Except Sony lost money last quarter.

So PS3 almost definitly loses Sony a LOT more then 20 dollars a piece per 40 gig.

The bundle definitly is costing them way more.

MGS4 alone likely costs more... as you'd assume Sony bought the games to bundle.

Look at it this way. They lose money on every 40 Gig. 80 gigs lose them more money. Hence why they were canned for a while in favor of just 40 gigs. Now add in the game.

The bundles are probably costing Sony a pretty penny.

If i had to guess i'd say on a bundle they lost around $110 dollars. 50 for the PS3 40 gig stuff. 25 for the chpset and about 35 for wholesale copies of MGS4 minus a publishing free and some distribution costs.

50 dollars for per PS3 loss might even be conservative. 

(1) Selling a PS3 in-store sells more titles than MGS4, typically in the same sale. $$ profit.

(2) $100 gift-card is NOT -$100 profit... its more like -$50, since they aren't selling you items at-cost, just because you pay with a gift card.

(3) Giving away gift cards is a tax benefit. take that -$50 profit from above (in #2) and reduce it some more.

(4) Walmart is a rural retailer. Sure, you find them in big cities, but they don't dominate there like Target does. They have something of a "rural monopoly". In other words, they sell you a PS3... then who are you going to come back to for more games? ++profit again.

(5) Clearing shelf space for the more popular 80GB model bundle -- more PS3s sold in a shorter amount of time.. +profit.


...the list goes on. I don't see how anyone could think Wal-mart was losing money in this transaction, in the grand scheme.

Target offered a similar deal, btw, but theirs was not on blu-ray players -- it was on 40GB PS3s, and it was only a $50 gift card. The 40GB units flew off the shelves like jets... probably with a game or two with each console, and future profits expected. Target wins, just like Wal-mart.

1. Except Sony only recoups a small fraction of the money from each copy of MGS4 while the whole cost of the game remains a loss for the bundle which is still sold at the price of a regular 80GB PS3. Even then, if Sony got to keep 100% of the money from each copy of MGS4 sold, they'd still be losing on the difference between the game and 80GB PS3 since MGS4 is being included for no extra charge. It never ceases to amaze me how people think the games themselves magically produce money from no where in situations like.

2. Again, sloppy logic. Since that is $100 dollars that would have been made otherwise, it's still a $100 loss no matter how you try to spin it. I would be curious to see where you get your made up figures or retail vs wholesale.

3. Really, a tax benefit, let's see some evidence of this and exactly how much it offsets the $100 loss.

4. Rural? You mean like Farm Country? They have a Farmland Monopoly? And, Target bigger than Walmart?

That aside, If any of this were true, then why not sell the PS3 at $100 loss all the time and not just on a special occassion since according to you they're making loads of cash either way. Heck they should sell it at a $200 loss and make even more money! Genius!

5. So selling more PS3's at a loss in a shorter period of time = a profit.

I don't know where you got your mail order degree in business accounting, but I seriously consider getting a refund. Or is this all part of your elaborate scheme to achieve more "profit"?

of course everyone has a profits small or big i don't know

so nobody ever loses money?

Walmart wasn't the only retailer doing this. With my own eyes I say the same deal at Best Buy, Circuit City, and Target stores.

This deal eased the pain of getting a PS3. $100 gift cards can be used on anything you want in that store.

really.... I only heard of wal-mart... with this huge sale dont you think more people would say something about other stores too?

"Profit" is the wrong word to use here. There is no question that Sony did not profit from this last week.

However, they certainly increased their install base.

Below are some numbers - please adjust if you have additional information - to see how the numbers work for Walmart.

Revenue = $399 for PS3

Cost:
PS3 = $350 (assumption - I don't know how much Walmart buys it for. There is a person that mentioned their store only makes $15, so $350 is generous).
Gift Card Cost - $100 less average profit margin on WalMart sales. In this case, if you look at Walmart financials, their operating margin (according to Yahoo) is 5.84% or 6% to summarize, and their profit margin is 3.33%. We'll use the operating margin for simpler calculation.

Therefore, the actual cost of $100 gift card IF FULLY REDEEMED is actually $94.

Even if you assume another 20% NON REDEMPTION (ie. lost cards, etc.) - the cost of the gift card to WalMart is $75.

THEREFORE....

I WILL SUMMARIZE IN THE NEXT POST.

Scenario A:
Walmart Revenue = $399 (PS3)
Less:
Product Cost = $350
Gift Card/Promo Cost = $75

Profit/(Loss) = ($26)

Scenario B:
Revenue = $399
Less:
Product Cost = $380
Gift Card = $94

Profit/(Loss) = ($75)

NOW $26 loss does not sound too big. HOWEVER, as a general retailer, that is a BIG LOSS. To put it into perspective, based on a 6% operating margin -- Walmart has to SELL an ADDITIONAL:

$433 (to make $26 @ 6% margins) TO BREAK EVEN ON SCENARIO A.
$1250 (to make $75 @ 6% margins) TO BREAK EVEN ON SCENARIO B.

You can see that offering $100 GIFT CARD is a huge deal and therefore it makes sense that Blu Ray manufacturers MOST LIKELY had some incentives for Walmart to get rid of inventory.

Please feel free to change SOME NUMBERS and ASSUMPTIONS, but the general underlying process and calculations should be relatively correct.