If you think Bravia is the source of Sony's recent profits, you should think again!
Read through post #14 of this thread here for insights into Sony's modern day profit drivers:
http://forum.beyond3d.com/showthread.php?t=48083
The console losses discussion thread (or 'how companies blow billions on products')*
- Thread starter AntShaw
- Start date
If you think Bravia is the source of Sony's recent profits, you should think again!
Read through post #14 of this thread here for insights into Sony's modern day profit drivers:
http://forum.beyond3d.com/showthread.php?t=48083
If you think Bravia is the source of Sony's recent profits, you should think again!
Read through post #14 of this thread here for insights into Sony's modern day profit drivers:
http://forum.beyond3d.com/showthread.php?t=48083
Well digital cameras then or whatever else, the point doesn't really change.
Well, I would just counter-argue that Sony did have the money - just as any company that is still profitable after expenditures "has the money." Now whether it was wise or not is the matter at hand, but Sony is not in financial dire straights for having pursued this.
As for how spectacular they'd look, they'd look probably about ~33% more spectacular on a yearly results basis. But seeing that as the case, then certainly a net profit last year of ~$3.75 billion, if not 'spectacular,' can at least be viewed as positive in its own right. I'm not trying to diminish the gravity of a ~$4 billion loss on the hardware though; on the contrary I'm among those first and foremost to want to explore it. But just seeing as so much of that loss was tied to Blu-ray, I just think we have to wait a couple of years before we make our verdict.
RancidLunchmeat
Veteran
Why the specific desire to determine how much of the loss was related to BR?
Does it matter if it was related to BR R&D or Cell R&D or if it was just the result of more expensive PSU's, nVidia royalties, or adding in 'features' like card readers and wireless capabilities?
The bottom line is that the PS3 was really expensive to make, almost too expensive to make.
All of the features included have an associated cost, but none of them can be separated from the loss.
Sure, Sony might profit from BR manufacturing and royalties in the future, but how can you determine it wasn't the built-in wireless that prompted people to purchase a PS3 over (or in addition to) a 360 that lead to them having the BR player and speeding its adoption?
Does it matter if it was related to BR R&D or Cell R&D or if it was just the result of more expensive PSU's, nVidia royalties, or adding in 'features' like card readers and wireless capabilities?
The bottom line is that the PS3 was really expensive to make, almost too expensive to make.
All of the features included have an associated cost, but none of them can be separated from the loss.
Sure, Sony might profit from BR manufacturing and royalties in the future, but how can you determine it wasn't the built-in wireless that prompted people to purchase a PS3 over (or in addition to) a 360 that lead to them having the BR player and speeding its adoption?
No desire at all.
Well both Cell R&D and BD R&D were conducted by divisions external to SCE, so... insomuch as we're interested in having a "big picture" view of the entire cost structure, I guess that just boils down to personal curiosity. But note how you included expenses for the PS3 that aren't at all (in the larger sense). And if you consider the external divisional costs worth analysis, not sure why you would take a more dismissive tone towards the internal costs... especially given that the actual loss levels of the system are in fact unknown.
That's something we can only qualify based on the net results for the corporation down the line, since a large aspect of said costs were premised on growing a business external to the divisional core.
Not sure I understand the question here.
Gaming is supposed to be profitable as a division this year.
I think he was using the Wi-Fi example as a means of indicating how one aspect of the console expense can't be given preferential treatment over another in terms of discussion 'merit.' But, since the debate here revolves around not what entices you to buy the system but rather on what happens after you do, I think it's a moot angle.
On one level the PS3 has 'lost' $x billion dollars, but I think more accurately, Sony simply made an investment/trade-off on the order of $x-billion. What we can dub true levels of loss (or profit) on a macro level we'll only have a clear view on several years from now. It's the whole console business model itself in a more abstracted sense... in consoles you lose money on hardware hoping to make it on software. Here, Sony lost money on the console division hoping to make it back later in other divisions.
On the console level alone, there is no doubt that PS3 will overall not be profitable for the division when everything's said and don this gen. But the extent to which it makes it back on the corporate level will need to be factored in as well when judging the decision.
By the way I for one do not believe that Blu-ray would have won the format war without PS3; for those that do, the calculus understandably changes.
Probably not the PS3, no... though we'll be told explicitly on the conference calls to come one way or the other.
Ehmm well those wireless buyers bought BD movies for their wireless equipped PS3 and made a difference in the end. So maybe it doesnt really matter that the build in wireless support made them buy the PS3, it still won them the war.
Did they? I'd say blu-ray won the battle against HD DVD, but its a long way from winning the war against DVD. We'll see in a few years.
The splitting of revenue/profit over divisions is a bit difficult to penetrate.
For fiscal year 07 the electronics division (that supply the games division with the parts necessary to build the PS3) had an operating profit of 356 billion yen, an increase of 121.8% over the previous year(!).
So while one Sony unit makes a loss from the PS3, another makes a profit. Unless you have better info than this (which is open to shareholders,) it is very hard to pin a number on PS3 costs up until now. And once you start to consider the intangibles of how much the PS3 helped their BR effort and what that will mean in royalties and associated sales of TV-sets, video players et cetera, even Sony internally will have difficulties making a solid assessment.
However, unlike Carl, I'd say that now that we have seen sales, and how their PS1, PS2 console dominance has been completely wiped out (along with associated software revenues), I would be very surprised if Sony in retrospect feels that the high cost of the PS3 was worth it. A cheaper, less ambitious console, released earlier may well have been a better play, that would have helped them maintain their console market position and as Shifty pointed out, allowed them to spend a LOT of money promoting BR directly.
