thinking that Sony has to make and exceed what the PS3 lost to make money off it? Isn't the money they lost on it thus far already written off? I don't play well with numbers but it would seem to me Sony has more opportunities than they did last generation. They have PSN, upcoming HOME (if they can utilize it right), and BR. If the PS3 helps their internal strategy then they should be good to go. That is just my amateur opinion

David's looking at past PS2 numbers to comment on the profitability of PS3 in the future. While the PS2 figure is a tough number of meet, it is also only a partial and old picture. It's like saying Microsoft will never profit from Xbox due to the combined losses so far (Too early to tell !). The market will be different a few years from now (PSN, in-game advertising, Blu-ray, lowered hardware cost, etc.). The verdict is still out there.

However, the PS3 has an invaluable trait that no other Sony product has. It allows Sony to (learn to) unify its internal media-hardware-software efforts, this alone makes it worthwhile to persue long term. So far, they have treated all their deliverables with care (i.e., No silly comments like "hardware does not matter").

If they are able to vertically integrate their divisions together, it will be a new and exciting Sony (like Apple !). *Every* Sony product will be reborned because of refreshed business model, methodology and middleware. I actually look forward to more deliverables from their R&D and the "new" Media Services divisions.

Meanwhile, they are grinding to level up.
Just leave them alone for a while and vote with your dollars.

 

[tirminyl]

I get what you guys are saying as I just had my "aha" moment. I too look forward to Sony integrating their internal businesses as they should be. I will go back to lurking on these topics

 

[eastmen]

Patsu lets hope they don't become like apple. Apple is having problem after problem recently from exploading ipod nanos to 3g iphones droping calls and connections left and right

 

[tirminyl]

Patsu lets hope they don't become like apple. Apple is having problem after problem recently from exploading ipod nanos to 3g iphones droping calls and connections left and right

How about the pre-exploding nanos and connection dropping iphones?

 

[eastmen]

How about the pre-exploding nanos and connection dropping iphones?

but then they'd still have to go through the exploding nanos and connection dropping iphones ! Its a paradox I tells ya !!!!

Lets just hope Sony learns from their mistakes and aren't arragont about what the consumer wants in the future. I really want a 3 console race for the next few console cycles. I'm not to fond of a one console future.

 

[patsu]

That's because these people are pushing the hardware envelope (like Sony's exploding batteries). Looking at PS3's robustness and how Kaz insists on delaying Playstation Home, I think they will be less aggressive schedule-wise.

One also doesn't set macro direction based on one-off incidents. Apple's approach is rather unique and successful so far. Even with these product problems, they are still exemplary model to learn from.

At the end of the day, Sony will pick its own comfort zone. Learning from Apple does not mean they will follow blindly. The Sony execs will internalize the parts they deem relevant and improvise their own.

 

[Nesh]

Surely he is not thinking that Sony has to make and exceed what the PS3 lost to make money off it? Isn't the money they lost on it thus far already written off? I don't play well with numbers but it would seem to me Sony has more opportunities than they did last generation. They have PSN, upcoming HOME (if they can utilize it right), and BR. If the PS3 helps their internal strategy then they should be good to go. That is just my amateur opinion

Yeah they have currently lost a lot, and have spent huge amounts of money to establish the platform. But it mostly consists of sunk cost. There is no going back now.

The infrastructure and features they managed to build for this generation shows possibly the long term horizon in their strategy.

Hopefully it will pay off in the future. But they have to ensure strategic fits and advantages that are unique to Sony and/or surpass overall that of the competitions if they want their efforts to not be in vain.

If in the future Sony and MS are at equal and very identical strengths this means that MS was operating the same at less cost and with higher profits while Sony was struggling with higher costs to keep a pace, giving lots of room and luxury for MS to move a step forward than competition whenever Sony tries to pull off something. Battling with your financials add constraints

 

[Carl B]

I'm not sure that this statement from Acclaim is actually news-worthy; afterall we've discussed this situation here at length before. Indeed, it is highly doubtful that the PS3 will ever be a profitable endeavor in its own right (inclusive of PS3 software). But if it becomes worth it to Sony anyway in terms of the larger picture of Blu-ray and home media efforts, that's a more complicated picture. Too complicated for the year 2008 I think... this is going to be one of those things we only have a clear view on retroactively a couple of years from now.