PS3 Shortages Possible, Eating into 360 sales says Analyst

[NJ5]

CGI-Quality said:

NJ5 said:
CGI, that quote from Kaz doesn't mean the PS business is profitable.

He says they have "gross profit", which means that they're only profitable if you ignore costs like employee salaries, advertisement etc. (none of which are considered for gross profit).

So what are you saying, the division, AS A WHOLE, isn't profitting?

No, I'm not talking about the division as a whole, since I'm just going by Kaz's comment, which only relates to the Playstation business.

Imagine you have a software company. You pay your employees to work for 2 years to create a piece of software, and then you manufacture a million DVDs with that software and sell it to some retailers. In this case, the gross profit is calculated by simply subtracting the DVD manufacturing/shipment costs from the revenue, ignoring all the costs of creating the software in the first place.

In the Playstation's case, what Kaz is telling us is that their revenue minus their manufacturing/shipment costs is a positive number. Which doesn't mean the business is profitable, since Sony employs thousands of people in their PS business, not to mention all the other costs like advertisement and outsourced R&D, etc...