Sony May Post Biggest Loss in 4 Years on PlayStation 3 Consoles
- Thread starter nelg
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And in related news.........
http://technology.timesonline.co.uk/tol/news/tech_and_web/gadgets_and_gaming/article1795915.ece
http://technology.timesonline.co.uk/tol/news/tech_and_web/gadgets_and_gaming/article1795915.ece
Wow its almost like it was a foreteller for 2007. What happened back in 2003 exatly so sony would have losses back then?
Ether_Snake
Newcomer
Err the Kutaragi part is like this week news.
Not sure what was going on in 2003 tho, probably something not related to the gaming division. Sony stock on the other hand has been doing extremely well since early January (up like 25% since).
Remains to be seen how things will be next week.
before ps3 everything ahd losses except the game division.Right now the situation is inverted.
This is one of those Bloomberg "ask the analyst" stories. Some times they are right, but seeing how many analysts completely mispredicted the current situation I wouldn't trust it at all. I'm also not sure why now it has been productized the costs would be so high, afterall the R&D cost the money right?
Edit: Only 5 out of 11 predicted this, what about the other 6...
Edit: Only 5 out of 11 predicted this, what about the other 6...
Wait wait.. Selling at a loss and poor sales make them loose money?
I´m confused.. i need to work as an analyst, i will piss in the sand and get a crack addict to tell me what figures he sees, then i will post about it on a blog and gather the comments into a "paper" to be posted on my analyst site.
EDIT:
So the numbers are out today?
You missed the point.When you sell at a loss you obviously lose money. But in that case you are getting back some money invested. What is worst is building consoles that you are not selling. It means you are not even getting back some money. And you Know, stockpilled consoles are not cheap to keep. Just keep in mind that in Japan Sony shipped 1 Million January 15 according to their PR. Some of theses consoles are still on the shelves. While some retailers are probaby losing money on them by now, the important part is they are not getting new ones from Sony for the moment. The cost of theses unshipped consoles is full for Sony.
Yeah that should be interesting to find out. Why hide theirs and show only the others predictions?
I think the article missed the point, i find it reaching to blame the PS3 and "stockpiles" for a 2.6 Billion dollar decline in profits (putting it at a 2billion loss) compared to last year, what about you?
EDIT:
More stuff here:
http://translate.google.com/transla...fe=off&ie=UTF-8&oe=UTF-8&prev=/language_tools
I think we would need someone that can read the original post though ;-)
thatdude90210
Regular
It's pretty simple actually. Sales refers to both H/W and S/W sales which both have been far lower than expected. Of course Sony loses money on H/W, but we all know that S/W sales and royalties are there to offset those loses. Unfortunately, those were lower than originally expected. However, the picture the analysts painted wasn't that grim:
Bloomberg Update1:
EDIT:
BTW, visiting our frontpage pays off:
http://www.beyond3d.com/content/news/221
I wonder how much losses were when the PS2 launched
http://www.sony.net/SonyInfo/IR/financial/fr/06q4_sony.pdf
There is a lot of bad news in there.
http://img82.imageshack.us/img82/6656/ps3disasterks6.png
5.5m PS3's shipped (missed the 6m target). Even worse, inventory is piling up.
Probably one of the plusses is PSP software actually increased. I still have high hopes for the long term of that platform.
There is a lot of bad news in there.
http://img82.imageshack.us/img82/6656/ps3disasterks6.png
5.5m PS3's shipped (missed the 6m target). Even worse, inventory is piling up.
Probably one of the plusses is PSP software actually increased. I still have high hopes for the long term of that platform.
Well, it's not difficult to dig up Nesh. It can be found here: http://www.sony.net/SonyInfo/News/Press/archive2000.html. But it might be difficult to compare since the PS3 launched globally which compresses the losses to a far shorter time frame.
EDIT:
Numbers at a glance FY2006
EDIT2:
I take that back about easy to dig up. The data has been removed from the Sony's HP and the wayback machine didn't archive it.
I think manufacturing did a good job to ramp to that point in just a few months. Let's not forget how few they actually launched with, and the rampant speculation at the time over the viability of 6m by the end of March. They pretty much got there, being off by less than 10% isn't bad.
I think more interesting is the forecast for FY07, 11m units. That seems very aggressive given the current climate. It might suggest aggressive cost and price cuts on the one hand, but on the other they're going to want to be trying to reduce losses at the division, so I'm not sure where that's one's going to go. Apparently they have said it will be difficult to bring the games division into the black in the next fiscal year, but I'm sure they do want to at least try and reduce losses there.
The other thing that stood out at me is that they expect to ship nearly the same number of PS2s and PSPs (each) as PS3. Three-platform strategy indeed.
Indeed. Numbers wouldnt be that meaningful then I guess. Not only losses arent collective for the PS2 for the period but launching in various territories separately after a time frame may alter the cost structure as well
The only bad thing in that is the increasing inventories. Its not wise to produce if you dont sell. But perhaps the nature of the cost puts Sony in a middle position between trying to reduce cost per unit by increasing supply and not to pile up too much unsold inventory from the other
Something should be done about demand. If demand is raised they will be safer to produce more units to reduce costs per unit and not have too much inventory.
But then again losses even if they sell more with the help of a price cut might not be reduced enough or at all to compensate.
If the PS3 has an elastic demand it will be easier to gain from a price cut. The real question which Sony should ponder is how elastic is demand and how much should they reduce the price in order to "enjoy" the gains from it?
