Breaking News: Sony to post massive $1.7 billion loss

[Demotruk]

BengaBenga said:

Demotruk said:

BengaBenga said:

Demotruk said:

 

Agreed, though I only think we'd say that because we'd not have taken an in depth look at the division if we weren't a gaming forum. They've been unprofitable by trying to win the generation, and because of that, most of their losses are already sunk and will never be returned. However, it's a division that can be switched over to moderate profitability in the short/medium term more easily than the other parts of the company.

All they have to do is admit defeat in the console war(internally). Once they've done this, they can switch focus to simply short term profit instead of loss-leading. How do they do this? No price cuts, and profit focussed software as opposed to unprofitable "system sellers". This doesn't require the restructuring that the TV's and other areas will require.

Ehm, how? And why does SCE suddenly will outperform the rest of the company while it has underperformed past years?

All I see is 3 years of losses in a row. Doesn't look like a division that can be switched to profitability very fast. If it was easy it would definitely have happened this year, since that was the main message from last year.

As it stands now PS3 won't have a pricecut therefore will likely lose marketshare and it's very probably the rising PS3 software sales won't keep up with decreasing PS2 sales. Meanwhile SCE has an infrastructure built around marketleadership. Sony has more studio's than Nintendo, which is unsustainable with PS3's development costs and low install base.

 

 

And in that time they've maintained a loss-leading strategy. Of course they've made a loss.

The reason I see this division as more flexible is because it's more based on software than the others. It's much easier to switch strategy in software than it is with hardware.

Stringer made it absolutely clear that SCE had to make a profit this year, so they didn't have a loss-leading strategy for this year. Yet they made a loss.

Software development in Sony's case is not flexible at all, because

a) Their userbase is out of their hands
b) Big AAA projects take 3-4 years to make (or longer...GT5...) 

When all these massive first party projects started Sony's estimates must have been much higher than what the PS3 actually sold. But you can't cut the budget for big games like GoW3, GT5 and Killzone 2 halfway through the dev cycle of course. This doesn't mean these games will make a loss, but profit margins will be much lower than initially expected.

If they were to do a Sega your statement becomes more valid, cause they could spread the risk around several platforms and distribute investment among different sized project. Sony bet big with AAA mega games only, which hurts them now.

 

While they're still going ahead with long cycle projects, they're clearly still practicing a loss leading strategy. It might seem like blasphemy, but they could reduce the budget and cycle of those games, get them out the door and sell them. The only reason they're not doing that is to make the game so awesome that new people will buy PS3's, a strategy that has been failing them so far(even MGS4 was not a sustained system seller as it was hoped), which is part of a loss-leading strategy. If they reduce the cycle and budget of these games, they will likely make more profit, and will be able to begin smaller, more profit oriented projects sooner.

If it's difficult to shift programmers and artists etc. off software projects, it can only be harder to shift factories and hardware designers onto new and more profitable phones/tv's/other electronics.