@DKII: fair enough, lets say they actually loose money on the PS3 at this very moment (past numbers set aside for the sake of argument) since it very likely they do. Unfortunatly there is 0.0 real evidence in the form of official numbers, but I agree with you, they must loose on their consoles. How much do they loose on a unit and how much do they make on others. Do they at all? Does high revenue immediatly equal high losses or do potential wins on PSP and PS2 make up for it?

I adknowledge your argument, if Sony loses a lot of money on the PS3 then high revenue means high losses like someone of Sony once said himself if memory serves me right. The argument just holds no ground if losses on the PS3 are small and Sony makes a decent profit on the PS2 and PSP.

@ Bdbdbd and Sullla: I never said that Sony didn't invest in R&d. It's just possible that Sony already invested a load of money in previous quarters (nice taxes trick I might add) into research and now simply don't have to invest that much anymore. Speculative you say? Ofcourse it is, but it isn't very unlikely. I just noticed FishyJoe mentioning that Sony has a bad track record for making realistic projections. Is that speculative? Yes, ofcourse. Assuming that a company does something based on previous behaviour, where that same company has also shown many examples of doing the exact opposite is as speculative as hell.

That just leaves my speculation on what Sony did to make a 2 billion loss last year. Most of that money was spend on getting sufficient supplies for the PS3. Let's assume that Sony made just 1.5 million consoles with a manufacturing price around 800 dollars. That alone already makes up for 1.2000.000 dollars. Add gamedevelopment, R&D, producing the new PSP (they were already busy with those then), advertising and so on. There have also been numerous rumors that the losses made by Blu-ray were thrown in to the game division.

I think we are going to see some pretty good figures from Sony this time around. They are most likely to make a loss this time around, but I think they are starting to turn around profitwise and this may have been one of the last bad financial figures we'll see from them in a long time

@Fishy, I'm not being crazy xD, someone pointed out a while ago that at the start of production, it was 800+ to produce, and they only sold for 600 and 500, that was way more than they are losing now, the 40g is assumed to be about break even point, and I'd say so is the 80g. Say they take another stab at they're wallet, and drop the PS3 to $299, NOT SAYING IT WILL!!! BUT IF!!!, do you think they could reach their target goal? I think so :P

@mesoteto, they do in fact have many units sitting on shelves, but Sony also ships the least ammount to my knowledge. If they haven't been flooding the market, then production values woulden't affect their overall plans of a price drop. It would be a minimal hit. Sony knows MS will be bringing price drops this year, don't assume a price drop is not an option. They've made some pretty drastic moves before no? 

chrono where are these reports that they are breaking even on the 40 or the 80 currently?

Oh I have no idea on that one, I don't research this stuff, it's been talked about numerous times on VGC though, and people have brought up articles about it. I just assumed that since that quote in particular has been debated over numerous times that we all just came to the conclusion that they are close to break even.

[edit] and wasn't their something recently which said Sony cut it's production cost in half? If it started near $800 I believe we can speculate at this point o.O 

This is probably the crux of the difference right here; your position is that Sony is taking minimal losses on PS3 sales, while PS2 and PSP numbers bring in enough revenue to offset those losses. I see the PS3 as very, very far away from profitability at the moment. While I don't have proof of this, here's what we do know:

• Sony was losing $250 on each 60GB and $300 on each 20GB console at launch (Nov. 2006)
• Sony has since cut prices twice in America, once in Japan and Europe, and introduced many software bundles.
• Sony has lost money in every single financial quarter the PS3 has existed, often very large amounts. Total losses in the "PS3 era" are over $3b already.
• Sony stated that they "hope" to achieve profitability on the PS3 by the end of fiscal year 2009 (Mar. 09), but refuse to guarantee anything. 

Offsetting this, we have:

• Independent (non-Sony) analysts stating that they believe Sony is close to or breaking even on PS3 sales.
• Value speculation and theories from forum members.

I believe that the circumstantial evidence strongly suggests that Sony is losing money on the PS3, and is not close to profitability. I will be happy to change my stance as soon as their financials demonstrate a turnaround, of course.

OK... what? First of all, I'm curious as to what exactly Sony was researching to cause such huge losses in the first two quarters of this year if it wasn't the PS3 causing those losses. (R&D on the PS3 clearly did cause most of the losses in the previous fiscal year.) It couldn't cost that much to redesign the PSP, right? I can't imagine that a new PS2 model would result in gigantic expenses either. I think it's enormously more likely that the underperformance of the PS3 caused the bulk of those costs. (Remember, Sony initially expected to sell 5m PS3s by March of 2007, and then another 11m [16m total] by March 2008. They only actually sold to consumers less than 3m by Mar. 07, and they're clearly going to miss their Mar. 08 target by millions and millions of units.)

The boldest sentence just makes no sense. Assuming that a company will generally follow previous behavior is a rational and logical way to approach the situation. For example, if Sony has posted six consecutive quarters of losses, it is likely that they will follow with a seventh. It is not guaranteed, of course, but I would need a compelling argument to break with the prevailing trend. Since none of Sony's platforms really lit the charts on fire this past quarter, I'm going to stick with the past numbers on this one.

