Look at the 360's sales this year compared to last year, and keep in mind that prior to the latest price drop, the Premium model was MS' best selling SKU.

Those gains happened primarily because of the $50 price drop last August.

And the ps3 DID win them a format war.  The Dark Knight is looking to be the first Blu-Ray movie to sell a million, and it's happening earlier in Blu-Ray's lifespan than it did with DVD and the Matrix.

By all accounts, Sony has been loss-leading much more than MS in the gaming market. If SCE dies, it's not just because Microsoft has more money than them, it's largely their fault (mixed with some bad luck regarding the economy and exchange rates).

His first paragraph was OT and blatant trolling.  His second paragraph was basically putting words into Squill's mouth.  Squill never said those games would boost the ps3's sales.  He said they would probably sell enough to make back any money spent on a price drop.

* 25% (aka $15) goes to pay the art and design guys.
* 20% ($12) goes to pay the programmers and the engineers.
* 20% (also $12) goes to your friendly neighborhood retailer. EB / GameStop, whoever.
* 11.5% ($7) goes to a "Console Owner Fee" - ie. whichever one of the Big Boys made your hardware (Sony, MS, Nintendo.)
* 7% ($4) goes to marketing, and puts Mad World and Marcus Fenix on MTV.
* 5% ($3) goes to "market development" -- paying for cardboard Standees of the Gears Crew and elbowing other games out of the way for shelf space at your local retailer.
* 5% ($3) goes to actually manufacturing and packaging the disc.
* 5% ($3) is spent paying the Man for IP licenses or maybe hiring some big name voice actors. If your game isn't an original IP, here's where you get dinged by Marvel, Disney, or Ray Liotta's agent.
* 1.5% (just $1) goes into the publisher's pocket.
* 1.5% (also $1) goes into the distributor's pocket.
* 0.3% (about 20 cents) goes into corporate costs. Management, overhead, lawyers, etc.
* 0.05% (less than 3 cents) go into the cost of paying for the Developer's Hardware. Who knew an SDKs can cost tens of thousands of dollars?

$12 + 3 + 3 + 3 = $21 + 1 (distribution costs) nets $22 out of a $60 price tag, the rest goes to Sony themselves.

Source: http://www.garagegames.com/blogs/37536/11924

As far as being optimistic or not I was also conservative in other areas, I didn't mention cost reductions (65nm RSX just been released), Continued sales of a few titles from last year such as LBP. Much of the cost of these games has been accounted for, and the only way they are going to make the platform viable in the long term is to cut the prices and increase sales so I applied revenue from the games in the same year as the games are going to be released and the sales of the consoles are going to be done.

As NJ5 said, the sales of the first parties aren't enough to justify the number of first party studios. The one thing I absolutely know will kill SCE dead is their large first party studio portfolio and stalling console sales.

I don't want to repeat myself too much from other threads, but the biggest argument there is against this is that Sony as a whole will be in trouble next year (unless exchange rates and electronics sales recover).

When Sony was making profits, they could finance SCE's extravaganzas, but it will be harder to justify them next year.

Wow, thanks a lot for that there. A bit shocked that they get that much.

And your 2nd point is pretty decent too, so it looks like you've done some good research here. Impressive, and I think you're right overall. Great thread.

Eh, even with the current install base, the only SCE published games that may have not made a profit are Lair and possibly Folklore, and neither of those are first party.  They're not even second party, as neither Factor 5 or Game Republic are tied exclusively to Sony.  They did cost SCE money, though (or at least Lair did).

Everything else* should've made a profit by this point, if not a nice profit, like Uncharted.

Of course, there's also current development expenses to think about, for games like Killzone 2.  And there's Home, on which they may never make back the initial R&D.

*Not including games released in the last month or so.  LBP is probably already in the black, and R2, Socom, etc. are well on their way to breaking even.

*prepares the crystal ball*

I predict a price cut in February or March to coincide with Killzone 2 release however I think that will be the last price cut before they announce a slimline PS3 version.

*puts crystal ball away*

Do PS3 need a price cut? Hell yes! And its already almost confirmed to come in march. 360 was way cheaper then PS3 in EU before but now its dirt cheap. And last couple of weeks have shown Sony that they can't afford to have bigger difference in price between PS3 and 360. Anyway 360 still will be cheaper but the difference will be smaller.

Almost confirmed?

Earlier this year, when Sony kept telling their investors they were focusing on profitability in the games division, some people kept saying a Christmas price cut was guaranteed. I doubted it back then, and I doubt it now too.