Sony's $3.32 billion losses on PS3

I posted this in my MySpace blog, and I'll copy & paste it here.


-$3.32 Billion and Still Hemorrhaging
Category: Games

No, this isn't about our economy or our nation's deficit, but rather this is about Sony and how much the PlayStation 3 is presently in the red. This continues to be a result of selling the system at a price point below the manufacturing costs per system, which has went on since the PS3 launched in November of 2006. Last year, these losses totaled $2.16 billion, followed by an additional $1.16 billion in 2008, for a combined loss of $3.32 billion. Obviously, the only reason the games division is still around from one day to the next is that it's entirely leaning against the rest of the company and its profits from other electronics.

Sony sank a large sum of money into development of the PlayStation 3 in an effort to hold a competitive edge over the competition, but this is a risk for Sony as these losses may not be recovered if PS3 "fails to achieve such favorable market penetration... resulting in significant negative impact on Sony's profitability." In the past couple generations, Sony enjoyed total sales of 102.4 and 120 million units for PSX and PS2 respectively, but Sony was pretty arrogant for believing these gamers would flock to retailers to pay $400 to $600 (depending on the SKU and when you looked at one) for a single game console.

Not surprisingly, PS3 has not been selling at a rate comparable to its predecessors. PS2 launched in Japan in March of 2002, but launched for the rest of the world in October and November of the same year, and by the end of June in 2002 it had sold about 28.7 million units worldwide. In the same time period from PS3's November 2006 launch to the end of June 2008, PS3 has sold just 13.6 million units worldwide; less than half as many. Sony simply is not seeing the kind of market penetration they hoped for in order to start getting out of the red, and at this point there is no evident reason to expect this to turn around any time soon. Without any price drops on the horizon, PS3 sales aren't likely to be shooting through the roof any time soon.

sources:
http://kotaku.com/5018899/sony-lost-331-billion-to-ps3-cost-pricing-imbalance
http://vgchartz.com/ (data on consoles sold)

Ouch. They lost lots of money.

I wonder when they will stop losing money like this. Sony may be doing well, but their games division is a failure right now.

their a big company so I guess they will survive but they cant keep losing money like that. That sucks for them bad.

sony mite start making the money back some day. thats what the way this normaly works right?

boomheadshot wrote:

sony mite start making the money back some day. thats what the way this normaly works right?

Yeah, Sony and Microsoft both have a history of losing heaps of money but eventually turning it into profits, but that only happens when 1) the hardware production costs come down so that they're no longer taking losses on hardware and 2) they're selling enough software to a large enough user base to make those losses back. Right now, PS3 still costs more to make than what it sells for, so every PS3 they sell just jacks their losses up another notch. They also don't have a very large user base at all, especially compared to their previous generations, so they'd have difficulty getting enough royalties off of game sales to make those losses back at this point.