Just what Sony needs

Another article pointing out what a pigs ear they made of their console launch and strategy.

Why dont we just point out that analysts said just a few years ago that Sony would win the console war hands down and the Wii was just a joke that wouldn't sell.

We all make mistakes !

No, they haven't made that money back. It's already on their financial statements as a loss. Posting a profit for the quarter does not make up billions lost over the last 6 quarters.

Posted in November 2006 :

Sony taking big hit on each PS3 sold; Xbox 360 in the black

By Eric Bangeman | Published: November 16, 2006 - 01:33PM CT

Market research firm iSuppli has torn down the PlayStation 3 to see what's inside. In doing so, iSuppli confirmed what we reported back in February: the PS3 is expensive to manufacture and Sony is taking a serious hit on each console sold.

iSuppli estimates that the more expensive $599 console costs $840.35 to build, leaving Sony with a $241.35 loss on each console. The picture is worse for the cheaper, $499 version. Sony takes a hit of $306.85 per $499 console sold, due primarily to the lack of any substantial savings from the hardware differences between the two versions of the PS3. For instance, the 40GB difference in hard drive space between the two versions of the PS3 only saves Sony $11 and omitting 802.11b/g on the cheaper console only saves Sony an additional $15.50.

iSuppli's teardown report shows three big cost centers for the PS3. Topping the list is the Reality Synthesizer from NVIDIA, which handles the PS3's graphics. According to iSuppli, Sony's cost for that chip is $129. Sony's decision to outfit the PS3 with Blu-ray costs $125 per unit, while the Cell CPU from IBM runs $89. Miscellaneous other components and manufacturing costs add another $148 to the total; the rest of the costs are broken out in the chart below.

Data source: iSuppli

If Sony is steering gamers towards the high-end PS3, it certainly makes sense from a cost standpoint as the consumer electronics giant's losses are much less on the $599 console. It also means that the major price drop for the lower-priced console for the Japanese market that Sony announced in September is an especially bitter pill for the company to swallow. With the console selling for approximately $402 in Japan at current exchange rates, Sony is losing almost $400 per low-end unit sold there.

iSuppli points out that money-losing consoles are not uncommon, with sales of games and services making up for the loss. With that in mind, the research firm says that "the size of Sony’s loss per unit is remarkable, even for the video-game console business."

July 2007 : Sony responds to a quarters loss in the gaming division:

Sony: Poor PS3 sales mean less financial loss

Monday 30-Jul-2007 10:29 AM Sony's CFO Nobuyuki Oneda looks on the bright side

Every cloud has a silver lining, they say: Sony's CFO Nobuyuki Oneda has revealed the recently reported financial losses experienced by the company's games division were less than expected because the number of PS3 sales were lower than hoped.

Looking on the bright side, Oneda said, "Sales of the PS3 have risen but we booked losses due to our strategic decision to price it below the (production) cost. Actually, because the number of units sold was not as high as we hoped, the loss was better than our original expectation".

Last Thursday Sony posted an operating loss of $237 million for its games division, a figure mainly attributable to the fact that the company has priced its PlayStation 3 console lower than its production cost.

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Note: That loss was 237 million including the profit from Ps2, PSP, software, PSN, etc. These are not hardware numbers or PS3 numbers. So the loss made by PS3 that quarter was much higher....

Sony has had some pretty big losses in the beginning of it's life cycle. This much is true, but recently sales have been better. I see them being second by the end of this generation as the 360 continues to slide. Also, gaming is one of several divisions that Sony has. I honestly wouldn't be worried about them being in the red.

2008 : Sony warns inverstors that it may never recoup losses from the PS3:

Sony: We May Never Recoup Initial PS3 Loss of $3.31 Billion
Kotaku - June 23, 2008

Sony's fiscal 2008 annual report delineated potential risk factors to its investors, outlining that "the large-scale investment required during development and introduction of the new Playstation gaming platform may not ever be fully recovered." The loss figures were provided as an example of the "significant negative impact" introducing a new platform can cause at first.

they are hoping to be making money on the ps3 by the time the ps4 comes out.

2003: $939,000,000
2004: $650,000,000
2005: $404,000,000
2006: $75,000,000
2007: $1,968,644,000

From Sony finacials here are Sony's profits for the five year period of 2003 - 2007 fiscal years (ending March 31 the following year, ie: 2007 = 3/2007 - 4/2008) Green = profit, red = loss.

I had another article showing Ps3 lost all profits the gaming division made since the birth of the PS1 (approx 12 billion total, thankfully they had the PS2/PSP making money for them to offset the loss a bit), but I can't seem to find it. I'll keep looking though.

I know costs of the PS3 have been greatly reduced, so these gloom and doom numbers are purley historical data now, but it does show the huge risk Sony made by using the PS3 to win the HD platform war. I believe BluRay will make those billions back for Sony even if its not in the gaming division.  

Sony? Learn a lesson? Dude...If you understands Sony, you will know that the company is extremely stubborn. They are like the rich kid in school who cant understand how a middle class person could outclass them and denies it until their end. Theres things I love and hate about Microsoft and Sony, but this has always been a fact about Sony. Sonys knight of understanding is Kutagari.

Kutagari=Sonys version of Miyamoto.

I was posted on this site as a News item way back when, you can probably still find it somewhere.