Is the PS3 a success?

[Alby_da_Wolf]

crissindahouse said:

Alby_da_Wolf said:

[...]

Yes, strong Yen and tsunami are huge problems. Luckily, though PS3 isn't losing mone anymore, but the "Business Segment" including it and other products, like TVs, does, and it loses a lot of money. Sony stated PS3 HW stopped losing money in Spring 2010 (WW average, it did it sooner in EU and later in USA), but the losses accumulated until then are huge and after the last price cut profit margin must be again very thin. PS3 previous losses are now blurred in the overall bigger one of "Consumer Products and Services", the "Business Segment" of which "Games", that includes PS3, gaming peripherals, games development and publishing, etc, is a "Product Category" (and not a Division anymore if Sony ever called a Division with this name, while smaller Business Segments can be equivalent to single Product Categories and larger ones, like CPS, include more Product Categories). Currently PS3 isn't losing, despite the strong Yen, but weak Dollar and Euro and price cut reduced its revenue, and obviously profit too. Sony anyway clearly admits strong Yen is jointly responsible with many other factors of the huge current losses of CPS business segment. In particular, strong Yen and fierce competition forced Sony to cut TV prices below profitability.

http://www.sony.net/SonyInfo/IR/financial/fr/11q2_sony.pdf

The biggest trouble for PS3 is that now it must not just help recouping its past losses, but that with the crisis of Sony's TV business, it must help balancing the other products losses too, but as HW price needs to stay competitive, its profit margin won't ever be higher than a few tens $ and Sony will have to keep on counting mainly on SW profits.

It's quite obvious next gen Sony will have to absolutely launch at breaking even or at worst small loss price, HW becoming profitable later than two years after launch is clearly unsustainable for more than a gen, while the razor-blade model can give huge profits only once the installed base is huge too (edit: and if the "razor" losses are a lot lower than "blades" profits)

do you have numbers that they made money with the ps3 in 2011? i know they started making money in 2010 but like i said i don't know if this will be the case in 2011 with all the hacker problems and other shit.

not that i don't believe it when you know it but i didn't read anything about the ps3 win/loss situation for 2011. i just heard soomething about the hacking costs and tsunami costs but tsunami was for whole sony no clue if this was bad for ps3 as well.

Not profits and losses numbers, because in the financial statement they declare just sales for the single Product Categories, while they group profits and losses in different tables of the balance sheets, but in the financial statement Sony clearly states that:

- floods harmed mainly CPS and PDS income, as production in some plants was temporarily halted (page 10 of the PDF I linked)

- unfavourable exchange rates affected revenue of many Business Segments (this is stated in various pages in different contexts)

And this confirms what both you and I wrote and at least agree on a minimum basis, that those factors negatively affected the whole Sony business overall, independently from what's losing or just profiting less.

Specifically regarding CPS Segment (the one including Games Product Category):

- Sales decreased 12.3% year-on-year (a 7% decrease on a local currency basis) to 779.7 billion yen (10,126 million
U.S. dollars). Sales to outside customers decreased 12.4% year-on-year. This was primarily due to a decrease in
LCD television sales, reflecting price declines due mainly to deterioration in market conditions in the U.S. and
Europe and unfavorable foreign exchange rates, lower PC sales reflecting price competition, a decline in sales of
the game business, reflecting a strategic price reduction of PlayStation®3 hardware in advance of the year-end
holiday season, as well as a decrease in sales of compact digital cameras resulting from lower unit sales due to a
slowdown in market growth and unfavorable foreign exchange rates. (page 3)

- Operating loss of 34.6 billion yen (449 million U.S. dollars) was recorded compared to income of 1.0 billion yen
in the same quarter of the previous fiscal year. This was primarily due to deterioration in the cost of sales ratio
and a decrease in gross profit due to lower sales, partially offset by a decrease in restructuring charges. Categories
contributing to the deterioration in operating results (excluding restructuring charges) include LCD televisions,
reflecting a decline in unit selling prices that exceeded cost and expense reductions, the game business and PCs,
reflecting lower sales as noted above. Operating loss included additional LCD panel related expenses resulting
from low capacity utilization of S-LCD as well as the above-noted asset impairment of 8.6 billion yen (112 million
U.S. dollars) associated with LCD television assets. (page 4)

In the quoted parts you can read that all the main products, LCDs, Games, compact digital cameras and PCs contributed in general to bad results due to lower sales (meant as lower revenue from sales, the sheets don't mention units sold, just money), but only for LCDs it's specified that they were forced to cut prices below profitability, so generating losses, while it clearly specifies that PS3 price cut caused lower sales, it doesn't say losses. In the second paragraph quoted it says profits decreased (obviously it must be referred to products that previously profited and now too, but less than before, you don't just say "profits decreased" if they were totally erased and turned to losses too), while only for LCDs it explicitly states they are losing.

Anyway, as I wrote, the fact that PS3 shouldn't be losing, but just profiting less, doesn't deny the fact that Games Category is surely suffering at least indirectly, as it belongs to a Business Segment that is suffering heavy losses. Whatever the cause, not being independent from the losing Categories, Games is in some troubles. This said, Sony must push them and all the other products that at least aren't losing, as much as possible to balance the losses caused by LCDs.