The console losses discussion thread (or 'how companies blow billions on products')*

If the Blu-ray business is successful, Sony will enjoy more than just royalties. It also supplies the diodes, read/write head and parts, the blank discs, the authoring software, Blu-ray drives and players, plus other enterprise equipments. On top of these, consumers will also buy Blu-ray movies... helping to complement DVD sales (93% DVD vs 7% BD revenue today).

The Blu-ray royalty is indeed higher than DVD's (Saw the number somewhere but forgot where). However, Sony may (or may not) have waived it for the supporting studios for a period.
 
Well, my conclusion is...I got a bargain! I've got a very funky bit of kit connected to my TV at a price it never should sensibly have been sold at. I'm not complaining ;)

For Sony, worst case is they adapt for next-gen and do something boring while making lots of money. And as for unit losses, can't we take this loss (3 billion), subtract PS3 RnD, and divide by units for a mean loss per box? That'll then tell us whether those early estimates of $800 BOMs were right or not!
 
That is alot but because of cell, Sony, like they have for PS3 and PS2 dont have to spend massive amounts of money developing a CPU for PS4 as it will then likely revamp Cell and it will be cheaper for them by useing cell for 2 console generations then paying billions for CPU R&D 2 generations in a row.
 
Without considering the blu-ray format, this is just sensationalism.

Yeah the company invested a lot of money in the tech, so what? They did that to make a lot of money out of it. Nothing new here.

So, on the price reduction, IMO no impact whatsoever.

Unless it serves its long run targets and helps getting money from somewhere else.
 
3 bil is not that much if they manage to put 100 mil consoles on the market, like they did last time. That would be 30 dollars per console, which is not the end of the world, you can offset this with just one good game per console.
Microsoft got away nicely with almost 7 bil loss for 40 mil consoles (xbox 1 and 2)
 
3 bil is not that much if they manage to put 100 mil consoles on the market, like they did last time. That would be 30 dollars per console, which is not the end of the world, you can offset this with just one good game per console.
Microsoft got away nicely with almost 7 bil loss for 40 mil consoles (xbox 1 and 2)

How can you offset 30 dollars per console with one game per console? The console vendor fee is something around $10; that means at least 3 third-party games per console. If you count first party games, you have to take into account the development cost of many of them, because no single first-party game will sell to all 100 mln users.

I don't think Microsoft "got away" with anything, they are still deep in the red for their entire gaming endeavor.
 
That is alot but because of cell, Sony, like they have for PS3 and PS2 dont have to spend massive amounts of money developing a CPU for PS4 as it will then likely revamp Cell and it will be cheaper for them by useing cell for 2 console generations then paying billions for CPU R&D 2 generations in a row.

Building the fabs was VERY expensive, designing the chips not nearly as much. You can be a very good fabless chip maker with the right partners and SCe seems to be intent on taking this road (actually it was Kutaragi himself whiich started the push towards a fabless approach for SCE and other parts of Sony IIRC).

The CELL BE chip was not big for its manufacturing process (even compared to the original EE for the PS2 on much smaller silicon wafers) nor clocked incredibly high.

Sure custom cooling, the HDD, etc... added to the unit's cost, but do not forget that the Blu-Ray drive with limited supply of compoenents and some VERY low supply parts such as the blu-violet laser diode necessary for the optical pickup unit which there was a global shortage of. That drove up cost immensely.

Still, many huge advancements have been made in cost reducing the console and more are in the pipeline.

I think Sony will do fine.
 
Microsoft got away nicely with almost 7 bil loss for 40 mil consoles (xbox 1 and 2)
First of all, saying MS "got away" with $7B loss is pretty baseless. Secondly, it was necessary as an entry cost to challenge the 100M unit monster that was Sony (well the $1B repair charge wasn't necessary, obviously).

Sony, on the other hand, already had marketshare and brand power. It's pretty inexcusable to lose so much money. The advantage they had over MS at the beginning of this gen was built up from over a decade of near-perfect execution. Pissing so much of that away is rather pathetic.
 
You mean bringing new technology to people is inexcusable? :oops:

Ummmm, losing 3.1B dollars is pretty significant. I'm sure it wasn't done with altruism in mind, to bring people better technology. The bottom line for Sony is and always has been dollars.
 
Ok, I`m customer not shareholder, and you? ;)

Mintmaster was obviously speaking from the angle of the corporations interests. If you think that Sony invested what they did in order to 'bring new technology to people' I think you're a little optimistic.

