Because Blu-ray adds to the price of each console manufactured and doesn't give huge returns on investment (Discs are probably sold just above manufacturing and content costs leaving little for Sony), whereas Live/Marketplace make visible cash that far outweighs (subscriptions and purchases) any mimimal server cost.

Expensive blu-ray means expensive PS3 means low sales and low RoI and/or losses.

Sony was even losing money on PS2 when it was the world's most popular console ever: how bad will it be now?

stranne said: Why is it not a problem with Sony burning money to leverage Bluray but a problem with MS burning money to leverage Live/Marketplace?   You could just as easily say "Sony's strategy might really please their rabid fans, but don't think Wallstreet is interested in how fun the PS3 can be due to Sony burning its massive piles of money on it. Shareholders will be seeing red soon enough if PS3 doesn't show any sings of paying off".

Stranne,

                It's not a major problem for Sony since they have yet to hit absolute zero. Their entire gaming division hasn't burned away all of it's profits. Now, this certainly can be a problem before too long if sales continue to be dismal. Although, PS3 is currently about on par with how 360 sold worldwide during its first year:

http://vgchartz.com/hwcomps.php?cons1=Wii&reg1=All&cons2=PS3&reg2=All&cons3=X360&reg3=All&align=1

The PS3 still has a lot of work cut out for itself in the upcoming months if they want to keep up pace though.

As far as many investors are concerned, PS2's profits have just been invested into the PS3, and it's pretty obvious of Sony's strategy to gain market share in other sectors with the PS3 beyond gaming. So even if PS3 fails utterly in the gaming sector, if it pulls off the victory for Blu-Ray, it still wins in regards to fiscal profits for investors.

Keep in mind that MS has never even hit absolute zero. They have dug a hole so deep, that reaching absolute zero will take years of non-stop profits. They have yet to have a profitable year in the gaming division. Period.

But in regards to Blu-ray specifically, it's winning. Thus, Sony is making money due to the leverage PS3 helped with. For instance, Blockbuster only carries Blu-Ray now. No more HD-DVD. Six months ago I read an article were the company stated that they would supply both formats in their stores to please their customers. That's a pretty big change in only six months.

Granted, like Game_boy has stated, the profits from this currently are minimal at best. But once more, this is a long term strategy, as once one of the formats ( Blu-ray or HD-DVD ) go the way of Betamax, and the market opens up for the consumption of these HD formats, the prices will drop and profits will continue to escalate. Much like with the introduction of the DVD.

As for Live, this is certainly one of the better things going for 360, but has it payed off the two billion dollar investment price tag it took to build the service? Last time I've heard, it's still no where close to paying off that debt, let alone others! If you've been paying attention, MS's debt in the gaming department has only been growing. Logic would prove that if Live was a cash cow many make it out to be, that it would only help pay for itself and then start lowering the overall debt. It hasn't. It might be good for helping slow the overall debt intake of the gaming department, but that’s about all it currently is doing fiscally.

Also I would disagree with your distortion of my statement. Simply because most Sony fans are not pleased with the way Sony has used PS3 as a crutch to expand their presence in other markets. Also there aren't very many great titles on PS3 right now. Most of their rabid fans would much rather have a superb gaming system right now, then have to wait till 2008-2009 for the bulk of good games to drop

I would rather wait and see the results from Microsofts price cuts. I would never have predicted the spike Sony saw with their price cut. The machine was still rather expensive. However the speculation was that there would be a price drop this year for that system. The speculation about the price drop was the same for Microsoft. Everyone expected the prices to get cut.

Further more interested consumers are not early adopters. Those who want one of the high end machines have had nine months to educate themselves. They have had a chance to hang back and see where the market is going. So they can make the better decision. Now they have the price cut, and they have a understanding of the market. The drop was a long time coming as was this years line up.

I will say that I would not be shocked if those three factors combined, the price drop, the line up, the failures of Sony. Well I would not be surprised if the sales did not quadruple in the Americas. I would not use Sony as a guide post in this situation even if it were recent. Microsoft has a better price point, has better games in the near term, and has maintained a stable trend through the year. Now if Sony can double or even triple sales in the short term with no great selling points I think Microsoft could do better. Consumers are lined up waiting for prices to drop. I just think there were more in the Microsoft line. We will have to see.

