Sony Lost $3.31 Billion To PS3 Cost, Pricing Imbalance

Kotaku writes: "Pricing the PlayStation 3 below its production cost caused Sony to lose $2.16 billion in 2007 and $1.16 billion in 2008, the company revealed today.

Sony's fiscal 2008 annual report delineated potential risk factors to its investors, outlining that "the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered." The loss figures were provided as an example of the "significant negative impact" introducing a new platform can cause at first.

"In the past, large-scale investment relating to capital expenditures and research and development for the manufacture of key components, including semiconductors supplied for [PlayStation 3] was also recorded within the Electronics segment," the company said."

[pharmd]

"The loss figures were provided as an example of the "significant negative impact" introducing a new platform can cause at first"

yeah, at first, but once there is an install base and games the profits begin to flow!!!

this is true regardless of console, it takes money to make money!

[eagle21]

Sony was always thinking long term instead of short term. They could have made a ps2 1.5 EASY..lol I am so glad they didn't. They are in for a great future with PS3.

Now with Blu-ray the de facto high def format, they are going to enjoy healthy income from the sale of games, movies, PC Software, etc. that uses Blu-ray Discs.

@the disagrees, should they have charged $100 for wifi, and made dongles? LOL The PSP, DS, PS3, and Wii have built in wi-fi, all outselling 360's every week worldwide. I wonder why? ;)

[Condoleezza Rice]

Kotaku are bubbling with glee hearing Sony lost some cash,not realizing that Blu Ray alone will be enough to make all that lost cash back and then some.

With the Playstation 3,the future is bright;Consumer adoption of Blu Ray will see an incredible rise in the upcoming months and years,with the Playstation 3 serving as the primary source for High Definition Content.

It's a shame the same can't be said for other Retail products.

[Superfragilistic]

Oops double post!

[Real Gambler]

Both Microsoft and Sony wrap bills around their consoles in the first few years, this generation and the previous one. It's about the only item you can buy, that cost more to make than what you're paying for. How cool is that. Business willing to gamble billions and we, the players save money on our consoles.

Luckily for us, they can afford it. Otherwise we could kiss our consoles goodbye.

[Ju]

I don't know. They could easily have pushed the PS2 to a next level with possibly a 10th of the cost. Would probably not be competitive with the PS3 now, but would have been out 2-3 years earlier. I mean, push the EE/GS to 1GHz, add some more RAM (64-256MB), and add WiFi and HDMI, using DVD9. Done with it. At least at that point, a nice early HDef system (not 1080, but 720 should do just fine on a PS2+).

[Tempist]

It could have been far worse. They did not have to just dump $1 billion dollars into it. Everyone saw that the loss was coming and it was to be expected given the items included.

All and all $3 billion over two years is nothing given that they have been reducing lossed profit. Not every system released can be a Wii or DS.

[beavis4play]

and i don't mean this in any insulting way. it's just that seems like what ms was shooting for.

[MikeGdaGod]

well i finally bought my first blu-ray disks so that's a good sign.

i had $50 worth of Best Buy points that needed to be used so i bought Planet Earth over the weekend. and it's a must buy for anyone that has a hdtv, it's beautiful.

prices are dropping and i believe it's time for more people to jump on the blu-ray bandwagon. if more people move in this direction, sony will be fine.

[plenty a tool]

great comment eagle21...lol after the ps1 and ps2, sony were hoping for another stampede!! that's why they took the massive hit! if things continue like this, they should recoup the investment around 2012.

beavis4play: great fanboy comment! it's only the blu-ray player that seperates the console, and caused the delays! the specs are almost identical!

-----> the open zone is where you and the people who've agreed with you should be.

fanboys are ruining this site in a big way.

[mikeslemonade]

People forget that the PS2 system was not profitable for 2 years and even to this day Sony said they're not making that much. Maybe 1 or 2 years ago I remember an article where Sony said they were only making $10 per system, so even now they're probably only making $50 at the most off of the PS2.

PS3 is in a similiar situation, but it is apparent that this generation profit is hard to come by because games are more expensive and they have the free online to deal with. According to Sony again the system is already breaking even in less than 2 years so that's even faster than the PS2.

[CrazzyMan]

1) Dollar is WEAK.
2) Sony did MUCH more PROFIT on PSone and PS2(when $ was MUCH stronger).
3) Sony WON Blu-ray WAR.
4) Sony is a BIG company, and has MORE CAPITAL, then M$. It`s just all MONEY are INVESTED in BUISSNESS, BUT, if they wanted, they could sell and have MORE money then M$ has. =)
5) Sony will regain money with Software sales, new PSN network + again make STRONGER and RECOGNIZABLE PLAYSTATION BRAND. =) PS3 FTW!

[mistertwoturbo]

Sure sony lost 3.3 billion in 2 years, but probably made 10 billion with just PS2 sales. They have plenty of money left. And if you look at 2007 they lost 2 billion, and 2008 they lost 1 billion. So they recovered from losing another billion in 2008. In 2009 or 2010 they still start to see profits.

[Silogon]

To me that sounds like Sony is about to close the doors on the ps3 all together. WOW, that' is bleak.

[Torch]

Uh...No.

[monks]

i really hope you are joking

sony wont give up they still have other hardware gaining profit

and i am not sure on the facts and figures but what did MS loss at the start of the 360 with the extended warranty etc

[fenderputty]

You've got to be kidding me? They've reduced their losses by 50% from one year to the next. It's a fact that most consoles loose money per console at first to boost install base. Money is made on software anyway and not on the console.

MS lost money for the entire life cycle of its first console man. This is just the nature of things.

The only depressing thing about this is that, it looks like the console might not get a price drop for a while.

[Bonsai1214]

money in the console business is made on software anyways. (unless you're nintendo.. in which case everything you release is a cash machine)

[kazuma]

well said fenderputty

[barom]

In actuality, Fiscal Year 2007 sold only a fraction of what Fiscal Year 2008 sold. So they have reduced their production cost PER UNIT significantly (I'm guessing around 70%-80%). I can only imagine that will continue

[Fragking28]

apparently you cant read because they lost 2.16 billion last year, with half of the year left their already at 1.16 billion

[iceman2885]

Fiscal year ends in September. So there are only about 2 1/2 months left in the fiscal year, not half a year.

