Linkzmax,
using the same website, software is the same as reported in the financial statements it seems like.

Yeah, peopel don't understand that.

Yes, SCE lost 3 bln dollars over three years, but they purchased 3 studios.  It's easy to blame it all on the PS3 when you don't know all the facts.  I'm sure that all the companies they bought weren't for free.  I'd attribute 1 billion + to the acquisition of the three studios.

DJMeister J

Do you have any sources or links showing when they bought those studios?  Also, any sort of financial numbers?

I am not familiar with those because I haven't been following videogame financials that closely until recently.

However, as a general note, in financial statement terms ....

Acquisitions are not part of revenue and expenses.  That is, if a company buys another for $500 million, the $500 million will not appear as an expense.

Only the revenues and expenses of the company will be attributed, starting on the closing date of the purchase.

For example:

Company A - Revenue: 50 million

Profit: 5 million

Purchase Price = $500 million

Then only the $50 million gets added starting when it was actually acquired, same for the profit.

Where you will see the losses, is through the amortization of the goodwill - if there is goodwill.

Though in this type of industry, there will be goodwill - because there is not much hard assets such as property, plant and equipment.

It depends on the amortization schedule, there are general guidelines for them.

But if you take the $500 million example and straight line it for 10 years, then the company will take a charge of $50 million in expenses for the next 10 years due to amortization.

To make a long answer short - if there were acquisitions, then yes, it would show up in the game division financials.

However, unless they were purchased at a ridiculously high price, the amortization charges should not have been that significant - eg. compared to the 1.8 billion loss.

For example, if Sony bought all these studios for $1 Billion - then a 10 year amortization schedule will have an additional expense of $100 million per year.   Significant, but not too much that it affects the original analysis.

Otherwise, if there is a source for those acquisitions and what type of goodwill amortization schedule, then we can calculate it.  But it is not likely that the goodwill amortization will be less than 5 years, as it is quite aggressive.

Sorry for the long answer.  Almost like a business lecture.. Haha

@ Bumidan.

Then how come Microsoft talked about their 500 million dollar purchase of whatever they bought during the last quarter attributed to the loss?

@ DMeisterJ

I don't think anyone assumed anything...Sony STATED that they lost money on the PS3 at the tune of $3.3 Bln.  I doubt Sony would attribute loses caused by acquisitions onto a console for some common sense reason, such as...acquisition losses are a one-time thing, so most financial analysts would overlook such a loss, and also because it would make the outlook brighter for the PS3 to reach profitability sooner.  The logic in assuming that Sony would mis-report this info doesn't add up to me.

http://videogames.yahoo.com/feature/sony-has-lost-over-3-billion-on-the-ps3/1223467

with already $1.16 bln lost in 2008, things look to match losses from 2007, or exceed them...probably due to it feeling the full effect of the price cut, and the added cost of all the free consoles given away with purchases of HDTVs and what not.  Added on the reduced margin for bundles like MSG4....2008 is looking like another less then optimal year for Sony's financials.  They are working very diligently to reduce unit cost, but that's probably only getting them back to breakeven on the console at best.  At this rate, it's maybe 2010 or 2011 before they stop losing alot of money in the billions...it's going to be interesting to see if they can ever recoup the cost of the development.

@DMeister J

From doing some reseach Danger was purchased for about $500 million in CASH.

The only mention of expenses so far about it was the $24 million in R&D costs.

I think the closing started in April 2008 - so Danger had only about 3 months worth of revenue and expenses associated with the EDD division.

Again, doing some quick research, I think FY end Sep 2007 or something like that, Danger's revenues were only $50 million + and losses were about $25 to $30 million.

Therefore if you do some very quick extrapolation, with some revenue growth - let's assume even 50% revenue growth.

Then approx. $50 million x 1.5 = $75 million revenue
divided it by 4 (4 quarters)
Then Danger roughly approx. had a revenue of $19million in the EDD division for the quarter.
For losses, lets also just quickly assume that they lost $10 to $20 million in the quarter.

If we take the $500 million and lets say amortize for 10 years - then amortization = $50 million per year OR about $12.5 million per quarter.

Clearly, while $500 million in this example is a huge number, in terms of revenue and profit, it is quite small in relation to the $8 Billion in Revenue that the EDD division had.

Of course if Danger suddenly explodes and have revenues of $500 to $1Billion, then that would be significant.

As it is, it has barely an impact in the overall financial picture.

I hope that explains a little bit. If anybody finds an error in my explanations, please let me know. As I am replying quite quickly to these questions.

Thanks.

Last reports are that they already are breaking even on their consoles and I thought games like LittleBigPlanet are a good push to getting some casuals...

Your always full of phail though, so I dont know why Im talking to you.

we'll definitely see if Sony makes a profit in their game division for the Jun 2008 quarter.

Most people, including myself, predicted a small profit (due to PS2 and PSP, with cost PS3 hardware leading the charge)

it would be interesting to see how much their profit is (if they profit at all)

Is Sony going to release their financial report 29th?

I'm not sure. Maybe.