I can understand the point (regardless the validity of the figures), but the issue I have with your example (using any numbers) is that it overcompensates the other direction -- it presumes SONY never sells another game or hardware unit for profit and relies solely on BD sales. That's simply not going to happen. There is (or will be) a balance there between purchased games, purchased BD movies, downloadable content, and purchased hardware units and accessories that are not going to be sold at a loss over the next five years. Another point to consider is the falling cost of hardware manufacture, which tends to out-strip price reductions on the units themselves. SONY knew it would lose money on the early adopters against the promise that it would make money over the remaining life of the console.

In terms of the media/content itself, where you can certainly find examples at both extremes (the avid gamer that purchases dozens of games per year versus the film buff that purchases dozens upon dozens of movies per year), I think the average tech-savvy household (in the US, at least) falls in the middle (probably purchases x games AND 2*x movies, or thereabouts).

The next quarter more than their electronics and games business I wonder about their Financial Services business. This has in the past been a source of cash for the games and electronics division but depending on how this all goes that may not remain the case. If that is the case then the games and electronics divisions, assuming that this is their big quarter as usual, may really be what keeps the company profitable.

A) Of course SCE is supposed to make money, every division of a company is. The question is one of the time horizon and whether the divisions are able (and willing) to outbalance each other. Just how long it takes for a division to achieve profitability (with a new product) and how long it has to stay profitable is a corporate management decision

B) This will have absolutely no effect on whether (insert favourite fanboy game) gets pulled or published. Software projects run over several years and once you go beyond a "point of no return" within the project, it does not get cancelled anymore (whatever the current state of an entire division is - unless it is short of bancruptcy..)

C) The cumulative losses are _not_ enormous and are certainly _not_ leading to a change of strategy at SCE given a 10 year plan. (By the way, such strategy change would come from Sony HQ as this would likely be a corporate decision). Such a decision is possible when the next quarter comes in and it is a critical quarter for SCE. They have now finalized all the redesigns of the PSP/PS2 (which cost them a ton of money hw-wise) and manufacturing costs are close to break-even for all consoles. The increase of software revenues should result in a massive profit (>$350mio) this quarter or something is (still and unrepairably) really broken inside SCE.

I don't really know how many disks it would take for Sony to make back the money through blu-ray but i'm sure the amount is insanely massive. However, why does everyone assume that blu-ray would have lost and putting blu-ray in the PS3 was the only way blu-ray was gonna win?

If Sony would have made a $300 PS3 and had a blu-ray add on for $100 or $150 the PS3 would have sold much much better and the add on should have easily sold enough to turn the tide of the war. It would still have been the cheapest blu-ray player on the market. They could have also money-hatted a studio if they really had to to turn the tide (dont' think it would be necessary though), it certainly would have been a hell of a lot cheaper than the losses they got on the PS3.

There is also the possibility that blu-ray could have won without the ps3 completely. Blu-ray players would have actually been sold at a decent price if it wasn't for PS3.

If the PS3 was the same price as the 360 we wouldn't be talking about how ps3 doesn't differentiate from the 360, we'd be talking about how 360 doesn't differentiate from the PS3. Ironically in trying to differentiate itself from 360 with blu-ray it actually does exactly the opposite.

Think they can post a profit this quarter.

Q4 maybe but the psp+ps2 have outsell the ps3 by alot.

and many first party have to managed to make profits.

this. The psp is a great device sony has and they aren't doing anything massively with it.

I do think it is still an awesome handheld, and I will feast on past releases, and downloadable titles.

<large rant canceled of why I know _a lot_ more about how large corporations work than you do>

Here are just a few points to correct your very strange ideas:

A) You just have to believe me. The mere fact that Sony is still producing PS3s is proof that your assumption is completely wrong. This project would have long been killed entirely if your ideas were true.

B) So your idea of a board meeting is that old men sit around and say: "hmm. we have to cut costs so let's kill this game and that game".. Whatever the reasons were for canceling these particular games (and if my memory does not fail they were still in early phases of the _whole_ projects), Sony still feeds its 4500 software engineers and none have been sacked as far as I know. So SCE still seems to have the same resources as before.

C) Once again, the losses are _far_ from being enourmous for an industry giant like Sony. I have no idea why you think that if gadget A made X amount of money then gadget Y must cost less than X to develop. This is such a weird idea, I really don't know what to say about that.

D) This is your biggest and worst assumption. Unfortunately this "the PS2 and PSP make tons of money" mantra is prayed by almost everybody on this site. It does not make it true, however. I can only repeat what I wrote above: None of the Sony consoles are, at this time, at a break-even point as far as production (or even manufacturing) costs go. I would even go as far as predicting that the PSP is, at this time, the loss leader as far as manufacturing is concerned (I'd have to disassemble a PSP3000 and talk with my industry contacts about that though, to be sure).

So let's summarize my points of a discussion we obviously will never agree:

1. Sony has to worry about staying profitable - big deal, everyone has to. The economy has unexpectedly increased the worries for _all_ divisions, but SCE might be the division that has to worry the least if people continue to buy consoles and games like there is no tomorrow.

2. _All_ consoles are close to profitability at this time at the manufacuring level.

3. Something went wrong in the 2nd quarter at SCE, a loss of $350m is illogical (unless some creative bookkeeping took place. Obviously a new factor has entered the picture we know nothing about).

A) That isn't proof that they'll earn back the money invested in it.  It's just proof that it's their best way to at least earn back some of that money.  As Benga's C points out, they've lost more since PS3 than they ever made with PS2 and PS3 is obviously not the huge success that PS2 was.

C) The losses may not be enormous for Sony, but they certainly are for SCE.

D) "The decrease in operating loss in the current quarter was primarily due to PS3 hardware cost reductions and
increased sales of PS3 software, as well as strong sales of PSP hardware. "  So clearly PSP hardware is profitable, and I'd be extremely surprised if PS2 wasn't as well at this point.  The mention of "PS3 hardware cost reductions" indicates that it is still being sold at a loss, but I'm not one to blame all of the losses on that. Though I would also be surprised if development of new software is exceeding the earnings generated by sold software across all systems.