Edit: I was going by the US Fiscal year, which ends September 30th. The Japanese fiscal year ends March 30th as pointed out by 2.13 below. I guess that Sony would probably go by the Japanese fiscal year being that they are a Japanese based company (I always hated economics so I have no idea how they cooperate their number between the main office and the SCEA offices and offices in the UK). Regardless, sorry for the misinformation I guess.

[juuken]

....
....
....

Just NO.

[Sonics020]

I guess since the PS3 has had such positive momentum lately, kotaku needs to post something to keep them down.

[Superfragilistic]

@fenderputty

Well pointed out. This is nothing new but the extents of the losses do mean a price cut this year is highly unlikely. which given the profitability of the 360 and Wii could become an issue if Sony's competitors cut prices. When you consider Wii's profitability since launch and the estimated break even point that MS is now approaching over the lifetime of the 360, a loss of US$244/console (based on 3.31bn/13.58m consoles) for Sony, opens the door for MS to cut their prices significantly without the concerns of a price war with Sony in the near future.

Strategically speaking, if MS wishes to regain momentum and steal some from Sony for the 360 they should go beyond the rumoured $50 price cut and go in for a fully fledged retail kill with a far larger cut somewhere near $100. They could do so with the confidence that for at least another 6-12months Sony would be unwilling and unable to financially respond.

Sony aren't in serious trouble, but clearly intend as indicated by their financial report to be fiscally conservative until those PS2 owners upgrade with MGS4 or the later Christmas holiday offerings such as Resistance 2 and Little Big Planet give the hardware a big time boost.

EDIT:

It appears this article directly contradicts Sony's own financial reports which reported the above losses not as costs on the PS3 but as losses on the entire PS3 division. http://www.gamasutra.com/ph...

This means that the actual losses may well be much larger when the estimated $1.2bn profits of the PS2 & PSP are removed from the above figures, revealing a PS3 division loss for April 07 - March 08 of $2.4bn and not the $1.2bn Kotaku claims.
See here http://www.computerandvideo...
and here http://www.n4g.com/industry...

[GiantEnemyCrab]

Come on Silgon. You can only make outragreous claims like that against MS and the 360.

See stupid articles and commentors in stories like "Microsoft in "trouble""

http://www.n4g.com/industry...

[getrdone]

@2.7 & 2.8
Sonys fiscal year ends in March 08, and the next one will be March 09.

[RememberThe357]

@Silogon Dude who gave you bubbles? This is why you will go back to 1, because you flame.

@Everyone. As many people have already stated Sony's 2008 fiscal year ended in march. This mean they lost 2.16b form April 2006 to March 2007, then lost 1.16b from April 2007 to March 2008. They cut they're losses nearly in half in only a year. Not bad. But the 3.32 bil.? Yeah, thats not good.

[fenderputty]

their losses in half, they did so while selling more consoles over twice the amount of time that the first fiscal year saw.

It's a good sign that they've reduced costs to build the machine. I would still like to see better results at getting costs down. The PS3 won't ever reach the mass market until it does so.

[angel604]

you act as if 360 fans are saints, what about that first year ps3 was out and all those articles about how ps3 has failed it can never catch up or have quality titles, they should all just stop production blah blah blah

like you or the mart or pog didnt make your comments driving that knife in the wound...so cry your river somewhere else you hypocrite fool

[getrdone]

For the three people that disagreed with me should really read this, and next time you three should do some research. I just wish some people would do some research before they do something stupid.
http://www.foxnews.com/stor...

[niall77]

heck the 360 and xbox as a hole only started making money once Halo3 was released.

This stuff is to be expected, same with the ps1, same with the ps2.

it shouldnt matter to use anyway. when you drink milk you dont care how the Cow is doing

[jkhan]

Actually it wasn't the 360, it was the whole MGS that became profitable with Halo3. Before Sept 25th 2007, for the last 6 years Microsoft was bearing the burden of MGS.
As far as PS3 goes, well Sony has to blame themselves. They were all messed up when they came out. Now Sony is on the right track.

[chasuk08]

Yep true, i read somewhere today, i think it was the article on the xbox 720, not sure though, that microsoft lost billions of dollars when they launched the xbox and 360, so this is nothing different. Sony made over 88 billion dollars in 2007, so its not much skin of their teeth.

[RememberThe357]

@1.3 I thought it was 78 bil. But what the use of arguing over 10 BILLION DOLORS!

[MANCREEP]

but if you heard that cow was sick, or had mad cow disease, would you fancy a glass then? i hope not.

[Silogon]

I can't believe you see this as good news. This means no matter what Sony is going to have a hard time pulling money from investors now. No marketing, no new IP, no obtaining exclusives, none of that. this is not good.

[chasuk08]

All companys who launch a massive product need to take risks to get their product to market. Microsoft would of lost billions aswell. But now the xbox in 3 years and the big games have been realesed theyve made big profits, and so will sony once they launch all their exclusives.

EDIT : How the hell can i get disagrees for that ! I see that the disagree trolls must be in full swing tonight.

[Real Gambler]

It's a proof that the PS3 is selling well! They are already working on cost reducing it, and sales should increase. Any investors will be happy with that.

Heck, Microsoft had to set aside over a billion just to fix flaky consoles! Was it that bad? No, marketing spun it has customer support, and sure enough, you don't hear about this anymore. Did anybody said it was the end of the 360? No. One billion is only small change for those big business. Even better, there's reports that even new 360 still give the red ring. They didn't even bother to fix the new production!

[Zeevious]

...in their faithlessness, and lo' before me they did bow down and I read from the holy scriptures of marketing:

SILLY WABBIT...Tricks are for kids!

Wait...
The OTHER holy scriptures of marketing:

The one that reports on 45nm PS3 chips by August, and $50-$60 Blu-Ray drives (Divine OEM costs) = a price cut and increasing profits.
The great book also says Sony's game division IS already profitable right now. These costs are planned for and factored into expenses.

