Several of those games listed in the OP's thread have been in development hell for 3, 4 or even more years. Surely that would have some effect on their profit returns.

I don't see Sony dropping prices until next summer. They simply aren't in the financial situation that will allow them to do it. So I think 30M sales at the end of next year would be nearly impossible.

My last point, Sony is in this to MAKE money not to simply break even. They have lost billions of dollars on the PS3 and another year of loss will just add to the overall problem they have. Profitability is the only answer, not a price cut. A 500M loss is not something that will be easily overcome and Execs have share holders that they have to account to.

Depends on the publisher. Nintendo charges a big royalty (at least to my retail store). We only make like $10 off of $50 Wii game. So, it'll depend on the publisher. Big games will have higher royalties, b/c they are the most likely to sell.

Squilliam has brought up a number of good points, I'm impressed. Unfortunately though, I fear the question of SCE's and Sony's profit outlook as a whole is going to rely heavily on quite a few unknowables.

1) At what point will the BOJ intervene in the currency markets vis-a-vis the euro and the dollar. It seems most of Sony's currency problems are coming from the (near term) weakness of the euro versus the dollar and the general strength of the yen. The fact that they haven't intervened yet seems to say either A) There was a new "plaza accord"-like agreement between the major economies or B) They are fearful that they already hold to much foreign debt denominated in currencies they have no control over and that they will be the last one's holding it.

Either way they have a history of surprise dramatic large scale interventions in the currency market and there is going to be increased pressure for them to do something as the Japanese economy has tipped back into recession and the government will have little options in terms of fiscal stimulus given the proportion of debt to GDP is already in excess of 100%.

2) Where and in what currency is most of Sony's manufacturing costs. Matsushita (Panasonic) is a terrible company to compare Sony against as they along with Cannon are notoriously Japanese (ie. significant proportion of production occurs in Japan, they still adhere to lifetime employment, and growth is mostly organic). Sony on the other hand is notoriously "American" in that they outsource heavily, employment policies are more in line with international norms, and they have never eschewed mergers and aquisitions as a means of company growth.

For both SCE and Microsoft I would expect most of the components to be manufactured in taiwan or mainland china (by a taiwanese companies operating in china). Now, whereas I know the PRC has allowed the RMB to appreciate significantly (as measured by percentage increase on an annual basis) since the begging of the year, I haven't seen or done any such analysis on the NTD recently. Usually, the taiwanese follow the lead of Japan currency-wise (in many subtle ways Japan still has suzerainty over the place), however these aren't normal economic times.

3) For the PS3 in particular it would be nice to know some staticstics on what Sony thinks it's marginal cost for each unit is. Until you know this and have some idea of what marginal demand is you cannot determine even in an extremely oversimplified, orthodox market model if they would stand to make or lose money and how much. This is complicated by the above average stickiness of prices in this market and the highly path-dependent nature of aggregate demant. The conole market is seems to be one of these markets in which multiple equilibra exist even before you add in the destablizing effects of it's deep supply-chains thanks to above-average irrationaliy.

Anyhow I suspect that SCE decided quite awhile ago that there would be a price-cut coinciding with the large scale production of the 45nm cell and the possibility of a smaller version of the PS3. Since the switchover to 45nm has been delayed until Q1 2009 by IBM the pricecuts are also delayed. Since the rumors are KZ2 is pretty much done, the tea leaves point heavily to Sony saving it to be bundled with the revised console at release. If this is true then KZ2's official release may date serve as a useful indicator for when Sony thinks it's going to have this new revision ready for mass market.

^ sorry there is a such thing as "too long" and that is one of them for me so no offence but I'll skip your post.

 Uh.... normal developing time first off. Secondly of course spending money on games effect profits.... but so does a game not being good and not selling. Third - those are already report in finacials.

Several?  More like two.  Only Killzone 2 and Gran Turismo 5 have been in development near that long.  They've already made back a good bit of money from GT5's development through the release of GT5 Prologue, and Killzone 2 has only been in "full" development for around 3 years.  Throughout most of 2005 and 2006 they were working primarily on Killzone: Liberation, and Guerrilla Games' team size only consisted of ~40 people before they were bought by Sony at the end of 2006. 

They started going over concepts for Killzone 2 around the beginning of 2005 (as shown through the CGI trailer shown at E305, requested by Sony to show off the ps3's technology).   Actual development of the title began around the end of 2005, and they went into full production of the title near the release of Killzone: Liberation.  It was at this time that they were able to begin significantly expanding their team size as well, due to their aquisition by Sony.

They should be making back the money spent on Killzone when it releases in just a few months, anyway. 

February can't come soon enough!

yes, the ps3 has reached price point saturation, and yes it needs a price cut, however, sony needs the ps3 to sell at a profit, to turn a profit in the division. i believe they will not cut the price of the ps3 until you see a profit out of the entertainment division, so if that happens this quarter some time next quarter there will be a drop. whoever, this drop will most likely lead to losses in the division as sells of a ps3 that is sold below cost would do that. they may wait until they are sure that when the cut comes any losses on hardware will be offset by software sales, so small hardware loss per unit... or a very small cut.

what could really help them with this is if japan decides to devalue its currency that could help make a 50 dollar cut profitable to sony. and help the rest of the company in general. japan may be forced to do this, to keep its export sector alive, which is where most of the companies make their money.

so u do admit its the end of PS3........as long as it stays at its current price?

I doubt it, at least not at first, defect rate in early fabs of ppc wafers normally have very high defect rates compared to x86, so it would take a few months to stream line the reduced size chips on the new wafers, also sony has to pay more now for the reduced size then it did when it first entered, since it has sold more rights on development to ibm, the reduced chip size will mean reduced cost but just not as much. wlan, would proably save you 20-30 bucks, and off of a minority of users make more money in the after add ons so really a good idea for them over all there.

honestly they are stuck on cost in a lot of ways, they need ram prices to drop, especially on the exotic stuff, and combining the cell+gpu will be alot harder then combining a standard ppc+gpu, though both will have very high defect rates for months before production is approved. blueray will always cost more then dvd laser... on the bright side they went with a standard size hdd, which is much cheaper then a laptop size hdd that micrsoft uses, so they got that going for them.

it comes down to they have almost cut everything away that they can to cut prices, expect to see the wlan cut, when a major board redesign happens next year. and reduced size gpus, and cpus will help price in the long run. blue ray will continue to get cheaper to make, but any price cut in the next year will most likely (although temporarily) take the ps3 back into a loss per unit. 

its not the end, its price point saturation... much like slow xbox sales early in 08 ... there is demand for it though.... so sales will just be slow until a price drop