WereKitten said:
HappySqurriel said:
According to Sony's own numbers ( http://www.sony.net/SonyInfo/IR/financial/fr/08q4_sony.pdf ) the operating loss of the gaming division for the year that ended March 31st 2009 was $529 Million ...
I think that it is reasonable to assume that the PS2 and PSP in hardware and software sales are (at least) breaking even, which would imply that after software sales were considered for the PS3 Sony was losing $50 for every console they sold. Even if Sony was profitable at this point in time on combined PS3 software and hardware sales, their numbers alone tell me that they're (probably) still losing a lot on each PS3 they sell.
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Isn't this naive? I mean, you assume that game division=PSP+PS2+PS3, thus if PSP and PS2 are breaking even, then each PS3 is causing a loss?
Actually we know that each PS3 is sold at about $40 loss, thus it brings profit with software and accessories. Hey, if I assume that PSP is breaking even, then it must mean that the PS2 is losing them a lot of money!
But in reality the game division finances are probably weighted by fixed expenses, needed to keep up the whole personnel and service infrastructure, and by development expenses for things like the new digital distribution on PSPgo etc. Some of these expenses can hardly be split cleanly between the consoles: where do you account the PSN or the PSP/PS3 integration? What about the PS3/Mobile one?
The most likely reality is that all consoles at this point are profitable when you combine hardware and software. They're just not profitable enough to cover structural and R&D expenses, with the exchange rate of yen and the declining sales of the PS2 line being the main culprits. Saying that "they are losing a lot on each PS3 they sell" looks like the result of simplistic and wrong deduction.
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Operating loss in Game improved 66.1 billion yen year-on-year to 58.5 billion yen. This is mainly due to an improvement in the operating performance of the PS3 business brought on by PS3 hardware cost reductions and increased sales of PS3 software. Here
Despite software and accesories, the division is still losing money, although less from the previous year. The software is not going to meet the gap.
The death spiral that was posited in the OP is not going to happen in this case, simply because the PS3 and Xbox 360 support each other. By which I mean, developers don't make Wii, 360, and PS3 games - they make Wii games and HD games, both of which they have 50m customers for. The current shift toward Wii development is simply a shift toward the equal balance Wii deserves, because as well as it is doing, it's nowhere near well enough to blow the HD twins away (in fact, it's not even beating them overall, which the PS2 did easily).
The moral of which is, as a Sony loyalist, I say: HOORAY FOR XBOX 360!!!
You've got it backwards. Microsoft is out to KILL Sony. Their whole goal is to stop and destroy the Play Station brand, and they are doing a good job thanks to both over shooting the market. Games on both consoles brings no benefit to Sony. It helps the third parties because it allows them to sell to more users. It helps Microsoft becuase it is stealing games from Sony, meaning they can one-up them. It is hurtful for Sony as they do not get the leg-up on Microsoft and lose out on some money from software were it exclusive. Also, Mircosoft is out to lose money on this adventure, so they will sell the farm to kill the Playstation. The buying exclusives has probably been a thorn in Sony's side becuase it makes it harder for them to hold onto exclusives without spending money the division does not have.
The death spiral will inneviabtly happen. It was stalled by the fact that 3rd parties can produces games for both consoles, peventing austronomical loses. The Wii is tracking above the PS2, so expect third parties move to the Wii as the gap grows. Don't forget that winning consoles have long lives where losing consoles have short ones.