LISTEN NOT to the ignorant and false prophet who takes the almighty expense scriptures out of context for malicious gain. For there is the folly of those unworthy of the presence of all who follow the third coming of the most holy.

So sayeth Kaz Hirai.

.

This has been a FanBrat test. If you where an actual FanBrat you would not be seeing this message, as you would be kneeling, trembling at the mere thought of reading from the sacred PS3 texts.

This is only a test.

[kornbeaner]

yeah forget that they have Blu-ray movies and players, TVs, Stereos, PC and more product to make money on.

[niall77]

$5 billion over 2 years is NOTHING to big companys like sony

its not like this hasnt happened to every system ever made.... that isnt the wii.

[Kholinar]

Or any of the Nintendo systems. Or the other systems before the Saturn...

Not that it's a bad thing... though it can definitely be if you lose the gen. But it hasn't been standard for consoles. People like to say that, and I'm sure it's comforting to shareholders... but it's not accurate. http://www.actsofgord.com/P...

[ReBurn]

Actually $5 billion is a big deal to companies like Sony, especially in terms of cash flow. Not many companies have a bankroll the size of Microsoft, Sony included. I'm sure they expected to take the losses in anticipation of achieving profitability later, so I'm not worried. But you can't maintain losses like that indefinitely. That's why the 40gb model was born.

[Pornlord]

Sony has more money than they know what to do with. ALL SYSTEM LOSE MONEY THE FIRST 3 YEARS. All of them. At this rate they will be have a profit of over 1 billion dollars by the end of 2010. They are cutting their losses by 1 billion a year, and they have the money to back the system for the duration. This is no big deal at all.

[karlostomy]

It's great to see you defending the ps3's woeful profitability, but dude, you got that wrong.

If you post stuff like that make sure you post the FACTS!

The 360 is, in FACT, profitable and has been for about a year now.
The 360 achieved profitability in just over 1.5 years.

http://www.xbox360fanboy.co...
http://au.gamespot.com/news...
http://arstechnica.com/news...
http://www.360-gamer.com/ne...
http://www.xbox360fanboy.co...
http://www.joystiq.com/2008...

Oh, and by the way, the 360 has had three consecutive profitable quarters, with another one on the way.

I suppose i don't care either way, but it irks me when people post BS, just because a factual article touched a raw nerve.

[Bebedora]

I would like to see the total for Sony Playstation division including PS2 and PSP. Those aren't going with a loss in the bankaccount, do they? And finally I think the PS3 will do a well good profit some time from now.

[chasuk08]

This is just for ps3 manufactoring costs, Sony would of made these numbers up with ps2 hardware, and games and ps3 games

[Bebedora]

Oh. Even less of a loss then?

[kazuma]

to everyone that thinks that sony is in trouble, do not forget this:
ps2 hardware
ps2 games
psp hardware
psp games
ps3 hardware
ps3 games

sony is only losing money on ps3 hardware, so...don't worry about them lol

[Superfragilistic]

This is actually old news from May so I don't know why Kotaku is reporting March 31 financial reports now?! Hmmmmmmm... lol

But anyways the financial reports showed Sony gaming division losses as above. $2.2bn last year and $1.2bn this year ending March 2008 so to start with the Kotaku article is misleading. As noted by the Guardian back in May ( http://www.n4g.com/industry... the PS2 & PSP profits may well have exceeded $1.2bn, but this would mean the PS3 division had losses of approximately $2.4bn from April 07 - March 08 and not $1.2bn as insinuated by Kotaku.

That's roughly $260/ console for the 9.24m sold last fiscal year. It is indeed a good thing when a behemoth such as the PS2 and successful PSP can cover half those losses, but until those PS2 owners upgrade in swarms the PS3 will remain in the red for the forseeable future. But then Sony already knew that and that's why they use killer software exclusives, Home and online content to recoup the costs.

Bottom line - great for gamers. :)

[ReBurn]

March financial reports are being used now because March financials are the latest to be released. You don't get one quarter's results until the end of the next quarter.

[Captain Tuttle]

Most of the 100 million PS2 owners will buy a Wii. They bought a PS2 because it was cheap and had some good games.

[crank]

Yes, fragilistic is right on. Otherwise I was going to report you off topic ;)

[etownone]

as I consumer, you gotta love em because they are taking a LOSS on every PS3 sold. (yet sonyfans are always asking for another price cut) haha

And I guessing MS is tired of losing money on consoles sold especially after the original Xbox, but if only MS had the same mentality, they would have dropped the price on the 360 long ago to keep the momentum going which has been on a decline lately.

Because as much as I love my 360, if I was new to the market and had to choose between a 360 pro for $350 or a $400 blu-ray/40gig ps3... without hesitating I would choose the PS3. simple as that.

[Egzekutor]

lol so what :D its not my money :P

[Bnet343]

I always say the same thing, but no one cares. They are too busy sucking their favorite companies' pony juice.

[Sonics020]

Well said!

[Mutley416]

The Sony Corp is Huge....The Movie/Music/Electronic...This company is @ Disney Levels-
With my Fan boy shades on I see Value, When I bought my PS3 @ launch, It cost Sony 852$...That`s value.
Just recently I have been able to find a computer with a Blu-Drive for under 700$-

I wonder how much the Pirates Franchise or Spiderman made Sony... I know that @ world`s end is like 400 million.

Better for them to take a hit then put out faulty Equipment.

[MANCREEP]

Completely and totally belongs to Disney. And with their TV/Movie/Merchandising, they are worth ALOT more than Sony, sorry pal. And speaking of movies, Wall-E is gonna make soooooo much money. Pixar(also owned by Disney) has never failed to deliver a money-maker yet. Sony's Production company made some bank off the Spiderman Movies, but Marvel made ALOT more off it. Notice now, the latest superhero films are done by MARVEL STUDIOS AND PRODUCTION CO., because they dont want to share ANY of the profits with ANYONE(especially sony). I just wanted to clear that up for you, lol.

And the hit that MS took over the RRoD is still just under a billion. And although everyone knows the POSSIBLE risk involved with buying a 360, they still selling a GREAT and STEADY pace.

