Sony sees large loss on PS3 start-up

[Titanio]

Sony sees large Game Division loss on PS3 start-up

http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=OBR&Date=20060427&ID=5674079

But Sony expects its game division to rack up an operating loss of 100 billion yen ($871.6 million) this business year as it gears up to launch the PS3 in November, overshadowing an expected recovery by its core electronics unit.

"We believe that we can lower costs dramatically (on the PS3) through chip shrinkage and by cutting the number of parts but there is no way to avoid high costs in the first year," Sony Senior Vice President Takao Yuhara told a news conference.

Two things:

- it's a good sign for the machine actually launching on time

- steep initial losses = aggressive pricing..?

edit - worth noting that overall profit for 06/07 is expected to be about 100bn yen anyway. Profit for 05/06 was 191.3 bn yen, up 68% on the previous year, despite a games division loss of 61.4bn yen, related to PS3 development.

 

[msia2k75]

Didn't Sony lose a lot in the first PS2 year too?

 

[Titanio]

Didn't Sony lose a lot in the first PS2 year too?

Of course, yeah, it's somewhat inevitable.

 

[Platon]

- steep initial losses = aggressive pricing..?

It would certainly indicate that. It would suck if they had both high losses and a console at $500...

 

[msia2k75]

Of course, yeah, it's somewhat inevitable.

Actually I wonder if someone has the number.

 

[Titanio]

It would certainly indicate that.

I was initially thinking that this figure just applied for the end of the calendar year - and purely for launch - but it's for the business year, that stretches to March. So things are a little muddier..but we'll see

 

[Platon]

I was initially thinking that this figure just applied for the end of the calendar year - and purely for launch - but it's for the business year, that stretches to March. So things are a little muddier..but we'll see

Hmmm... As usual, it is clear as mudd ...

 

[Titanio]

And just to clarify things further, they still expect an overall profit for the year to March 07, of about 100 billion yen (down on analyst's estimates, though). The game division, on its own, will lose the same amount, though, but the other divisions are sort of beginning to pull their weight more (electronics has improved a lot - its loss shrank significantly this year, movies income doubled in the year, other financial services were up significantly).

Also worth noting that for the last year, to March 06, the games division posted a 61.4 billion yen loss compared to 1.5 billion yen profit the year before, thanks to PS3 investment.

 

[London Geezer]

Well they can thank god that their LCD TV divison is doing very well. The Bravia TVs are the best sellers and have been since coming out, and Sony makes BIG profits out of them, due to them being so overpriced. Those things are certainly not sold at a loss let me tell you! That will help them a lot.

 

[!eVo!-X Ant UK]

- steep initial losses = aggressive pricing..?

Yes thats a very god sign

 

[Phil]

If the HD still remains in the package, I'd be interesting to revive the topic on the PS3 launch price prediction I started a while a back...

 

[Platon]

If the HD still remains in the package, I'd be interesting to revive the topic on the PS3 launch price prediction I started a while a back...

Without the HDD I don't have problems seeing them launching at $400. Actually I expect them to. With a HDD standard I have more difficulty seing that happen, although not totaly unlikely, but then I don't expect them lowering that $400 pricetag anytime soon...

 

[London Geezer]

- it's a good sign for the machine actually launching on time

... What's "on time" about the November launch date?!

- steep initial losses = aggressive pricing..?

I think it goes a little bit like this:

[steep losses on PS3] + [all other overpriced TVs and electricals] = [aggressive PS3 pricing]

 

[Shifty Geezer]

If they went with a 3.5" HDD they'd save a bundle. I don't quite see the fascination with small hard drives when it's in the case, unless the heatsinks are filling up that area

 

[Whatever]

Also if I'm reading Titanio right, the two years previous, they made 1.5 billion yen, or basically, a virtual break even, in gaming?

And I think it's possible, they might break even or lose money year after next as well.

That could be four years the game division basically generates no profit. Such is the cyclical nature of the business no doubt.

 

[Platon]

If they went with a 3.5" HDD they'd save a bundle. I don't quite see the fascination with small hard drives when it's in the case, unless the heatsinks are filling up that area

As you say, I guess they need some "breathing room" and since the console size for some reason seems to be so extremely important even a crappy little 1" is of major importance, a bit pathetic actually...

 

[Whatever]

At least this way I can say my true opinions to you Londy

I like how I make some of the most popular topics that remain up too..

 

[Shifty Geezer]

Especially when you see no games doing anything unusual with it so far, and I dont expect too.

1) Raytraced volumetric clouds is pretty unusual. 2) Cell isn't (in theory) just for their consoles, and has been seen doing other unusual things like realtime 3D virtual makeovers. As long as Sony can sell the processor okay, it'll have been investment worthwhile IMO. Plus it's nice to have a new and interesting processor in the wild. Monolithic OOO cores are soooo last millenium

 

[fulcizombie]

Wow,so Sony makes in a year aprox. 5% of what Samsung makes.Talk about a pathetic company....How the mighty have fallen....

 

[Titanio]

Wow,so Sony makes in a year aprox. 5% of what Samsung makes.Talk about a pathetic company....How the mighty have fallen....

What a silly statement. That kind of talk might have been more credible a couple of years ago, but Sony's results have improved greatly, not least this year. These results beat forecasts, there's now talk among analysts of a proper recovery materialising.

Not to mention that Samsung's net profit is nowhere near 20x Sony's. Sony made about $1bn last year, Samsung was forecast to make ~$9bn. And that "pathetic company" has shot to the top in terms of LCD TV marketshare, overtaking Samsung, in a very short period of time. Oh the embarassment for Samsung..