@Rainbird

I do not see buying another studio or studios as necessarily a good move. Buying studios is an expensive way to get a handful of exclusives, and even then it isn't necessarily a sure thing that the majority will generate console sales. It seems like a case of diminishing returns. I am also not seeing money hatting third party exclusives as a particularly good strategy either. All that might do is cause a bidding war. There is some room for it in the market, but too much of it could cause a rush.

However software is probably the best option for Sony. Just not spending the money outward, but pouring it inward towards Sony Online Entertainment. This is a underutilized positional advantage they possess. So in this case it would be less about matching a position, and more about enhancing a position that the other players aren't in a position to exploit themselves. Sony even has architecture in place thanks to Home. Granted it wasn't a run away success, but that doesn't mean the concept isn't sound. They may even find a answer to World of Warcraft or Eve. In which case they could generate significant cash from subscriptions. There is a real opportunity there, and even without billions of dollars there is still an opportunity here. None of the other manufacturers are in the field so it could be a serious library advantage.

Anyway thank you so much for answering.

Before the spat of 'crisis' Sony was actually considered on the mend. It was expecting to report a profit for the quarter and possibly for the year for the first time in yoinks. The setback is severed but temporary. If Sony continues to improve upon their marketing strategy and thin their portfolio as per Stringer's mandate, I'm fairly certain they can ride this rough patch to a better performing future.

@mibauokami

Whether the strategy will ultimately work out for Sony is somewhat irrelevant. Right now the situation is what it is. I suppose you may be arguing future prospects may justify some verbose design choices, but that isn't exactly a safe coarse of action. Which is the crux of what I am saying. Without the large influx of capitol Sony generated prior to the launch of the PS3 the company would have become severely over extended on the up front losses. To go at it another way they sold a lot of things to have money to bring their console to fruition.

Sony has insinuated that they were not happy with what transpired financially, and do not intend to have a repeat of what happened this generation. Where they felt compelled to loss lead into a massive money pit. That said they are not exactly going to be acting in a vacuum. If the other two competitors through their choices move the field then Sony may be compelled to oblige. So in the final analysis instead of the hypothetical sale now, it could be a real sale just prior to the next launch, or after the next launch depending on what happens.

I am just interested in the hypothetical sense what the money would mean sooner rather then later. In fact it may lead to better decision making if it comes earlier in the development cycle. That could give Sony more control over its own strategy. Better to be acting rather then reacting.

It wouldn't surprise me if Sony sells off some of it's self, obviously the question is what and what they would invest the money in?

If they were intent to not repeat the last generation why are they going to sell the Vita at a loss?  They just seem to love to put so much hardware/specs into their machines now that they have to sell them at a loss to be price competitive.  Selling systems for a loss isn't the smartest business move and especially if you are selling at a loss and still out of most consumers price range (PS3 launch).  The "hardcore" graphic whores seem to be leading Microsoft and Sony to failure.  If they always demand the latest specs how can these companies survive by selling their systems at a loss just so the average consumer might buy into it.  Sony used to be able to take huge losses due to their capital but not anymore. 

To make one more point even during PS2 heyday Nintendo was making more profit than Sony (although Nintendo had handheld sales while Sony didn't at that time). 

@sethnintendo

A business strategy is only good or bad in reference to the current situation. Loss leading is a very old strategy, but I think you need to see it in practice outside of gaming to grasp this. What exactly do you think promotional sales are in retail. They are items sold at a loss or a insufficient margin. It isn't that the seller is expecting to make money on this item. They are banking on making money on other items you might buy, good will generation, or simple market dominance to reward the up front loss. You cannot really argue with the effectiveness of this strategy, because it is a standard practice for a reason, and that is that it works.

Granted there are situations where loss leading isn't the best strategy. Like with any strategy it must be viable in the given economic climate, and it must be implemented properly. This generation Sony poorly implemented their own strategy, and came out with mixed results. Microsoft used the same strategy with very good results. Nintendo who followed a straight profit strategy probably had the best results. That said in previous generations that strategy wasn't necessarily a blessing for Nintendo, because it placed them in a bad market position. Being profitable doesn't really matter all that much if in the end you get forced out of the market, and thus close off your opportunity.