But I totally agree with you when it comes to Sony taking a Hit in sales, over sacrificing hardware quality---they were awful nice to do so.

[Solid_Snake666]

like to see Microsoft sell their system under profit...lol they only care about the $$$$$ they dont care about their fans...

[etownone]

you really aren't very smart, are you KID??

MS sold the original Xbox's entire life cycle under profit.

[Bnet343]

Fernando, nice self ownage there kiddo. Your just another blind fanboy with a peanut sized brain.

[Nevers]

$3.31 billion > $1.9 billion

Anybody know what I'm getting at with the $1.9... give ya a hint... starts with R, ends with D, and has the word "or" spelled backwards right in the middle of it.

Anyway, that's a ton of money...

[Egzekutor]

Dont you think losing money in order to get the fans satisfied is better than selling hardware that is not ready to be sold better ?

Now you are trying to make Microsoft stand out as "better" but actually its SONYs' dedication to their fans that puts SONY in the front. They would rather lose billions of dollar than make their fans unhappy about some RROD crap.

Microsofts' way : "Rush the product and sell it quickly and get those $$$"
SONYs' way : Check the product, make sure its ready to be sold. Then sell it.

Thats all. Dont even try to disagree with my comment because you all know im right. You are only lying to yourselves, not me ;).

[Nevers]

FB's are funny 8D

... take offense at anything. I can think what I wish... I just knew this article was gonna be riddled with spin from all sides.

[ToastyMcNibbles]

thats a lot of loss but you know what...sometimes you gotta sacrifice in order to reap the rewards

[Xi]

I was pissed today to see sony trading at 46.8 when I woke up.

But I know how important the ps3 is in their line-up. the playstion is the thing that will make them the most money because it effects nearly every sale of electronics off of it.

either way, I'm not scared, I bought them at 46.70 almost 10 months ago and I saw them reach a high of 58, i don't doubt that to happen again.

my other stock I bought activision at 27 (no trading at 34). Just sucks right now because the price of oil keeps consumerism down.

[pumpkinpunker]

you should have sold at mid 50's. the ps3 is going to get hammered this holiday season by both the Wii and 360. Sony cannot compete in the price war that is about to ensue. they screwed up by putting a below cost blu-ray player in their gaming console. Microsoft will be dropping the price of the 360 by $50-$100 dollars.

hey, i'm sure you'll ignore me but don't say I didn't tell you so when you're losing money on your stock.

[PoSTedUP]

even at 600$ the ps3 was losing money on evey unit sold. thers nothing they could do about it. they still profiting off the ps2.

[kewlkat007]

like past gens, built on yesteryears success. You just cannot cling to that notion, even though fanboys swear by it.

Sony is loyal to their Investors first...not fanboys on n4g type sites. Money is the bottom line...to investors. They are like "whack em" guys.

Anyhow I'm not so into stock type news but Sony does have weaknesses and they do not have a Stockpile of CASH like Nintendo and MS. Does this spell trouble....as a gamer naaw, but Investors might have a different sentiment.

[LevDog]

Ok no biggy.. Sony makes up for that lost money.. With TVs, Surround Sound, and a huge market for electronics.. They may have lost billions on PS3 now, but make up for it in other areas..

Also remember that PS3 is on a 10 year life span, even if it only makes it to 8 years.. thats 6 more years the Ps3 can turn a profit.. With production cost already cut in half and soon prolly that half will be cut in half.. Ps3 will get that money back.. I mean look at Ps2, it still sells a crap load and its prolly dirt cheap to make now..

Everything is fine on the Sony Front.. You gotta spend money to make money

EDIT: @ Below

True but spending 50 million on a game that was on both consoles and didnt help sell consoles isnt good.. Sony spent money on making a superior and more reliable product.. You still have to spend your money smartly

[fredy]

"Everything is fine on the Sony Front.. You gotta spend money to make money "

isn't that funny that's exactly what ms is doing but somehow ps3 fanboys dont see it as...

[GiantEnemyCrab]

Come on Fredy, you have to know your audience.. Of course it's OK that Sony's loses money. If it happens to MS they are going out of business and the 360 is finished. Hypocrisy is the order of the day.

[Superfragilistic]

@EnemyCrab

Tell me about it! You've been catching people with your giant claws all day! lol

Bubbles for you and the bloke above you. :p

@LevDog's EDIT

Errr. That $50m of DLC has yet to be revealed/released and may well have a slow burn affect on consoles sales, particularly if the console enters a more mainstream friendly price range, just like I expect MGS4 and the bundle to do for the PS3 over the next six months.

[kesvalk]

if i got this right... sony is pricing the PS3 BELOW production cost, sooo they are not having any profit...

if i got it right, then they are in big trouble...

[chasuk08]

No you got it wrong, if you would of read the article it says they lose money on ps3 production costs. They would make up these losses through the sell of games for ps3,ps2,psp playstation store etc, and ps2 and psp hardware sales.

[Avto]

This is what I love about it when I buy things for less than they cost and why I'm not such a big fan of Xbox, I mean it feels like M$ mad some money with my X360, I hate this feeling. Look at Bugatti Veyron it is somewhere 1 million, but each one used to cost 4x that when it first came out now that's classy!

[juuken]

I love how this tries to put a negative spin on the PS3. All new systems lose money when they're first released. What matters is that Sony continues pressing forward to deliver the best of the best for their costumers.

Lol, and the disagrees! Mind telling me what exactly did I say wrong here? Please let me know so I can correct my mistakes.

[LaChance]

the mistake is you NEVER would have said that if it were the 360.

Dont even try to respond because if you say otherwise youre just one big lier.Being a blind fanboy is bad enough.

edit: or should I say "fangirl"...

[Mutley416]

I can see Sony Stock going to 75$ a share in the next 2 years...They just got in bed with the cable companies, who print money...lol

[Xi]

they wont hit anywhere near 75 dollars within the next two years considering they only hit 58 dollars ater HD-dvd bowed out.

as much as I would love for that to happen it wont.

[tk]

With a ten year life cycle, losing money on the first two years on the hardware is not much.

On the PS3 costs recovered was for Cell CPU, Blu Ray development etc.

