i believe that 2009 will be great for the PS3. there is home, PS3 slim, price cuts, and many great exclusives.

^^ I doubt the PS3 Slim would come so soon.

A price cut must come first. It would be like abandoning all the hard work they put into the Cell if a Slim came out in 2009.

Yeah but this gen, 3rd parties don't know what to do with the "#1 beast console" ala the ps2 last gen which is the wii this gen and the xbox and GC of this gen (the 360 and ps3 respectively) still don't have enough sales difference between them to justify single platform releases.

Lastly, however irrelevant JP may be compared to the world this gen, the last place console isn't last there so 3rd parties whose games aren't wii-compatible and sell decently in JP( think MGS series-type games) still cannot ignore the ps3.

Also, 200k sales of a console in a single week hardly points to death. Whats with people these days, can you not see beyond console wars?

good discussion, but noone mentioned the 600lb gorilla in the room...what the accountants refer to as 'industry exit'.

When a product is unprofitable but has positive margins elsewhere (ie it supports blu-ray, or helps pay the bills in a plant where other profitable products are made) you keep making it short term. Long term, if the product appears to have no chance of profitability you stop making it aka 'industry exit' (blu ray doesn;t need it, the lease on the plan expired and the company can move to a smaller plant...)

Sony needs to
A) Cut the price immedidately to build critical mass in the marketplace for the PS3. It does not have that now. It needs to be within 80% of the sales of the xbox360 to be relevant in the HD market. Today that means it needs ~ 23M*.8=18.4M It is already behind and falling away every week...

or

B) prepare on withdrawing from the home console market.

So in early spring of 09, look for a drastic price cut...or a fire sale...

Not until this one, but roughly it goes as follows. I hope it's not too confusing or unclear.

Sony's FY 2007 revenue: 8871 billion yen (source)
Percentage of revenue coming from overseas: 80% (source)
Ballpark figure of how much the dollar/euro are down against the Yen: 20%

Lost revenue from overseas according to the figures above (all other things being equal to FY2007): 1419 billion yen ($14 billion)

Profit in FY2007: 369.4 billion yen ($3 billion; source, the same as revenue above)

This means that if the "collapse" of the dollar/euro had happened in FY2007, instead of $3 billion in profit they'd have had a $11 billion loss. According to this page they have a $12 billion dollar cash reserve.

This is an "all other things being equal" scenario which would probably not happen in this precise way (for example, some of their expenses are also paid in the declining currencies), but it gives an indication nonetheless. It also assumes unchanged currencies which is why this scenario is just a possibility.

Hmm... interesrting.

I'm always surprised company contracts don't have a general "currency failsafe" of some sort

They do have ways to protect themselves against currency movements, but I don't think they're ever protected against such sudden and big movements.

For example, if I remember correctly Nintendo's profit margin declined from 25% to 10% in the last quarter, largely due to the same problem (the dollar/euro got even lower after the quarter ended). Sony's problem is that their profit margins are close to 1%, so you can see where they're going.

I can imagine a lot of running around at Sony's HQ.

The price cut is not an option right now. They just cannot afford it. They are already losing $1B/year in their gaming division and $100 price cut on 10M consoles will exactlu double that loss. Since the company made only $20M in profit in the last quarter I doubt it will be willing to take a x100 of that in loses just for one product. The PS3 alone can sink the whole company.

The PS3 will need to become profitable without a price cut for the next 10-12 months. As long as it is profitable, Sony can stay in the market even if it is just for playing for 3rd place. With profitability they can justify making a PS4 and give it another go. If they continue to lose money then they will have to do the "industry exit".

They have no more than 12 months to go being either profitable or cutting down the loses and exiting the market.

You are probably right about the price cut. But there is no way they have 12 months to think about this. No way. Decisions need to be made...now.

Let me put it this way: you don't want a price cut because it will cost $1B. but you are willing to wait around a year, which by your own math, also will cost a $1b?

if the world economy hadn't just collapsed, then they might have a year. But it did. So they don't have a year. They have to take a 1B risk by cutting the price, or get the heck out. And it will happen in early spring.

personally I'll wait for the firesale :)