Good question. There is no easy answer. Their first priority must be to stop the bleeding. They must make the PS3 at least revenue neutral. It is losing them over $1B a year and they will not be able to sustain such loses anymore. They will need to cut jobs, projects, features, games, marketing and quality. Anything to cut the costs. They may even raise the price knowing that they will be giving up on the race for this gen.

The PS2 is a dead horse by now. Cannot turn time backwards.

The PSP could be huge. It seems to be really picking up lately. Perhaps that is where their attention should focus.

Back to the PS3 - if/once it is stabilized, they need to make sure it does not drop to the red again. Again - forget about price cuts for a while. They need every penny and it takes precedent over the volumes produced and the competitive situation against Microosoft.

If the PS3 does not stabilize (and it is not easy to save $1B in cost/year) then they'll have to consider exiting the market. For good. They just cannot afford letting one product sink the whole company.

Won't that kill consumer confidence in the playstation brand though? No PSP2? Would people even buy a PSP if they see PS3 die?

You just don't get it. Do you?

Sony is the Titanic that hit the PS3 iceberg. It is taking on massive water and all you can do is advise the captain to overhit the boiler to engage with some exciting leasure racing with another, healthy, ship.

Sony must slow down, fix the massive leak, throw any unecessary weight overboard and plot the safest route to the closest harbor before it sinks.

My list for 2009:

1) infamous
2) wardevil
3) gow3
4) heavy rain
5) ico3
6) ffxiii(japan)
7) kz2
8.) uncharted 2
9) quantum theory
10) mag
11) wkc
12) GT5
13) every year game from insomniacs
14) Yakuza 3
15) eyepet
16) Demon`s soul


p.s
+ rumored
17) Hardware 2
18.) Tears of Blood
19) Twisted Metal
20) Turrican from factor 5

In any way, IT wil be a GREAT time to be a PS3 owner. Because it`s about games. =)

Basically Sony as a company is suffering from Diseconomies of Scale, much like GM. It gets kinda confusing though once you factor in that adding Blu to PS3 upped economies of scale of scale for Blu ray... yet at the same time blu ray might fail now becuase of the bad economy and PS3 might (seperatly) fail... thus Blu ray itself would just contribute to Sony getting too big and sluggish for profitability.

Exiting the market has major negative consequences. It will not be taken lightly. But they will amputate the leg if it means saving the company, even if it means they'll never race again.

Sony isn't just getting paid in dollar/euro, their expenses are largely paid for in dollar/euro as well. So this number is wildly exaggerated.

That said, I think it's a only matter of time before Sony pulls the PS3 from the North American market. That's basically where Sony is bleeding money, and looking at various statistics I don't see how the PS3 could ever become profitable in NA.

In Europe though, the PS3 has a very realistic chance of becoming profitable. Sales are more or less on par with the 360, software attach rate is higher than the 360, and Sony is selling both the system itself and games at a much higher price than in NA. I also doubt Sony would give up on Japan/Asia yet, at least not until they've seen what effect FF13 will have on hardware sales.

You're missing the point. When Sony is loosing a significant amount of money on each console sold, and the buyers aren't buying enough games to make those sales profitable in the long run, then high sales only make matters worse.

The Blu-ray player and the hard drive is killing the PS3 (in North America). The manufacturing costs are too high. Microsoft learned the hard way in the previous generation. The hard drive cost was the main reason the Xbox never became profitable despite a higher software attach rate than the competition.

Exactly!

Unfortunately (and please don't flame me for this because its the truth) Sony is definitely going to have to cut prices prolly within the next 3-6 months in order to stay competitive in the console race. Why?

Two words: Blu Ray!

When it was released 2 years ago, the most appealing aspect of the PS3 was that it was a cutting edge console AND also played high-def Blu-Ray discs for almost half of what most stand-alone players were going for at their debut (around the $1000 mark).

Fast forward to today and standalone Blu-Ray players are selling for much much cheaper... some stores have them for $199 for Black Friday. And as prices drop for the stand-alone players, that takes away potential buyers of a PS3, who now are figuring "why spend $399 for a game system with Blu-Ray when i can just get the Blu-Ray player (which is what i really want) for half that?"