NTDOY analyst article with interesting historical data

[Sullla]

Nice find. Here was my favorite section of the numbers...

Sony’s most profitable video game years were 1998 and 1999 when it reported profits of $950 million and $1.1 billion, respectively. On a relative basis, the video game segment of Sony’s business reached its zenith in 1999 when it accounted for 40.3% of Sony’s profit. For the last eight fiscal years ending in March 2007, however, the income earned by Sony on its video game business has been less than stellar. In fact, from 2000 through 2007 Sony’s video game business combined profit was only $920 million on combined sales of $57.3 billion, a gross margin of only 1.6%.

In other words, Sony had its most profitable years back during the Playstation days, when their product was not being sold at a loss. Even at its zenith, the PS2 - which sold far more consoles and software - still didn't make as much profit. And a gross margin of under 2 percent for the last eight years combined - ouch. That is not a lot in the business world. Granted, those numbers looked a lot better before the release of the PS3, but still.

Do we need any more proof that selling consoles at a loss is a poor strategy... I'm more convinced than ever that this is simply a losing business practice.