Now BR diodes is cheap, the CPU and GPU is becoming cheap - all in all - the hardware will be breaking even and making profit end of this year.

What did they make on:

PS2 Hardware sales (very cheap to manufacture now, still selling very well)
PS2 and PS3 software (sales like 1.4m copies in first week of a title helps)
PSP hardware and software
BR title sales
Other BR hardware

All taken into account, the loss leader is not much. Especially if you have to consider that Cell will most probably be used for PS4 as well, just upgraded, multi PPU/SPE model - so R&D cost for PS4 will be a lot less. Taken into account it will be easier to have BC - even less development cost.

XB on the other hand will most probably not stick with the three PPU core - so they are in for more this time around. ATI seems to be doing well - so GPU cost both sides will be less. As for storage - XBnext will most probably go BR. PS4? Well - Sony has so far introduced a new storage medium every gen - but for some reason I think it will still be BR - just maybe a 500GB.

[Xi]

I'm curious as to how you come up with this info.

[tweaker]

The gaming division of Sony is still profitable with the PS2 still alive.

[Aclay]

I already knew that Sony lost a lot of money from PS3 sales, but I had no idea they lost that much.

People were calling the PS3, "Overpriced" but Sony was selling their PS3's for $499 and $599 at launch, but it cost a little over $800 dollars to produce each console, and really even though the PS3 seemed expensive, at the time you were getting a bargain.

Right now Sony should be just barely breaking even because production costs have dropped to around $400 dollars per console and they should be making money on the PS3 by next year, but a price drop most likely wont be happening and I doubt that Sony wants to loose more money on the PS3.

I really want Sony to drop the price of the PS3 in the U.S. because I know Microsoft will drop the 360's price most likely before the year is over, but the PS3 is still outselling the 360 in Europe and the 360 is cheaper than the Wii in Europe now, so maybe a Xbox 360 price drop in the U.S. before a PS3 price drop wont be too big of a deal.

If the PS3 is still outselling the 360 worlwide even though it's more expensive, it's obvious that a lot of people aren't just looking at a sticker price and they are looking at what they are getting with each system, and when you buy a Sony product you know you get the best and people can trust the Sony brand name easily.

The best thing that Sony did to help cut costs was to introduce the 40GB PS3 and introduce the 80GB PS3 that used Software Emulation for backwards compatibility.

But, I definantly applaud Sony for not going cheap and building a console that was intended for the long run because it's going to pay off for Sony in the long run like it always has.

[Figboy]

i find it hard to shed a tear for the multi-BILLION dollar a year corporation...

they've gotten PS3 production costs under control, the PS2 is still selling hardware and software in impressive numbers, as is the PSP, and the Playstation 3 has been selling better than the PS2 has during it's lifetime, and the machine has only released ONE of it's proven heavy hitter franchises (Metal Gear Solid 4; GT5 Prologue doesn't count, as it's not the full release of GT5).

Sony has their hands in too many pies (film, music, television, games, consumer electronics, etc) to be too concerned about what the PS3 cost them almost 2 years ago.

their financial outlook right NOW is looking fantastic, and that's what matters to them now.

now, if they were STILL losing billions of dollars on the PS3, that would be a concern.

leave it to kotaku to dredge up some old news in their pathetic attempts to keep the "Sony hate train" going. memo to kotaku: the "Sony hate train" stopped running in January of 2008, when Blu Ray handily whooped HD DVD, and the Playstation 3 has been coming up roses ever since with useful firmware updates, and sweet games (ie, MGS4).

Sony lost a lot of money on introducing the PS3 to the market, and for $500/$600, when it cost roughly $800 to produce, but they stand to make a buttload of money on:

1) PS3 hardware sales, as they come closer to breaking even, and making a profit on the console by years end, if not at the time i write this.

2) Software sales. first and second party titles like Uncharted and Ratchet and Clank Future have sold rather well. making Sony money. with the impending release of titles like Resistance 2, Killzone 2, God of War 3, Final Fantasy XIII, and Final Fantasy Vs XIII, Sony stands to make a lot more on software sales than they have in their first year.

3) Blu Ray won. those that want hd content for their newly purchased PS3 or Blu Ray player will be getting Blu Ray discs. Digitial Distribution is still too far off, and not technically feasible on such a large scale to bump Blu Ray to the sidelines anytime soon. maybe in 5-10 years. at that point, Blu Ray will have naturally run it's course, and made Sony a buttload of cash.

4) Music. Sony owns music studios. they will make money off of the music industry through partnerships with corporations like Apple, and even offering their own music download solution via the PSN.

5) Movies. the Spider-Man trilogy alone earned Sony a crapload of money. just from theatre release. the DVD sales were equally profitable, as were the Blu Ray release. with upcoming movies like Metal Gear Solid (produced by Sony Pictures), there is no shortage of cash-generating blockbusters on the way.

6) Consumer electronics. from computers, to dvd and Blu Ray players, to disc drives and HDTVs, Sony has a lot of quality consumer electronics on the market that still sell in impressive quantities despite equally quality, and even cheaper competition like Samsung.

i just don't see any reason to "worry" about Sony. lol.

personally, as a gamer, this will only affect me if they cease operations in their Playstation division, and looking at the fact that the Playstation, Playstation 2, and even Playstation Portable are synonymous with gaming, i just don't see them abandoning their flagship product line anytime soon. and again, the huge losses they occurred were during the 2006 launch period, up until 2007, their fiscal years 2007 and 2008, respectively. we are currently in their fiscal year 2009, and looking at the software they're releasing, and the steady increase of hardware sales since the new fiscal year began (April, 2008), it'll be interesting to see their reports NEXT June or so.

i'm not downplaying that they lost a crapload of money, oh, they DID. i just don't see how this spells doom and gloom for Sony, like kotaku implies.

better luck next time, kotaku.

[kazuma]

one bubble for u coming right up =D

[juuken]

Amen.

[Sonics020]

Very well written and very true

[LaChance]

.

[strotee]

what would be interesting is to take the money they made (assuming) from the PS1 add it to the money from the PS2, and then subtract it from the cost of making the PS3 and see if they even blinked from 3.31 billion or if they are taking a "hit" with the PS3 after all.