For fiscal year 07 the electronics division (that supply the games division with the parts necessary to build the PS3) had an operating profit of 356 billion yen, an increase of 121.8% over the previous year(!).
So while one Sony unit makes a loss from the PS3, another makes a profit. Unless you have better info than this (which is open to shareholders,) it is very hard to pin a number on PS3 costs up until now. And once you start to consider the intangibles of how much the PS3 helped their BR effort and what that will mean in royalties and associated sales of TV-sets, video players et cetera, even Sony internally will have difficulties making a solid assessment.
However, unlike Carl, I'd say that now that we have seen sales, and how their PS1, PS2 console dominance has been completely wiped out (along with associated software revenues), I would be very surprised if Sony in retrospect feels that the high cost of the PS3 was worth it. A cheaper, less ambitious console, released earlier may well have been a better play, that would have helped them maintain their console market position and as Shifty pointed out, allowed them to spend a LOT of money promoting BR directly.
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RancidLunchmeat
Veteran
Yes, that's exactly what I meant.
You've lost me here because of your very next statement:
Indeed, an investment would be how I would look at it as well. However, my point above was that the console included other features and design choices that increased the production cost in addition to BR.
Sony could have stripped down the feature set of the PS3, still included BR, but operated at either a lower loss or provided the consumer with a lower price that could have resulted in additional sales.
My point was the PS3 isn't a 3.1B loser to Sony solely because of the BR and Cell R&D. Sony made very expensive decisions on design and features. All of those decisions combined to result in the cost of the PS3.
It then goes to follow that you can't simply look at BR or Cell revenue as necessary profit streams in order to compensate for these losses. The losses aren't solely the responsibility of BR or Cell to offset. The console should be profitable in its own right, because many decisions were made to make it appealing in and of itself.
On this specific matter though I want to clarify that their is clarity beyond just what is on the financials themselves. During the conference call it was indicated that the semiconductor operations within Sony were slightly profitable; in fact for the last several quarters it's regularly been slightly profitable or slightly lossy. So, although the Electronics division, through its umbrella structuring over semi, does supply the majority of the key PS3 componentry, the PS3 doesn't seem to have much more than a neutral gross margin effect on the division. Though on the BD side of the ecosystem, certainly a significant infrastructure build-out component is present through the internal BD demand for game disc and diode replication. Semiconductors as well of course, but now that the SOI lines and OTSS have been sold to Toshiba, we won't see that in future reports.
Well keep in mind I'm not saying that Sony is not of the opinion that the PS3 was too expensive... no doubt they would feel this way. A lot that they were banking on pre-launch went awry, and each misstep had a compounding effect. But that's different though than casting the system as an economic failure outright for the company, which I think we still need to wait on to judge, even if we can agree that the price paid was higher than they were at first expecting... or even willing... to pay.
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I agree with you by and large. But of course, it's already a forgone conclusion that PS3 will be an immediate-term economic failure in terms of SCE's performance in the present generation.
So then it's just the secondary mission to which it was assigned, format penetration, that we can eventually use to judge whether the PS3 can still earn 'qualified success' status in the larger corporate picture. How important BD eventually is or is not for Sony is something that is now out of SCE's hands though; I do hope for the sake of everyone involved in the decision-making that it eventually contributes $5+ billion over the course of the years.
Imagine, if the PS3 tech had 1 more year of gestation, what the final product might have looked like.
Start with adding more (and faster?) VRAM. Couple that with a higher speed BD-ROM drive. Now they manufacture the Cell and RSX on a smaller process which could allow for higher clocks or even more functional units.
Developers also would have had more time to come to grips with the new architecture and there would have been a stronger launch lineup.
All this in my mind adds up to a product that much better delivers on the original promise of the PS3.
1080p in every title. Much higher quality textures thanks the combination of the BR drive and the increased VRAM. In short, something that really would have made the 360 look like "XBOX 1.5".
Carl's right, though. Sony really had no choice but to do what they did. And the resulting product, while maybe not what it could have been, is still strong enough to be competitive even after it's abysmal start.
Everything is a long way from winning the battle against DVD. But every moviestudio, electronics manufacture (except Toshiba* they are really betting on DVD) basicly everyone that earned money on DVD wants to earn money on BluRay.
That is a big momentum.
* http://www.dvdfile.com/index.php?option=com_content&task=view&id=6765
For me as a consumer, gamer, moviefan and tech head, the BluRay drive in the PS3 is one of the most brilliant things to ever happend.
If the PS3 took one more year, then GTA4 would've been an x360 exclusive and you guys would be playing MGS4 on the xbox today as well.
And Sony wouldn't have included more hardware in there in any case; they'd just be happy to build it a bit cheaper and loose less money with it.
And Sony wouldn't have included more hardware in there in any case; they'd just be happy to build it a bit cheaper and loose less money with it.
Nah, they don't need another year. They just need to design it better.
They screw up PS2 BC by choosing RSX. Their solution was to include hardware BC, which was very stupid. They should just have canned BC out right then. And not go with the hardware solution.
If they want to waste money, they should put in more GDDR for RSX instead. 512MB can come in handy, especially they want to reserve huge chunk of it or actually design a more suitable GPU for the job.
That hardware BC was really wasted money.
They also went for internal PSU and quite design. This surely effect how much heat Cell and RSX can dissipate. Considering they are competing with external PSU and vacuum cleaner, I don't think that extra expense is needed.
Also they should have gone with 3.5" HDD. The PS3 is the biggest console out there. Why bother with 2.5" HDD.