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makingmusic476 on 03 October 2007
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rocketpig said:
SlorgNet said:

1. A single year loss doesn't matter in the console industry, which is driven by long-term sustainability. Sony booked one year of losses, but has earned high profits in the game biz in other years - by contrast, Microsoft has had consistent losses since 2000 (-$6.5 billion and counting) and still isn't turning a profit.

2. Sony's overall margins and earnings are up - way, way up. They sold a few underperforming divisions, but are doing extremely well in TVs, screens and audiovisual tech. The PSP is becoming a huge cash cow, and the PS2 continues to sell well. Sony's vast studio network is producing some stellar games.

3. Sony is not losing money on the PS3. Here's why: electronic components drop in price 30% a year. The Bluray drive cost $120 in Nov 2006, today it's not more than $20. The EE/GS chips will be gone, that's a savings of $27. Total manufacturing cost of a PS3 this November: maybe $450 or so. What this means is that Sony can reduce the price to $499/499EUR for high end 80GB model, and $399/399EUR for a 40GB model. At current exchange rates, 399EUR = $559US. Profits in Europe offset losses in the US (total sales are about the same in each region) for the low-end models, and Sony turns a profit on both high-end models. By November 2008, further cost reduction will drop the manufacturing cost to around $315, making a $299/299EUR model possible.

If the price cut is for real, and all the evidence from retailers suggests that, yes, it's going to happen, things could get real ugly for Microsoft real quickly.


1. Yes, Sony booked one year of losses. Big losses that will only grow through the rest of the fiscal.

2. The PSP is becoming a cash cow? Any proof of this? I'm sure that it is doing well with its current sales but from all accounts, Sony lost a bundle on the handheld for quite some time.

3. Yes, electronics drop in price quickly. Any links to that $20 number for the BD drive? If that's true, why are standalone players still residing in the ~$450 range? And by your accounts, the 360 probably costs MS around $200 to produce now. It seems as if they look to be the ones who could actually start slashing prices at any time by your estimates. They already took the loss for the RRoD, 2007 is a new year with new budgets. People also completely disregard revenue streams such as XBL, which has to be pretty significant for MS (assume 3m Gold subscribers = $150m/year).

I also love how so many fanboys completely ignore the overhead and marketing costs involved with these companies; they're EXTREMELY large. You can't just assume that the straight manufacturing costs lowering means that the company can reduce the price; they have to recoup R&D, various overheads (hosting, labor, CSRs, etc etc), and massive marketing budgets.

In short, if you think that somehow Sony is delivering a deathblow to MS and that they are somehow better off financially than the Redmond giant, you're a friggin' idiot. This is a desperation move by Sony and nothing more. Last generation Sony dictated price structure to Nintendo and MS; this generation, MS and Nintendo are returning the favor and Sony is doing everything they can to keep up.

No one is sure how much the Blu-Ray drives cost right now. However, it was estimated back in April that by June the blue laser diodes, one of the main parts of the drive, would have gone down in cost from $125 to $8 a piece. If true, they would be even cheaper now.

Standalone players are still very expensive for the same reason that they were being sold for $1000 when the ps3 only cost $850 to manufacture back in November. CE manufacturers sell new technology at a profit to make back all the money they spent on R&D. The only reason the players are as cheap as they are now is because Toshiba keeps dropping the price of their HD DVD players in an attempt to counter-act the PS3 effect, so the BDA must react. It's rumored that Toshiba has been subsidizing their players for months now in an attempt to save their asses.  I wonder how long they can afford to keep taking losses like that?

Blu-Ray standalone player manufacturers could easily drop the price on their players if they wanted to, and they will do just that come the holidays, says a top Panasonic executive.

To quote the article:

"Blu-ray manufacturers are going to start cutting prices and go out on a promotional binge this holiday season, Matsushita Electric Industrial's Kazuhiro Tsuga said during a briefing with reporters at Ceatec, a large tech trade show that started here Tuesday."

(Warning: The following rant is not aimed specifically at you. :P)

To begin with the Blu-Ray drive wasn't the thing driving up the price of the ps3. It was a combination of things that were responsible, from the Cell, RSX, and blue-tooth, to any number of other extra features Sony threw into the machine. The RSX was estimated to cost more than the Blu-Ray drive at launch. Take out Blu-Ray and the ps3 would have still cost over $600 to manufacturer, which is why it never made sense to me why people complained about Blu-Ray specifically. Despite it's high cost, I still think Blu-Ray's worth it purely from a gaming standpoint, because it didn't add that much to the final MSRP of the machine anyway. Sure Sony is losing a hell of a lot, but they'll make it back by selling Blu-Ray movies, and we get better games as a result.

I can understanding complaining that the complexity of the machine made it cost so much, but saying that Blu-Ray made it cost that much? BS.