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Forums - Sales Discussion - Do you think Sony will ever make a net profit from the PS3?

SSPOrSK on 08 January 2008

When pigs fly.



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Renar on 08 January 2008
RolStoppable said:
Renar said:

Individual PS3 software, of course, some have, some won't.

PS3 hardware profit on the final box sold, probably. On the other hand, note in the table:

Sony Annual Reports Game Operating Income
YearEnd Mar 31 Yen(B)

2006 8.7
2005 43.2
2004 67.6
2003 112.7

Either PS2 operating income peaked in 2003, and its profits started declining. Or 2004 the cost of developing the PS3 was already so large, it knocked down the net game division net operating income even with PS2's income staying the same or growing. PS3 losses are *much* bigger than the losses reported for 2007. There is probably 100-200Yen(B) of PS3 losses masked by the PS2 in the previous years and 2007 itself.

For the PS3 hardware to be profitable LTD at the end, no way.

Including software and other game related income, very doubtful.

Including Blu-Ray royalities, possibly if it becomes a long term standard. But Blu-Ray income will not go to the Gaming Division. That is not one of their items to 'sell'.


You are missing one important big factor: the PSP. It launched during fiscal year 2004 and was sold at a loss initially.

Ahh, yes.  So the PSP could have (probably) ate up a lot of the PS2 operating income that I blamed on the PS3.  For 2004, most likely, 2005.  But, as I'm sure Sony supporters would tell you, PSP is now making lots of money.   Which if it is, that money is being eaten up by the PS3 as well.  Poor PS3.  I guess the only thing that it can't be blamed for is global warming.

 

(Which as we all know, is due to the X360!) 

 



Torturing the numbers.  Hear them scream.

SSPOrSK on 08 January 2008
TWRoO said:
Needs More Graphs.

Hey Rol... how did you (or Renar) get the gaming division operating profit for 96-98? because I have just been looking through those reports and I couldn't find anything other than revenue and sales for gaming division... all the operating profits were lumped together for the company rather than being seperate.

anyhow.... I copied some of the charts from various reports to build up a picture... so this shows the sales revenue and operating profit from 1999 onwards, but also revenue for 95-98.

 

There seems to have been a change in their reporting methods between 2000 and 2001 by the way, because the lower left chart is from 2000, but shows lower sales than the 2001 chart (which i put on it's side).... I believe they may have reported sales to retail pre 2001, before changing back again recently.

Also I don't know what operating margin is, so don't ask me.

------
and finally, I guess the numbers Renar has given you do not include the R+D costs for the PS1, which will probably have been in the 95 or 94 report... so Sony won't have made 383billion Yen in the PS1 era.

and according to the 1997 report the xchange rate then was 124 Yen to $1... but unless it went up a lot before coming down recently I don't suppose that makes too much difference.


 



Rath on 08 January 2008

I think Sony needs to concentrate on the next generation as personally I think this one is a goner. They are extremely unlikely to turn a profit on the PS3.

They need to keep the PS3 competitive without bleeding too much money so that the general public doesn't see it as a complete flop, then they need to concentrate on redesigning their entire business structure so that they can survive in a console market in which they aren't king. The main problem with the PS3 is that it is unable to survive in such a market, each PS3 sold represents a loss in money for the company and while such a loss leading strategy worked while PS was king the PS3 has clearly shown such a strategy just doesn't work when another console gains the lead.
They need to adapt and learn from Nintendo who showed last generation with the GC that it is possible to survive at the bottom of the heap. I expect the PS4 not to use a loss leading strategy.



celine on 08 January 2008
SSPOrSK said:
When pigs fly.

 

Oh darn, this is an invasion !  



 “In the entertainment business, there are only heaven and hell, and nothing in between and as soon as our customers bore of our products, we will crash.”  Hiroshi Yamauchi

TAG:  Like a Yamauchi pimp slap delivered by Il Maelstrom; serving it up with style.

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starcraft on 08 January 2008

On hardware and software alone? No chance. They have simply lost too much money on this console and are not in a position to capitalize on the market substantially enough to make the money back.

I really do think that Sony sacrificed gaming dominance in order to ensure Blu-Ray survived, and I really don't believe they thought they could only get one without the other. They thought that the PS3 would take off like the PS2 and take Blu-Ray with it. They have saved Blu-Ray, but it won't have anything like the dominance DVD did before it is replaced by digital downloads.



starcraft - Playing Games = FUN, Talking about Games = SERIOUS

TWRoO on 08 January 2008
RolStoppable said:
TWRoO said:

Hey Rol... how did you (or Renar) get the gaming division operating profit for 96-98?
because I have just been looking through those reports and I couldn't find anything other than
revenue and sales for gaming division...
all the operating profits were lumped together for the company rather than being seperate.

(...) 

------
and finally, I guess the numbers Renar has given you do not include the R+D costs for the PS1,
which will probably have been in the 95 or 94 report... so Sony won't have made 383billion Yen in the PS1 era.

and according to the 1997 report the xchange rate then was 124 Yen to $1...
but unless it went up a lot before coming down recently I don't suppose that makes too much difference.


I actually haven't looked at the financial reports myself, because I just believed the numbers
Renar has given to be true. They fall in line with what someone would expect, so I had no reason to doubt them.