[cyclindk]

This is true for virtually every console release...nothing new or surprising; why is this news?

[heyheyhey]

it's been said a million times- new systems lose money

but look at the PS2 now- outsold the 360 and PS3 a couple NPD's ago and its making billions

[vilmer]

Kotaku was all over this one eh!

[cmrbe]

looses crapload of money on gamers behalf to give us a rock solid reliable and state of the art tech console but some people still hate them for it. Got to love how some people think.

Reading it says that this is for PS3 manufacturing cost so i am pretty sure they are alright with the way the PS2 and PSP are still selling both HW and software.Umm the advantage of thinking long term.

My only concern is that when next time comes around Sony will look for the easy way out like Nin and MS. I really couldn't blame them anyways with the way the mass crucified them for including the Cell, Blu ray, Wi-fi and a HDMI port. Without Crazy Ken. I am not too sure Sony will go crazy with features next time and then every PS gamers should look at migrating every 5 years.

[etownone]

"11 - Sony
looses crapload of money on gamers behalf to give us a rock solid reliable and state of the art tech console but some people still hate them for it. Got to love how some people think. "

So how is that any different than MS and the original Xbox?

In the end, it's all about the quality and quanity of games at an affordable price.

[bigmoney617]

then they are desperate and failing hard but with sony..well read the post above yours..

[cmrbe]

There is a very big difference between Sony and MS. Sony delivers varied and quality games. MS only focus on the hardcore irrespective of Hardware specs.

[etownone]

"There is a very big difference between Sony and MS. Sony delivers varied and quality games. MS only focus on the hardcore irrespective of Hardware specs."

stop being such a blind sonyfan and open your eyes.
Sony "delivered" (as in past tense) varied and quality games in the past with the PS1 and PS2 BECAUSE of strong third party support.
That in NOT the case this gen.
Not only does the 360 have a bigger game library and the highest rated exclusive games... BUT due to the complicated nature and expensive costs developing for the PS3, the 360 now has the strong third party support. Resulting in many exclusives by default (like Left for Dead, SFIIHD beta, C&C3, etc, etc,) and multi-plat's look and run better.(GTA4 perfect example, PS2's best selling franchise... this gen runs sub HD with no AA on PS3, while the 360 version is HD w/2xAA.)

Your statement reminds me of idiots that keep saying the 360 is only good for Halo and FPS's. Yet @ this time the 360 is KING if RTS, RPGs, JrPGs, Racing, Fighting, FPS's, with the exception of casual and platforms (Wii)

and PLEASE don't come back at me with future games being released on ps3..... if you like waiting, thats on you. For now, be happy you got a blu-ray player with your PS3.... thats all Sony cared about this gen anyways.

[cmrbe]

Defensive. Why?. I guess because what i said is the truth. Say whatever you want to say but it will not change the outcome of this gen. Sony will always have the most varied quality software lineup and will win this gen again against MS when all is said and done. Does the x360 have games like Arfika, Heavy rain, EOJ, LBP, Dress?. See. These are just the tip of the iceberg of truly new games that will appeal to other gamers from other markets and will only expand the PS audience further. You know Sony has the biggest internal development studios as well a huge catalog of proven and varied franchise. Sony will always have the upperhand when it comes to software. 3rd parties are adopting multi-platform strategies this gen which will put the x360 future in the hands of third parties but not Sony. In the end, this gen will come down to 1st and 2nd parties exclusive games which Sony is King.

The console war is only in its infancy and you also remind me of idiots that think that MS has sort of won this gen will only 25% of last gen gamers migrating sofar. It is far, far from over and alot of things will change. EA the biggest game publisher forecasted that the PS3 will outsell the x360 this year as well as almost every analyst forecast i read sofar. The PS3 is continuing to outsell the x360 since its was released. Do you seriously believe 3rd parties will prioritize the x360 in years to come?. If you are then you are sadly mistaken. MGS4 is the smallest of the big 3 PS exclusive and yet it looks like it will move about 600- 800k PS3. Now just imagine when GT5 and FF13 will drop let alone KZ2, R2, GOW3, ICO team games. What does the x360 have left?. Gear 2 and 3?. Mass Effect is doubtful it will be exclusive and Bioshock is Multi-plat. This is the problem with relying too much on 3rd parties.

As for Sony and Blu. Hate all you want but i would imagine almost all PS3 owners are happy with the Blu ray fictionally of the PS3 like i do. Don't be one dimensional. It is quite possible that Sony wanted to push both blu-ray and gaming together you know. Don't hate Sony if they had the guts to MS was afraid to do. BTW MGS4 is amazing. The benefit of waiting for quality.

[etownone]

This gen it was more important for Sony to win the format war, not the console war.

So even if they never fully recoup the losses for the PS3, that's ok because they now have a bright future with new avenue for huge profits, blu-ray.

[Mutley416]

75$ in 2 years not impossible- The PS2 people are just starting to see there console slowing to a halt, and With The Wii`s toys losing there Hype, The XBox unreliable Sku`s , And the High prices of gas, making more people looking for Entertainment @ home.

+PSN catching up to XMB
+Sony`s Cutting Edge Monitor`s on the horizon(1,000,000. to 1 contrast)
+The cable company deal
+Blu-Rays players prices are gonna drop soon, cause computer`s need them too!!!
I would put a buy in @ 42 and wait, cause I believe another drop is on the way, then a nice smooth rise-

Ohh and want another tip... buy GNBT @ .92 a share and sit... They are gonna cure cancer in the next 5 to 10 years- you can thank me with a bubble-LOL

[Xi]

from my perspective as some who actually owns shares of their stock, that is the dumbest thing I ever heard.

1. sony doesn't do just consoles. Most of their money comes from high end consumer electronics, particularly their bravia tv's, and ericson phones. And their competition in those markets are a lot more unforgiving then the console race.

2. Sony spends too much on research and development, and this is eveident on their sale of a 50 million dollar insurance firm in japan that occured last year, this was in response to losses that they recieved from the PS3. This helped the stock reach the 55 mark.

