Do you seriously expect SCE to start posting profits that exceed those of Nintendo? Because that's pretty much what you're implying will happen.

I think $10 per PSP is more reasonable. Like Fishy said there are a lot of other costs noy (yet) in your projection, like marketing etc. It is also reasonable that part of the PS3 R&D costs hve been spread over several years before and after the launch.

Edit: licensing fee for PS3 titles is said to be quite high, say $8. PSP probably lower, I expect around $4-5

Scenario Analysis (2)

FY End Mar 2007
PSP HW = $5(*) profit per unit

FY End Mar 2008
PSP HW = $10(*) profit per unit

PS2, PSP, PS3 software profit per unit = $4(*)

All other numbers the same, THEN:

PS3 HW loss - FY end Mar 2006 = $1,075(*) million
PS3 HW loss - FY end Mar 2007 = $3,194(*) million OR $580 loss per UNIT
PS3 HW loss - FY end Mar 2008 = $2,591(*) million OR $280 loss per UNIT

TOTAL PS3 HW LOSS end Mar 2008 = $6.86(*) Billion LOSS

For Sony Q1 2008 end Jun 30, 2008, I am predicting a range of $50(*) million loss to $15(*) million profit on slightly different assumptions.

Still based on a $150(*) net loss per unit on the PS3, taking into account PS2 sales decline, PSP sales increases and PS3 sales increases.

You can't go through financials and try to compute a loss per PS3 units sold as it just doesn't work that way.

The gaming division covers a lot more than the making and selling of hardware and collecting licencing fees....

You forget whole entities like SCEE, SCEA that employs thousands of developers and covers things as varied as first party development studios ( many of which have yet to release a PS3 title so they can't have been making a profit last year), MMORPG ( stuff like Vanguard, SWG in the end get reported under SCEA and the gaming division and those can't be making much of a profit either).

Then you ignore the whole marketing budget which is probably very significant.

All those costs are not dependant of the number of PS3 units sold so you can't compute a loss per PS3 sold when you include them....

In the end I would not be surprised if the yearly cost to run SCEE + SCEA wasn't over 500+ million a year and until Sony releases more first party titles you have to know those organizations are running at a loss...

@ Ail

I'm not quite sure I understand your points. The analysis is for profits and losses are based on Sony's numbers.

Costs associated with running these business are already reflected in these numbers. The numbers we are trying to analyze are NET profits or losses.

1. The game division numbers are reported for everyone to see. Revenue and losses are there. This includes all the costs associated with the gaming division, including all the ones you've mentioned.

2. Game development in general should already be reflected in the game division numbers. If not, where would Sony put it? You can't just leave out figures in your public statements. Also, the analysis incorporates a long enough time frame to include development costs and average them out. This evens out in the medium to long term.

If Sony is developing games every year, then every year they would have software sales to record that were developed the previous year, so everything will balance out over time.

3. As mentioned in previous posts and in No. 1, net profit/loss takes into account everything, including marketing costs.

4. I have never seen MMOs ever mentioned in any Sony financials. Therefore the logical conclusion is that the figures (sales/costs) for these are probably not "material" in the financial sense. Unless it is in a separate division or company all together.

I hope that clarifies some of your questions and concerns.

Yeah... but that would indicate the Sony has had more first party flops then third party flops.  Or something... wouldn't it?  Or are we counting "buy-offs" in there too.

I disagree with the initial assumption that PSP 'start up costs' means each PSP sold at a loss. It doesn't mean that. It just means there were start up costs, building inventory, advertising, etc.

And bonus points for sony for making their statemtns as confusing as possible. Fiscal Years are usually named for the year in which they end. Jan 1 2001 to Dec31 2001 would be FY2001. Mar 1 2001 to Feb28 2002 would be FY2002. On Sony's SEC reports they do that, "Fiscal year Ended 2008"
http://www.sec.gov/Archives/edgar/data/313838/000114554908001104/k01608e20vf.htm#145

But on their own web site, they refer to the same document as FY2007:
http://www.sony.net/SonyInfo/IR/financial/fr/viewer/07q4/

Nice.

this was very well done thank-you . its posts like this that i come to this site for

I can confirm that the per-unit software profit is closer to $5-$10 (depends on the price point, amongst other stuff), not $2, and that lots of the early titles in the PS3 lineup were published by Sony, which pushes the per-unit profit up by quite a bit.

Otherwise that's some really great work.. very interesting read.