That said, as was mentioned there is tangible benefit to Sony outside of BD royalties when it comes to the ecosystem at large, so it's hard to cast it in black & white as to whether it was 'wrong' or not. That'll be easier to determine a couple of years from now when we view the corporate positioning of Sony retrospectively wrt both Blu-ray and Playstation.
 
Xbox was a calculated risk and a risk Microsoft could afford to make. IIRC, quarterly profits from the Business Division were more than enough to finance annual shortfalls in the Entertainment and Devices Division. So while there were losses, they did not affect the overall health of the company.

Of course the picture at Sony couldn't be more polarized. :unsure:
 
... but this is why it's fascinating to watch Sony play its cards. Despite financial pressure and their incumbent status, they are willing to take huge risks for technical innovation and the next big leap. Personally, I couldn't be more happy to see that.
 
Mintmaster was obviously speaking from the angle of the corporations interests. If you think that Sony invested what they did in order to 'bring new technology to people' I think you're a little optimistic.

That said, as was mentioned there is tangible benefit to Sony outside of BD royalties when it comes to the ecosystem at large, so it's hard to cast it in black & white as to whether it was 'wrong' or not. That'll be easier to determine a couple of years from now when we view the corporate positioning of Sony retrospectively wrt both Blu-ray and Playstation.

I see the point, but I think Sony is sane enough. Blu-ray wins the war (thanks to PS3?), Cell is ok. PS4 will be just continuation = next Cell + blu-ray + next nVidia.
 
Carl,

Taking away the PS2 and PSP profits, what would you estimate that the PS3 project in itself has cost Sony so far? Including the r&d years which are obviously costly.
 
Of course the picture at Sony couldn't be more polarized

Well, just to clarify for you, the company itself has been in its best financial shape in years recently, in spite of the PS3 losses. So, I question the logic that Microsoft could afford it, but Sony couldn't. It's simply a matter of scale. But a material effect, no doubt.

PS4 will be just continuation = next Cell + blu-ray + next nVidia.

Who knows what PS4 will be; a thread dedicated to just such a topic in the technology section should you wish to join it. ;)

But certainly there's a lot of expectation that it will be a Cell continuation, and an NVidia card. As for Blu-ray, probably, but its costs (or lack thereof) for PS4 exist outside of the context of previous investment into it from an SCE standpoint.

Carl,

Taking away the PS2 and PSP profits, what would you estimate that the PS3 project in itself has cost Sony so far? Including the r&d years which are obviously costly.

(Very) hard to say, since it's educated guesses at best. Arbitrarily I'd say $4 billion, simply based on what the expectation for a PS3-free profit boost over the last three years might have resulted in, so valuing the last several years of PS2 and PSP at a little less than a billion. But the way things are silo'd across the divisions it's hard to put a direct handle on it from a corporate-level standpoint. For instance, SCE paying a lot for Cell chips and BD diodes, and that being accounted for there as a loss, but in turn helping to generate revenue over in the Sony semi division. So with this console especially there's been a lot of internal cross-accounting that's hard to get a handle on. PS3 essentially is a multi-billion BD subsidy in action, but when a lot of that money goes itself towards the build-out of the diode and replication capacities... hard to know what to say from a net perspective.

But what we do know from the financials is that Sony wasn't recording incredible sales from diodes, semiconductors, and optical media over the last couple of years, so whatever the internal sales figures were, the net effect was still clearly a very lossy cost structure surrounding PS3, and it would seem that the intra-division sales were made at minimal profit.

So... yeah I'll go with $4 billion, but it is arbitrary. :) Truth is that it could be a lot more based on figures like 2003's SCE profits, yet at the same time there are tangential projects at play surrounding PS3 that it wouldn't be fair to consider as a direct PS3 cost (Home, PS Network, etc..)
 
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Well, just to clarify for you, the company itself has been in its best financial shape in years recently, in spite of the PS3 losses. So, I question the logic that Microsoft could afford it, but Sony couldn't. It's simply a matter of scale. But a material effect, no doubt.

The difference here is that Sony took the gamble when they didn't have the money, MS has always had cash lying around. Bravia has turned Sony around recently, they'd look spectacular right now if not for ps3 holding them back.
 
Numbers don't tell everything though. During PS3's birth period, Sony has matured quite a fair bit due to re-org and re-focusing exercises.

Besides Blu-ray, their software effort, network strategy are coming together. Cost/margin seems to be under (much) better control. The different units are working together better now too.

I think they still have issues with simplifying end user concepts and UI. Hopefully they found the energy, right talent, structures to pursue further.
 
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