I've been wondering just how Sony are managing to lose so much money in their gaming division (I know it includes the Vaio and some other stuff too, but gaming is likely the biggest part of that).

I'm going to take the figures for 21st November, seeing as that is the last full week (hardware and software) we have info for.

If we assume that Sony are losing $50 per PS3 (based on recent statements), that would account for a loss of $17.5 million approximately.
On the software side, a profit of $5 per game will cancel out the loss on the hardware. However, isn't it normally said that the profit margin for the publisher is ~$8-$10, or higher for 1st-party games (~25% of the sales were Sony Computer Entertainment that week, though that would include PS2/PSP). So, by that reckoning, Sony should be making a profit of around $30 million on software weekly, equating to an overall PS3-related profit of $12.5 million per week.
I know that that does not include marketing, but could they really be spending so much weekly that they are losing $100s of millions per quarter (or ~$7.5 million per week, per $100 million loss). Could they really be spending $20 million or more per week on marketing ($1 billion per year?)?

On top of that, Sony should be making a sizeable amount of profit on the PSP (isn't that profitable?) hardware and software, along with the PS2 (which must be pure profit).

How do you reckon Sony are losing so much in their gaming side of the business (not that they aren't suffering overall, but that's a different story). Is shipping not being included by Sony in their 10-20% loss figure on the PS3?

Please discuss, as I am genuinely looking for everyone's input.

I don't think there loosing as much as people think. Its really just a matter of time untill there making some good profits, I think the ps3 is going in to there 4th year , they will make some really good profits soon.

im gonna believe dirkd over sony's financal statments because he makes much more sense

I don't think they're losing money, but they're winning little

Well game projects currently in progress are eating millions away without any return. This would include the teams simply working on firmware updates and updates to the PSN.

R&D invloved in the re-designing of the PS3 and the PSP.

The huge marketing campaigns.

Those are all other possible reasons beyond the simple fact that the PS3 is selling at a loss.

You make sense with the game projects in development, but couldn't we also say that the profit per game now would be higher than is usually quoted, seeing as the game has already been paid for (so you're not paying people wages etc for the game any longer).

I can see the R&D of the PS3 being massive, but surely the Slim wouldn't have been anywhere near the same level (on the basis that new tech didn't need designing from scratch, they already knew what had to go in etc). It would still have been high, yes, but surely not anywhere near AS high as the original R&D.

@RolStoppable: I'll look at some figures from the past year or so, and pretend that the PS3 price was $299 all along and the loss per console $50, so that it would seem closer to what we'll see in the future (in terms of loss/gains per unit) as opposed to what has passed (which is no longer significant in the making money now sense).

How do we even know for sure if they're losing money? they might be and have been making tons of money since the very beginning of the PS3 first out....

Ok, the figures being used here are 28th December 2008 -> 3rd January 2010 (but obviously I only have the figures as far as November 21st, for not even I can see software sales into the future!).

You'll notice the attach rate is closer to 7.5 games sold per console sold during this period (as opposed to the 10:1 in the first scenario).

This gives us a loss of ~$460 million on hardware, with a gain of ~$690 million on software.

This would represent a profit of ~$230 million for the year to date, or a little over $5 million per week. This is significantly lower than the estimated ~$12.5 million per week above, but still a sizeable profit.

Obviously, marketing would be a massive expense, but could it really push Sony $500 million per quarter into the red in the gaming division (the gaming division was about $500 million in the red last quarter, right?). That would mean marketing is roughly $50 million per week, or $2.5 billion per year, which seems very excessive. On top of that, marketing would also have to eat up the profits of the PS2 and PSP.

Now, don't get me wrong. I'm not trying to say Sony is tricking us and is actually rolling around in billions upon billions of dollars (which would be worth like, €25 or so...no, I didn't live out the millions or billions ). I'm just wondering where you guys all think the loss is originating from. Could the shipping be that big (and that is assuming that Sony don't include it when talking about the PS3's cost)? Where are Sony losing such a collosal amount of money?

Your calculations don't factor in the cost of keeping PSN up, resources for game developers, research and development, advertising, etc.

Yeah, I assume that Sony can't just lie and pretend to be making a loss if they are actually making billions of dollars in the gaming division. I've heard of companies hiding losses, but I don't think I've ever heard of a company that is making profit pretending to be at a stage that would destroy most other companies.