Why reports of the decline of the PS3 have been grossly exaggerated.

[cleveland124]

The only ways the currency variations should effect SCE is for operations inside Japan. Staff, production, profits etc that are all paid in yen which has apreciated. Everything else should be conducted in countries outside of Japan. The only componentry I can think of which will be more expensive would probably be those which are sourced from within Japan as well, obviously as they are a Japan centric company it would cost them a lot but I feel its balanced by the sharp drop in component/commodity prices from outside of Japan due to the economic situation. Unless you understand it better than me, I can't see how they would be severely effected by the balance of things. Sure, Microsoft would probably be doing better now as they have no operations inside of Japan to speak of and they too would be happy to take a reduction in Silicon cost as they own the I.Ps and can produce their components whereever they are cheapest.

The problem is two fold. A. Most games are developed 90% of the way in Japan, and then local Sony of America localizes/regionalizes. So most of the cost is still incurred in Japan. B. Even for operations outside of Japan, Sony was already losing money. So they would have to cut costs greater than the drop in currency rate just to try and get back to break even.

I'm not happy with what Sony is doing but I understand it. The Wii is the thing everybody wants. Between Xbox and Sony, Xbox had a year head start. Then Sony was chipping away at that lead for the next year. Then Xbox finally became the thing to get again.

Sony is banking on the economy getting worse in the short term. They are saying, we are not going to cut our price and fight for the scraps that are available now. We are going to stay profitable (or as close to as possible) during this tough time. Then as the economy recovers, we'll drop our price and swing momentum to us while Xbox has already played the price card. They are hoping that when momentum swings towards them the HD market demand is higher than it is now. So Sony is essentially saying we are sacrificing short term competitibility to be better in the long run.

Will it work? It depends how much momentum the 360 is able to build up in the short term, but this war is far from over. Except for the Wii which will continue to put up PS2 numbers irregardless of the HD market.