Which brings up a valid point, and this needs to be said. Nintendo isn't speaking about courting hardcore, and core gamers for no reason. Which is the market Sony and Microsoft are catering towards. Nintendo was able to survive with its out of the box profit model due to customer retention. Loyal customers overlooked what was offered on the basis of past experience with the brand. Without that their previous console could have been their last. It was thanks to this loyalty that they were able to reach a critical mass. This is part of the mistake that Sony made this generation, and they have seen how fickle consumers can be if they feel betrayed.

Sony is in a difficult position when it comes to this strategy of that there is little doubt. Microsoft on the other hand has shown itself to be quite effective. The difference is they worked a better starting position, and they have a far more robust tail end. This means the strategy worked out well for them. While it worked out poorly for Sony in a final analysis. Regarding your argument against this strategy all I can say is your well meaning, but entirely on the wrong point of reference.

Consoles are consistently becoming more uniform. Unlike previous generations where consoles had some rather obvious differences. So we are approaching a point where face to face power comparison is going to be far more crucial. When you cannot be radically different. It becomes that much more important to be technically better, or at least on the same level. If anything the expectations are creating pressure to match performance.

There is a lot of ambiguity regarding what has been said on the profitability of the Vita. Personally I think that this interview makes it clear that the Vita is going to be profitable much sooner than after three years, which would mean that while they may take a loss, it's nowhere near a PS3 kind of scenario.

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IGN: Most everyone was surprised by the $249.99 price announcement, including a lot of third-party publishers. How important was it for Sony to get to that point and will the company make a profit on the console sold out of the gate? 

Yoshida: At the very start of this project a bunch of us core members went to Japan and spent a day discussing what it is that we wanted to achieve with the new PlayStation portable device. One of the goals was to hit the right price point, which was actually $250. So at the very beginning we agreed that we're going to hit $250. But during that time we were still recovering from the difficultly we had with the high cost of goods with PlayStation 3 where the company lost a lot of money. We asked consumers to spend a lot of money to purchase what, at that time, was bleeding-edge technology. That was great from a technical standpoint but the technology has to mature enough so that a reasonable price can be put on the performance. 

For Vita, the price on performance was something we definitely wanted to hit, although we all agreed because we are PlayStation, people expect better graphics and prettier pictures, so we have all those things we wanted to achieve in terms of capabilities, but we capped our ambitions with a cost of goods target that we can profitably sell the hardware for $250. 

To answer your question, we set out a goal: Yes, we're going to hit the $250 price, and no, we don't want to sell the hardware with a deficit. That's a goal we set out to do and I'm very happy we are achieving that. 

IGN: So you're going to be profitable with each Vita sold? 

Yoshida: We haven't completed the hardware development. It's like 98-percent done in terms of hardware, and on the system software side and network code, we have a few more months to work on that. We don't have the final-final answer to that question, but the way we are projecting it seems like we're going to do pretty well. "

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@ Dodece

Buying a new studio is indeed a big bet, and making contracts with second party developers might be a better tactic. But compared to the sales of the Wii and Kinect, Sony desperately needs a killer app that can draw in a wider audience if they want to have a share in that market. Not to mention that Sony finds its first and second party games important to the continued success of its platforms, as it has shown previously through contracts with developers, buying developers and giving great creative freedom to its studios (as freedom to create the games they want, would certainly entice developers to seek Sony as a publisher).

And a bidding war could happen, but Sony have already lined several small exclusives up from third parties in the form of DLC, not to mention Sony's history of timed exclusives. If SCE does get 2 billion dollars dumped in its lap, trying to attract more third party exclusive content doesn't seem out of the question to me. Or maybe they would seek to entice independant developers to create games for them.

I do agree that SOE would be a great option for investing some of this money into. I think the first move should be to integrate SOE more into SCE as a whole, because it is a bit too self contained, considering that it's making games, including for Sony's own hardware. It shouldn't damage SOE's potential for developing PC games though, but I think making SOE more involved with the World Wide Studios will help them produce better games, although they might need some new blood before it happens. They haven't been that successful lately after all.

And you're welcome.