You are correct that most of Sony's gaming losses in fiscal year 2007 came from R&D on the PS3. However, your accounting (bolded above) is not the way that companies usually handle inventory. When manufacturing PS3s, Sony doesn't include the cost until an actual sale is made. That is, they record a one-time gain (or loss) at the time of the sale, instead of an $800 loss at the time of production and then another $600 profit at the time of sale. Unsold inventory is usually listed as assets in financial reports. Most of the Q2 2008 losses from Sony came from their unsold PS3s (listed as $600 assets in financials) being marked down to $500 assets during the first price cut in July.

In other words, Sony doesn't have some huge backlog of losses that are now being turned into profits as units get sold. If you are expecting some kind of miracle out of the blue like that to turn Sony's gaming profits around, sorry to disappoint you.

I guess we'll see, won't we? That's probably a safe prediction, since Sony's gaming division has nowhere to go but up. If they keep slashing prices in a desperate bid to gain marketshare, however, profitability is NOT going to increase. Sony will have an interesting choice to make in that regard: accept a minor position in the market and try to achieve profitability, or spend spend spend in an attempt to sell more units. I know which of the two most fans on this site would like to achieve - but they aren't the ones getting paid to make decisions. Long-term, I'm more pessimistic on Sony's financials than you are. If they couldn't turn much of a profit with the PS2, which had over 70% of the market, how are they ever going to break-even with the PS3?

Nice discussion. Best wishes.

This is going to take ages to reply to, but here it goes anyway.

I was trying to point out that money lost on the first batch of consoles don't necesarly mean they lose the exact amount of money on current consoles. Losing 250-300 dollars on a unit may have been relevant back then (if those numbers were correct anyway, they were speculations even then), but they aren't now. For all we know, Sony has been making money on them or atleast cut down on their losses immensly. Sony is a company that has been around since before the second world war and I doubt it will start throwing all of it's money away right now.

Sony has indeed lost money on their gaming division for a few quarters now but that doesn't mean this quarter will automaticly be the same. Sony's structure is way too complicated to just assume this based on a few quarters with very little info. Of course the same can be said about my argument.

I think it's fairly obvious I agree with the independent analysts.

Apart from redesigning the PSP slim&lite and PS2 (they put the powersupply inside the PS2 and that one will be announced for 99,- soon) they also invested millions in (exclusive) games and advertizing them. I honestly believe that Sony simply invested millions of dollars at a time that their gaming divisions lossses didn't affect the overall profit of sony as a whole too much. Sony as a whole did make a great profit this last year and having a bad division as a tax writeoff never hurts.

I'll add some more tommorow, but I have to go for now. Great discussion.

sooo... the company with the largest gross revenue and quite possibly the largest net deficit is somehow winning?

Ummm no. That is not how it works.

@Thetonestarr: I wasn't asking what sources do you have for the data that can be found on VGC. I do see thd data accurate enough, there's just the error marginal that you should keep in mind.
The reason why i asked, was because if you have manufacturers numbers, it's easier to know what exactly they are meaning.

In order to count bundled software separately, you need to know its value. Of course, it's easy to determine when you have hardware bundled and not bundled. But even then, the amount of money that flows for the publisher is not known, unless you have specific details.

@Gazz: I believe you're mixing Sonny with Service Games and if i recall, neither did start before WW2.
Anyway, it really doesn't matter how long have the company existed, since what matters that can they change while the market changes and remain profitability. Of course, the longer the company has existed, the more changes it has lived. For example Sonys TV production didn't actually live thru the change in the market, Philips' electronics production didn't live thru the change, Segas console manufacturing, etc. But all of these companies/units still exist because they could change.

But back to the topic, Sony isn't going to throw their money away and that's why they are investing in R&D to make profit eventually.

Sony really has been able to cut the costs of PS3 manufacturing significantly. And gaming divisions losses were lower than expected in Q2, due lower than expected sales of PS3, so if the PS3 sales are again below expectations, it doesn't hurt SCE bottom line as much as expected. And even that USD is low, Yen is even lower, then CAD, AUD and EUR are high and PS3 is pretty strong in Europe, so the currency exchange rates help their bottom line (although, Yen dropping compared to USD raises the cost of chinese-made products in Yens).
Those were the points, concerning PS3, i see speaking on behalf SCE making comparatively good bottom line. But the opposite side:
Sony propably still sell PS3 with loss. Sony used a lot of money for marketing (now the low Yen hurts by making advertising outside Japan more expensive in Yens). It has a lot of R&D considering cutting PS3:s costs and a lot of games under development. Sony has recently cut the price of PS3.

The reason why Sony has failed to make realistic projections is because their sales haven't met their expectations.

Having bad division as a tax writeoff doesn't hurt, if that is its purpose. But Sonys gaming division is supposed to make money, not waste it.

@Rol: LOL

Thank you, sir. I appreciate it. =)

@ bdbdbd: Yeah, that's true. It's pretty difficult to get accurate manufacturer's numbers, though, when some manufacturers put ridiculous spins on the numbers.