3. both the wii and the 360 are much stiffer competetion then what the ps2 had, it's not going to be the same cake-walk. Not only this, their sales from consoles and games is mariginal to what they make from other endevors.

4. sony's cutting edge monitors are based on oled technology, which have an average life span of about 15,000 hours, that's compared to current lcd's with around 50,000 hours. The main purpose of oled displays are hand-help consumer electronics. Not only that but kodak owns the actual patent to the oled technology.

5. I already explained why the blu-ray effect is gone. When hd-dvd bowed out, sony shares hit 58, right now sony is sitting at 46. Any new effects from blu-ray will be marginal.

6. I've owned sony shares for about a year, I bought them at 47.40 a share last summer, sony wont drop below the 45 mark. I've been watching them long enough to know that.

I will tell you again, sony will not hit 75 a share, if they do I make around 10 grand.

[DarK-SilV]

I think I read on N4G where SONY said that they turned profit in 2007 (about 100m)?
Is this 100m from all the consoles and software (PS3, PS2, and PSP?)

So correct me guys if I am wrong

[Pornlord]

I think I know what you are talking about, and that's 100 mil counting PS2, PSP, and PS3, hardware and software.

[MANCREEP]

Um. Please tell me you meant billion. 100 million would be sad.

[DarK-SilV]

100 million (114m I think the exact number).but really I want somebody to clarify this for us.

[Fishy Fingers]

Oh well, I'll get by.

Takes money to make money... someone might of said that once.

[MANCREEP]

Between LOSSES and EXPENSES. HUGE difference.

Maybe things will break even in the long run, which would be nice.
Right now Sony is worth a little over 40 billion(Market Value)---not 100 billion

[militant07]

sony worth 100bil
so 3.3bil isnt little its about 3%

but what ever they are taking that dangerous console war game

i dont care for them when its us better "customers"

btw i 360 fanboy, but its make us also better ,cuse of the competiton

[Marty8370]

Why do you think Sony spent $2 billion on Blu-ray too win the Nex Gen format. That was too rich for Toshiba who had too pull out.

Too stay ahead in the electronics game, you have to invest heavly. You reap the awards from it later. That's all part of the gameplan, always has been.

[Isaac]

This is peanuts. They are not in a 3.31 billion dollar hole as they made profit before. Microsoft, on the other hand, was in a 6 billion dollar hole and is barely making a profit now.

[bama]

Have you never heard of Windows? Bill Gates' private funds? MS is using the Xbox to combat Sony because Sony wanted the PS to take over the computer markets. Why do you think Ken Kutaragi claimed Microsoft was his biggest competitor with the PS1? MS wasn't in games then. PS has been the main source of income for Sony. With them losing money on that and with the walkman dead (figuratively) I really want to see where Sony goes now.

[rawd]

HEY LOOK ITS A NEGATIVE SONY ARTICLE FROM KOTAKU

DIDNT SEE THAT ONE COMING

[Vanqu1sh]

ps3 is a bigger disaster than I thought

Wii HD and xbox720 will launch in 2 or 3 years and Sony will be forced to give up on money losing ps3 soon after

epic fail sony imo

[juuken]

...You honestly expect to be taken seriously with that comment?

[MANCREEP]

@ Jew-Ken
do you? lol.

[juuken]

Cute...but no.

[bama]

MANCREEP that is disgusting. Go spread your bigotry elsewhere. Gamers come of all religions and colors. If you don't like that you shouldn't game let alone post on message boards.

[Rageanitus]

Sony's initial losses means gains for Early Adopters, which helps push out more units which helps bring down costs for future mainstream owners. We all win, but Sony will gain ALOT in the long run (gaming and movie machine in the living room) Selling software and movies from their studios for the next 10 years is a huge gain. Especially when dvd has hit its high point and ps2 is SLOWLY losing ground. This is what you call strategic positioning, combining product lines to hae a greater outcome for the company.

The ps3 will help sell their games, their movies, and their TV's. Its a shame sony does not make good speakers.

[bama]

"movie machine in the living room"

The PS2 isn't the PS3. the public is looking at digital distribution more and more. So much that the PS4 was declared before the PS3 was released as a non blu-ray product. It was said it would not even have a disk drive. Blu-Ray is a scramble to higher tiered customers Digital Distribution is going up tiers through youtube and the music industry. There will always be a want for physical data but I believe it will become niche.

[DarK-SilV]

I think I read on N4G where SONY said that they turned profit in 2007 (about 100m)?
Is this 100m from all the consoles and software (PS3, PS2, and PSP?)

So correct me guys if I am wrong

[SL1M DADDY]

Another negative article about Sony from Kotaku... Imagine that...

[avacadosnorkel]

I heard that the next XBOX will come with its own Kotaku blade on the setup screen.

[Mutley416]

Umm so you really think that Sony will not drop like 2-4% before the end of the Next quarter?
I would`nt bet my house on that one my friend... I would put a buy in @ 42 for 100 shares and by the middle of september(if not sooner) you`ll have them...And to say they won`t drop to 45...that`s crazy. One hiccup and 45 is a done deal-

[highdro]

talk about loosing money!!! any way i could not care less, i got a ps3 and i am loving mgs4, at the end of the day does people u dont see behind the scence of sony are still laughing all the way to the bank !!

[dkgshiz]

They act like thats a lot of mony. Its nothing for these huge multibillion dollar companies

[ApocalypseShadow]

here's a hammer to continue hitting all the nails on the head.

best post on this thread.kotaku and rabid 360 fans want to somehow turn what everyone knows happens in releasing consoles on the market into a bad thing for sony.and try to put microsoft and sony on even footing when microsoft has no other offerings besides zune in the gaming sector.and 360s breaking and losing billions on top of releasing 360 to cover repairs.

but,you lose money to make money.

but sony made some of that back easy in the game sector with...

psp games,psp hardware and UMD movies
ps2 games and ps2 hardware
ps3 games and accessories
bluray sales
selling the CELL plant to toshiba so that buying chips is cheaper than making them yourself
ps1 games on PSN.original games on PSN.qore on PSN with FUTURE

the list goes on and on.bitter haters can't pull down sony when next month,they will see the revelation.E3 will make them repent.some gamers already have repented an excuse it as being neutral gamers or liking all consoles.or came back after their 360s died.when in reality,they could never live without playing PS3 or using sony products.even THE MART loves his psp.

apocalypse...............