I think the reason why Renar hasn't given any numbers prior to '96 is because the gaming division wasn't
listed seperately in the financial reports until this point, so there simply aren't any numbers at all available.
Of course with the R+D costs for the PS1 Sony won't have made 383 billion yen in the PS1 era, but at least
we know that they haven't made more than this sum, in case somebody is claiming otherwise.

The total profit Sony has made off of its Playstation brand prior to the PS3 is somewhere between $5-5.5 billion,
since then they made a loss of about $3 billion. We don't have exact numbers for everything, but we have a
good idea how profitable the videogames business is/was for Sony.


page two is ifn on my laptop... it might have just been the Wii opera browser.
so I can finally reply to Rol.

Yes the numbers are all the same for Renar as the ones I found, except I couldn't find any
seperated (game division only) operating profit numbers for 98 and earlier (this is the year they showed
the game division as seperate from the "other electronics" division) I did find, as you can see on the
charts, the game division revenue/sales figures because they put a chart of it on the 1998 statement
showing the past 5 years (though there is no bar for 1994 because they didn't sell anything)

I will PM renar and ask him.... perhaps it was hidden in the text from one of the reports.



Dno on 08 January 2008
Gamerace said:
This thread is too long to address all the different arguments so here's my two cents:

PS3 hardware & software, clearly will never earn a net profit. The already incurred loss is simply too great. PS3 would have to outsell PS2 and it's software would have to substantially outsells PS2's for this to happen. And after one year plus it's clear the PS3 will never reach PS2 sales.

Now if you include blu-ray then it really gets confusing since we really have no idea how much they make off that. Also you have to consider the sales of blu-ray players and even HD tvs that might sell because of blu-ray becoming the standard. All of which is impossible to quantify even for Sony.

Plus John Lucas is right, Sony put themselves into a hugely expensive fight with MS by deciding to aim the PS3 at the exact same market while ignoring Nintendo and the larger audience share. This fight will be a blood bath for them both. Both systems will see quarterly profits in time, but neither will earn a net profit this generation. MS might break even thanks to larger revenue streams, but it'll still be billions in the hole from the original xbox.

One thing I'm feel very confident about. You're seeing the end of the powerful, subsidized, loss leading console. If and when Sony & MS put their next gen system out, they'll ape Nintendo's highly profitable business model. Nintendo has never lost money, not even with the worse selling system. Why should Sony & MS continue to slowly bleed to death? Just so core gamers can be happy? I don't think so.

Nikko Citigroup's Kota Ezawa estimates the games division will lose $1.4 billion this fiscal year, following last year's $2.1 billion loss. And while he doesn't expect the business to be prosperous until late 2009, Ezawa applauds Sony's efforts to shrink the PS3's chips and tweak its design. Already such changes have cut the cost per machine to around $400 now, from above $800 just before it went on sale in November, 2006, he says. (The PS3 with an 80-gigabyte hard-disk drive retails in the U.S.

 

this means they cut making the ps3 buy 400 bucks... so next year expect it to be even cheaper so yes they will make money off their system... with PSN downloads Blu-rays and ps3 games they will. and id say very soon.



Gamerace on 08 January 2008
Dno said:
Gamerace said:
This thread is too long to address all the different arguments so here's my two cents:

PS3 hardware & software, clearly will never earn a net profit. The already incurred loss is simply too great. PS3 would have to outsell PS2 and it's software would have to substantially outsells PS2's for this to happen. And after one year plus it's clear the PS3 will never reach PS2 sales.

Now if you include blu-ray then it really gets confusing since we really have no idea how much they make off that. Also you have to consider the sales of blu-ray players and even HD tvs that might sell because of blu-ray becoming the standard. All of which is impossible to quantify even for Sony.

Plus John Lucas is right, Sony put themselves into a hugely expensive fight with MS by deciding to aim the PS3 at the exact same market while ignoring Nintendo and the larger audience share. This fight will be a blood bath for them both. Both systems will see quarterly profits in time, but neither will earn a net profit this generation. MS might break even thanks to larger revenue streams, but it'll still be billions in the hole from the original xbox.

One thing I'm feel very confident about. You're seeing the end of the powerful, subsidized, loss leading console. If and when Sony & MS put their next gen system out, they'll ape Nintendo's highly profitable business model. Nintendo has never lost money, not even with the worse selling system. Why should Sony & MS continue to slowly bleed to death? Just so core gamers can be happy? I don't think so.

Nikko Citigroup's Kota Ezawa estimates the games division will lose $1.4 billion this fiscal year, following last year's $2.1 billion loss. And while he doesn't expect the business to be prosperous until late 2009, Ezawa applauds Sony's efforts to shrink the PS3's chips and tweak its design. Already such changes have cut the cost per machine to around $400 now, from above $800 just before it went on sale in November, 2006, he says. (The PS3 with an 80-gigabyte hard-disk drive retails in the U.S.

 

this means they cut making the ps3 buy 400 bucks... so next year expect it to be even cheaper so yes they will make money off their system... with PSN downloads Blu-rays and ps3 games they will. and id say very soon.


They'll likely start to realize a profit at some point yes. But the question is a NET profit.  Will they ever make enough money to offset the incurred losses?  The total profit from the PS2 wouldn't have been enough to offset these kind of losses, and the PS3 is no PS2.



 

Entroper on 08 January 2008

I don't think Sony's games division will see a net profit this cycle, but I think with the PS3 being a successful trojan horse for Blu-ray, BR profits will more than offset their losses on PS3 in the long run.



http://entroper.no-ip.org