Breaking News: Sony to post massive $1.7 billion loss

[BengaBenga]

Demotruk said:

BengaBenga said:

Demotruk said:

 

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.

Making a loss is not the same as actually having that as your strategy. Again: Howard Stringer very clearly stated after last year's 1 billion loss for SCE that the only target was profitability for the company.

You can't just stop software projects halfway the development cycle to make them cheaper. These projects aren't lenear progressions. The scale of the games has been decided quite a while ago and they can't change that now. We likely won't see a big system seller for PS3 anymore. The market will progressingly become more casual (because hardcore gamers tend to buy their systems earlier in the gen) and GT5, the one true massivive Sony game, is far too late to change anything, even in the remote case it will release in 2009.

Obviously it's hard to shift recources and to cut, but fact is that they have to do something.