[PoSTedUP]

history tends to repeat itself. : P eace

[bama]

This comment is as stupid as Bill Orielly's No Spin Zone. The PSP is dying everywhere except Japan and PS2 is currently selling less than the PSP at this point. How long can Sony rely on the PS2? As long as Nintendo relied on their handhelds? Only time will tell.

Edit: UMD movies? is that supposed to be a joke? No major company even supports them.

[dcbronco]

The Entertainment & Devices Division is a global division comprising five main businesses: Interactive Entertainment Business, home to the Xbox® and Games for Windows® gaming platforms; Mobile Communications Business, which develops and markets Windows Mobile software, services and applications; Media Business, developers of the Zune® portable entertainment devices and services; Connected TV Business, which includes Microsoft® TV and eHome groups; and the Specialized Devices and Applications Business, which includes PC Hardware, Microsoft® Surface, Mac Office, Microsoft® Auto, and Windows Embedded software.

There are a few money losing parts in there. The 360, however, is not one of them.

[JasonPC360PS3Wii]

Can you guess which two consoles are making a profit? And one had a to spend billions on repairs... XD

[tplarkin7]

They actually warned their investors that the loss may not be recouped. That means Sony is in deep doo doo. Sony lost the U.S. which is the biggest market, so they won't be pulling a PS2 this generation. Those losses won't be recouped. Sony may not make another console.

[bama]

Don't be so gloomy! Sega made the Dreamcast after the Saturn. A successor won't likely have a long life cycle though.

[karlostomy]

There won't be a repeat of the ps2 in terms of profitability and sales for the ps3.

If you were a SONY stockholder what would be your thoughts on a ps4? (with the Profitability debacle of the ps3 in mind?)

[dcbronco]

@Superfragilistic

You're right about the loses actually being larger than the rep said. It's not Kotaku, it's the rep that's not being completely honest. The way the rep states things is still trying to make things seem better than they are. The loses are far more than 3.31 billion. Like you said, the PS2 and PSP are both very profitable. Plus there is the statement about,

"In the past, large-scale investment relating to capital expenditures and research and development for the manufacture of key components, including semiconductors supplied for [PlayStation 3] was also recorded within the Electronics segment," the company said.

which I take to mean that some loses were passed over to the Electronics division relating to Blu-Ray. Electronics and Playstation are two different divisions within Sony. With the console still losing money with each sell and no realistic ability for a price cut this year, they can only hope to break even on console sells. Whether they want to openly admit it admit it or not, they paid off studios and retailers. And they might have even paid some devs for exclusives. In all Sony has lost between 4 to 5 Billion on the development of the PS3 and Blu-Ray. They also have begun to lose the gains they were making in the television market and Blu-Ray has not caught on. Sony has a lot of problems. On top of that, Sony recently had to admit that they don't have the developer support that they have gotten in the past. Lack of developer support killed the Dreamcast and that and the PS1 killed Nintendo's dominance a few generations ago. And while it's true that most consoles lose money in the beginning, this is too much to overcome this gen.

[bama]

You can spin it all you want but Sony made the same mistakes Sega and Nintendo did. Except last time Sony was reaping the benefits.

Sony PS3 = $599 Wii = $250
Sega Saturn = $399 Sony PS = $299

What amuses me is that Sony fell for the same fates that the others did. They had just as much arrogance as Nintendo did with the Nintendo 64. They threw on motion controls at the last minute similar to how the Saturn throw in a 2nd graphics chip. They claim quality over quantity just like Nintendo did. Damn i guess even the best of companies make mistakes. The Saturn led Sega to its demise will Sony leave the gaming world in a similar fashion? This all reaks of deja vu.

[dcbronco]

If the US economy sinks as bad as I believe it will in the next couple of years. Sony might be out of the gaming business. And it will be their own fault.

"Those who cannot remember the past are doomed to repeat it."

[JasonPC360PS3Wii]

This isn't good news for Sony no matter how you spin or dance. The 360 is making money even after spending billions on repairs.

[Testo]

"If you were a SONY stockholder what would be your thoughts on a ps4? (with the Profitability debacle of the ps3 in mind?) ""

How are Microsoft stock holders dealing with Vista / 360?

I can't wait to be forced to purchase Vista while waiting for Windows 7

[karlostomy]

lol man...

Are you for real?

the 360 is making massive profits
VISTA is making massive profits.

If I was a MS stockholder I'd be popping the champagne!

Here's a tip: THINK before you post. ok?

[Testo]

You can't honestly say that Vista is doing well?

http://tech.yahoo.com/blogs...
http://blog.wired.com/games...

Now they are forcing it upon people.

http://www.ctv.ca/servlet/A...

And you know as well about these topics for the 360.

1.5 Billion lost.
http://gizmodo.com/5015483/...

50 million for DLC
http://www.thegtaplace.com/...

4 Billion lost on Xbox original
http://www.joystiq.com/2005...

By the way, I do think before I post.

Maybe you should think before you do.

[pumpkinpunker]

These loses are for their WHOLE gaming division and are figuring in all their consoles: psp and ps2 right along with PS3. so basically any money they are making off the psp or ps2 is getting eaten up by their loss leader, the PS3.

Sony's big mistakes--
1)underestimating xbox live.
2)putting too much stock in the blu-ray and selling it at below cost. High definition is over-rated. you can barely tell the difference enough to spend gobs more money on new discs, hardware, and a HD TV at this point unless you have tons of money to blow which is not your average consumer.
3)forgetting their roots: third party development. they're system is so bass ackwards that 3rd party developers don't even want to touch it.
4) sony studios taking far too long to develop games. look at there best selling franchise, Gran Turismo. Key-rist, it's been two years now and what do we have: a crappy beta release gran turismo prologue while the 360 has Forza 2 which, as of now, is the industry standard for next gen racing simulators with a 90 metascore. whats the hold up, Sony?