I think the best time is to reduce price when some major titles appear. During that time perhaps elasticity will increase since people might respond better to price reductions. It will have a two fold boost. One from release of major titles (increasing demand) and the other from price reduction gains due to higher elasticity.
Interest is already there but people are reluctand due to price and uncertainty of the games which makes reactions to prices, limited and steady
edit: And I think they need such titles soon. The late the come the bigger the hole will become
Simple, they don't loose money on the PS3 …
But they have maked a lot of bigs investissements for PS3 ( I think the CELL factory with Toshiba, may be blu-ray diode factory was input on the PS3…) who are generally included in the manufacture and distribution cost what is a mistake.
You have to separe the manufacture cost and the global cost to analyse the resultat of PS3.
I think the PS3 Manufacture and distribution cost is near Japon price, so Sony make money on US and more on EU…
But when you go to the global of PS3 (Investissement, manufacturing, distribution, licence of games, sales) Sony loosed money.
Look this example: Sony invest 2 billions$(for example) on the PS3 (R&D, factories constructions) so they have a loss of 2 billions$.
PS3 cost 400$ for manufacturing it, and distribution 100$ and price sell was 600$, so Sony make 100$ on each PS3 selled for example…
But licence game report for exemple 20$ by game (I think is less) at the attach rate was for example 5 by PS3 selled.
Sony selled 2 millions PS3 so the gain was:
Hardware: 2 millions * 100$ so 200 millions$
Software: 2 millions PS3* by attach rate of 5*20$ so 200 millions $
Total gain was 400 millions $
But Sony have a plan of rentability on three years ( example) so by year they have 666 ( the number of the beast!!
) millions $ to refund.So for the first year Sony lost 266 millions $, but they make money on each PS3 selled…
Now try this example with a loss of 200$ for each PS3 selled…
Sony lost at with moment for first year 866 millions$… so 3 time more and to expect to be at equilibre, they have to reach a attach rate of 26,65 by PS3 selled!
Try this with 5 millions PS3 selled for first year Sony need a attach rate of…16,65 for equilibre…
And for 10 millions PS3 selled for first year attach rate need is… 13,33
For 20 millions PS3 for first year attach rate is… 11,665…
Least with 100 millions PS3 for first year (World Champion!!
) attach rate is … 10,33…
So I really think Sony don't lose money on each PS3 selled may be they don't make a lot or nothing but not loss, and if Sony really lost money on each PS3 selled I think they have made a big mistake and I didn't think this is it…
But with the pretentious of Sony why not?
PS: On a ten years period with 100 millions PS3 and attach rate of 11 Sony will be a equilibrium you think it's a valid business plan, Personally I didn't sign it and you?
Almost always all console manufacturers sell their hardware at a loss at the beginning. Its not something new.Simple, they don't loose money on the PS3 …
But they have maked a lot of bigs investissements for PS3 ( I think the CELL factory with Toshiba, may be blu-ray diode factory was input on the PS3…) who are generally included in the manufacture and distribution cost what is a mistake.
You have to separe the manufacture cost and the global cost to analyse the resultat of PS3.
I think the PS3 Manufacture and distribution cost is near Japon price, so Sony make money on US and more on EU…
But when you go to the global of PS3 (Investissement, manufacturing, distribution, licence of games, sales) Sony loosed money.
Look this example: Sony invest 2 billions$(for example) on the PS3 (R&D, factories constructions) so they have a loss of 2 billions$.
PS3 cost 400$ for manufacturing it, and distribution 100$ and price sell was 600$, so Sony make 100$ on each PS3 selled for example…
But licence game report for exemple 20$ by game (I think is less) at the attach rate was for example 5 by PS3 selled.
Sony selled 2 millions PS3 so the gain was:
Hardware: 2 millions * 100$ so 200 millions$
Software: 2 millions PS3* by attach rate of 5*20$ so 200 millions $
Total gain was 400 millions $
But Sony have a plan of rentability on three years ( example) so by year they have 666 ( the number of the beast!!
So for the first year Sony lost 266 millions $, but they make money on each PS3 selled…
Now try this example with a loss of 200$ for each PS3 selled…
Sony lost at with moment for first year 866 millions$… so 3 time more and to expect to be at equilibre, they have to reach a attach rate of 26,65 by PS3 selled!
Try this with 5 millions PS3 selled for first year Sony need a attach rate of…16,65 for equilibre…
And for 10 millions PS3 selled for first year attach rate need is… 13,33
For 20 millions PS3 for first year attach rate is… 11,665…
Least with 100 millions PS3 for first year (World Champion!!
10,33…
So I really think Sony don't lose money on each PS3 selled may be they don't make a lot or nothing but not loss, and if Sony really lost money on each PS3 selled I think they have made a big mistake and I didn't think this is it…
But with the pretentious of Sony why not?
PS: On a ten years period with 100 millions PS3 and attach rate of 11 Sony will be a equilibrium you think it's a valid business plan, Personally I didn't sign it and you?
Are the costs you are talking about assumed numbers or did you take them from some credited place?
Also are you sure the PS3 has an attach rate of 5 games per unit? I think its closer towards 3
Something else you brought up though and I d like to get some more clarification, but are various parts of the console manufactured in different fabs and then assembled at one fab?
That would increase costs a lot
If the PS3 would have an attachment of 5, it would mean that close to 3 million PS3s (out of 5.5m shipped) is unsold.
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