A Sony exec for the PAL territories dropped a big hint recently as to when the company expects to break-even with the PS3 business. The exec also dispelled rumors of a pending price drop despite the current financial crisis. According to the executive, Sony is on track to breaking even sometime in 2009.
I wrote a story back in October where I stated that Sony was indeed very close to breaking even, after studying the company’s financial reports. If you read the story here, you can see that some of our readers accused me of making “unsupported speculation.” Even though I clearly pointed out that the financial report indicated a reduction of 60% in operating loss.
When a company reduces operating loss by that much while software sales have been comparable (shift from PS2 software sales to PS3 software sales) you can bet that the company is very close breaking even by reducing manufacturing costs. According to MCV, SCEE President David Reeves stated that getting the Computer Entertainment business back into the black after two years of reporting losses is their top priority.
He also indicated that despite rumors of an imminent price drop, it will not be happening anytime soon. Reeves said that the company will focus on providing a more value added package rather than drop the retail price of the system.
“As soon as we got the manufacturing price down on PSOne we lowered the price. Same with PS2. But we’re not doing that on PS3 – that’s not the model, even if people are expecting it.”
The reason Sony won’t be reducing the price as soon as manufacturing costs have been lowered is to reach parity with a break-even cost of manufacturing. If Sony constantly reduced price as soon as manufacturing costs have been lowered, the company would never break-even.
However, once the break-even point is reached, the company can start aggressively competing with price. Reeves stated, “Next year we are probably going to be a little bit more aggressive when we reach the break-even point.”
Reeves also indicated that the PS3 is currently outselling the Xbox 360 by 300k units in Europe. Considering that the PS3 launched 16 months after the Xbox 360 in Europe, that is an impressive feat. It is too bad for Sony that the marketing team in the U.S. hasn’t been as competent.
http://gamer.blorge.com/2008/12/04/sony-to-break-even-with-ps3-in-2009/
http://www.mcvuk.com/news/32597/Sony-Were-ahead-of-Xbox-in-Europe