@dodece, points taken. I find Sony to be in the most difficult position regarding home console systems. Sony still easily has an opportunity to take back the market. I believe if they release a system that is comparable to Microsoft's next generation in specs and price then they will at least surpass Microsoft. Microsoft is only leading them because of a head start and the abysmal PS3 launch. It almost seems like Sony is at the point of which GM was (just not as bad). GM used to be the sales leader but then they got sloppy, relied on gas guzzling SUV/trucks and their lineup basically went to shit. They had to do major revamping just to get their product in check with consumers. Sony needs to take a hard look at itself and make some changes. I am sure they are a little less cocky now than they were right before the PS3.

@rainbird, looks like they are actually following a decent business plan in regards to Vita.  They have learned their lessons and it looks like they have gotten their hardware cost in line with the price they are selling it for.  It isn't terrible to sell a system at a loss especially if you become market leader.  However, you can't sell your system at a 100-150 loss and have the price range still out of consumers.  Looks like Sony is getting smarter which means more competition.

Of course Sony cannot repeat a PS3 fiasco. The loss this gen Sony expirience was staggering, what I'm explaining is that the current financial report is an exceptional circumstances and cannot be considered the norm when doing future projection.

Sony expirience its worse lost in 16 years, with the biggest contributing factor being the Japan quake. (which would have been much worse if Howard hadn't started Sony on the globalisation of its industry). Before Stringer step onboard Sony's manufacturing was almost all centralised in Japan, it now outsource gobally more than 45% of its manufactoring. It's mobile phone and gaming division both began turning profit and its sale in TV increased by 44%.

These aren't the signs of a dying company, nor is their a threat of bankruptcy due to liquidity risk. They're hurting, and hurting bad, but there is no mandate to selling a portion of there business. Especially since they are pushing 3D tv so hard recently and the leverage that comes from being a big motion picture studio.

Given the above, I don't feel that a 2 billion dollar windfall for SCEI would be much fo a strategic asset at all. Their studio lineup is the most plump out of all 3 console manufactorer, they retain a fairly diverse core audience with appreciation for all genres and they are a global brand with stronge link to many country that MS cannot reach due to the stigma of being an 'Amercian product'.

What Sony lacks at the moment is an attractive service, they are too hardware oriented and came into the service side of the console bussiness late when compare to Microsoft. This is not something you can just throw money at and see result. This requires strategic thinking and empathy to target audiences, something Sony seems to always hit and miss.

Give the 2 billion windfall something more needy. The game  division has finally began working right again in the past year.

@miboukami

Sony is responsible to its share holders, and as we all know investors aren't necessarily long term thinkers. When the value of their stock falls it is their bottom line that is impacted, and they do not necessarily have the luxury to simply wait troubles out. So if anyone is going to issue anything like a mandate it will be them if they begin to dump their stock management may have to sell off assets to reverse the overall financial perception of the company.

The gaming division being profitable right now is to be expected. Now if Sony gaming weren't making money at this point. I would argue vehemently that Sony should cut its losses and sell the division, or leave the hardware market, and become solely a game developer. With no large hardware introduction costs, and with fifty million consumers buying games that provide licensing fees to Sony. There is absolutely no excuse to not be profitable. This is simply the golden period during a consoles life. This is where they should be making good money.

That however is not the issue. The measure of the division is how it fairs in the upcoming launch cycles. That is the period of time where risk is highest, and profit is at its lowest. Your arguing that the boxer that just lost a round is in good shape, because he is sitting in his corner. Well obviously he will be doing well if only, because nobody is punching him in the face. Even though Sony is getting a breather it doesn't change the fact that it needs to find a way to win the next round, or at least avoid getting knocked out. Sony spent a lot of this generation on the ropes, and some better conditioning before the next round can only be a good thing.

@Rainbird

In regards to Sony Online Entertainment. I strongly agree with your sentiments about new blood being seriously needed. The problem goes beyond poor acquisitions which is almost always a question of plundering studios that are basically roadkill. The management is either treated with indifference, or outright disdain due to its conduct. They have alienated a legion of gamers in their core market. So it makes the concept of integration almost a case of poisoning the waters. I am constantly dumbfounded why Sony hasn't already canned the management given that it would actually generate positive public feedback. Just canning the management would likely stimulate a jump in profits. Anyway they need to restore the reputation before integration becomes a positive, and the only way that reputation will be restored is for the developer to put forward at least one good massive title into the market.