So again, before you mention some other numbers and assumptions, I urge you to check the first few posts. In there, there was a scenario analysis where $3(*) profit for software was used.

your assuming on me assuming on his assumptions?

yes, sony dug itself a hole with blu ray, a really huge hole. but my take on this, sony used its game division to develop for its other divisions. imo, R&D for the ps3 included improving the bd drive which sony will use in its bd players etc etc, plus development for the cell, which is obviously going to be utilized by sony and their partners for their other products other than the ps3. hell, the cell is already being used on medical equipments. the gaming division took the brunt of the loses but it all pans out for sony as a whole.

all this is of course imo.

ils411,

Sony has announced that their production costs of the PS3 are now less than the sales price.  Unfortunately, too many believe that means they are making profits on the PS3 hardware, which after adding in the non-production costs (fixed overhead, costs of getting the unit to the retailer), they are not making a profit on the PS3 hardware. 

In a similar manner, their announcement of $3.3B in losses for the PS3 could be speaking of production cost losses, i.e., average cost life to date of a PS3 is $800, average sales price to the retailer is $500, net loss of $300 per unit, times the 11M units at the time of the announcement would be $3.3B.

But bumidan could still be correct if the addition non-production cost were added in, to get to the total $5.5B overall loss.

"i would assume that you over estimated ps3 loses and at the same time under estimated the gaming devisions profits."

That would be impossible for bumidan to be doing both of those.  He knows based on Sony financial reports the operating income of the game division overall for the last 4 years.  The operating income = the gaming divisions profits (of PSP, PS2, PS3 software, misc.) plus the PS3 hardware losses.  If the losses of the PS3 are not as much as bumidan's numbers, then his estimate of the gaming division HAS to be OVER-estimated.

Ooops, forgot to post the numbers:

If you suddenly "tweak" and change some of those numbers, then all the other numbers change, quite dramatically for most numbers that other people comment or spew out.

Let's look at this example:
PS2 software gets $5 profit because PS2 is so profitable.
PS2 hardware gets $20 profit because it's so old and cheap now.

Now you may think that $2 to $5 for PS2 software is not that much different, the same for PS2 hardware profit of $20 from $10.

If we keep everything else the same from the original analysis, this is how the numbers will turn out:

PSP HW Loss FY Mar 2005 = $1,238(*) million or a LOSS of $417(*) per console

With these numbers, it doesn't even make any sense any more.

Now let's still move on with the same assumptions:

PS3 Hardware (Research) Loss FY Mar 2006 = $1.377(*) Billion Loss
PS3 Hardware Loss FY Mar 2007 = $3.395(*) Billion Loss
PS3 Hardware Loss FY Mar 2008 = $2.657(*) Billion Loss

Total PS3 hardware/research loss = $7.429(*) Billion Loss

Now you can see that a "small" change in your assumptions, though still somewhat reasonable can have a dramatic effect. From $2 and $10 for PS2 to $5 and $20 profits for PS2, you can see that PSP now lost a ridiculous amount of money per console on launch and added an additional $1.4(*) Billion loss to the PS3.

Those losses would be more if we use, as some people have suggested, a higher amount for PS3 and PSP software profits as well.

Just a reminder for people to show that there are HUGE implications just changing some numbers around.

actually, i did which is why i said that you had too many assumptions.

lets take fy 05 for example.

404 million is what sony reported. what you did is allocate 48 million for ps1 base on what? you assumed $10 for ps2 hardware and $2 for software base on what? you also assumed $2 for psp software, but again, base on what? though total figures talied at 404 million, the breakdwon is questionable.

like i said, too many assumptions for my taste.

LOL! where did i imply that? Nintendo got the same idea with the Wii and the DS.....

This thread is long and I don't have time to read it all, but Sony recorded two or three major financial one-time gains. The first was selling the Cell line to Toshiba and was something just short of $900 million I believe. There was another -- a financial/insurance arm IPO -- that raised $2.75B or so. Rumor was that the revenues would fund PS3 losses due to the $100 price cut. Lastly, Sony reversed a big chunk of loss they recorded for the battery fiasco. Again, I don't recall the amount but I believe it was around $275 million. These were all one-time gains and I'd be curious as to where/how these relatively large transactions appear in the financial statements.

http://edition.cnn.com/2007/BUSINESS/10/18/sony.toshiba.ap/index.html

http://kotaku.com/gaming/cashola/sony-to-sell-insurance-ipo-to-fund-ps3-price-cut-296335.php

I can't find the link for the reversal on the battery recall but I know I read it in one of Sony's financial releases.

Thanks for the dissection. It would be nice if MS didn't clump everything together so tightly as it would be easier to figure there numbers out as well.

A tried to get a retailer friend of mine to locate me a PS3 80 gig MGS4 bundle and she said that all her stores were out and waiting on Sony.  She then told me to just go to Wal-Mart as they had them in stock.  She said they made $8 on each PS3 they sold and frankly didn't care if I bought it elsewhere -- just come back to her store for the games and accessories....

Well, the bolded part implies that. SCE has posted losses that are on the same ballpark as Ninty's profits, so there you go.

Wow, I have known that the margins on consoles are low and money is made on games and accessories, but that low? That is just insanely bad business. I wonder why anybody is willing to even run and own game stores? It must be a calling of some sort, they're definitely not in it to make a buck.

Actually, this kind of margin structure and business model can not survive the rise of digital distribution of games and other content. I predict that in the foreseeable future, quite probably starting with the next gen, hardware margins have to rise up to the normal levels because with more and more content sold online, there will be less and less sales to offset the losses the stores currently take on console hardware. Meaning, in essence, that the prices of consoles will rise, or if the manufacturers wish to maintain the current price points, the specs have to be sacrificed and there won't be as big of a performance leap.