Looks like August 14 is the cross over date in real time (based on estimates for the weekly data divided by 7).  It will show up in the data on August 19.

I had 360 pegged at 88k worldwide this week on strong Americas sales (60-70k)...

Right now the totals are:

360 - 10,434,881

Wii - 10,406,135

A quick guess at next week's sales...

Wii - Japan (70,000), Others (75,000), Americas (80,000) - 225,000

360 - Japan (3,000), Others (25,000), Americas (60,000) - 88,000 (Madden)

August 19 totals:

360 - 10.522 million 

Wii - 10.631 million

TheSource said: Looks like August 14 is the cross over date in real time (based on estimates for the weekly data divided by 7). It will show up in the data on August 19. I had 360 pegged at 88k worldwide this week on strong Americas sales (60-70k)... Right now the totals are: 360 - 10,434,881 Wii - 10,406,135 A quick guess at next week's sales... Wii - Japan (70,000), Others (75,000), Americas (80,000) - 225,000 360 - Japan (3,000), Others (25,000), Americas (60,000) - 88,000 (Madden) August 19 totals: 360 - 10.522 million Wii - 10.631 million

 Seems to be a pretty big change to the others region for the Wii recently, data over the last 6 weeks is now showing as 85-90k.  Not sure if you noticed that but if correct I would imagine it could change some of your numbers a bit.  Otherwise it looks identical to my projections.

DoesWhatNintenDont,

Sorry for the late reply.

 

I may have a very naive and simplified view of things, but this is how I see it.

(quarterly)

Sony:

PS2 = good profit, decreasing

PS3= huge losses, won't go away for some time

BluRay = small profit now, huge potential

 

MS:

X360 = huge losses, will soon break even and make a (small) profit

Live = some profit now, huge potential

 

Sony did great with PS2, but they're digging themselves deeper and deeper into a hole with PS3. MS got into a deep financial hole with XB, but are getting themselves up from that hole with X360.

stranne said: DoesWhatNintenDont, Sorry for the late reply.   I may have a very naive and simplified view of things, but this is how I see it. (quarterly) Sony: PS2 = good profit, decreasing PS3= huge losses, won't go away for some time BluRay = small profit now, huge potential   MS: X360 = huge losses, will soon break even and make a (small) profit Live = some profit now, huge potential   Sony did great with PS2, but they're digging themselves deeper and deeper into a hole with PS3. MS got into a deep financial hole with XB, but are getting themselves up from that hole with X360.

Is that your personal opinion or what?

Last I heard PS3 manufacturing costs were going down significantly and they were moving towards a 65 nm chip.

 

Besides moving to a 65nm chip, I see nothing to suggest that the 360 will soon break even and make a small profit.

As far as Live goes, only about 20% of my friends with 360 (most of them casual gamers) have the Gold membership, the rest all only have Silver for Demos and Trailers.

I had a link and I'll try to find it where there was MS, Sony and Nintendo FY earning from 2000 to 2006 or so. Microsof has not made a profit at all, and like I said, nothing suggests that they are digging themselves out of this hole.

 

TheBigFatJ said: Lost tears of Kain said: You know that microsoft mad somewhere of 14 billion last year or fiscal year (read it) microsoft is in this for the long hall they want to beat out sony and take its place. BTW sony is like microsoft they are loosing billions on the ps3 right now but they see that if they can win the blue ray war they it will come back as profit later years, its the same microsoft sees about the gaming industry   Sony is not like Microsoft because the playstation brand consistently generates a profit with no consecutive fiscal years of loss. Microsoft hasn't generated a single fiscal year of profit yet, and has lost an average of more than one billion per year on their xbox division.

The problem, of course, is that Sony's trend of no consecutive years of fiscal losses is almost certainly going to be broken this year. Sony lost 2 billion last year, and they've already lost 300 million this year (which is an increase in losses over the same time last year).

In the past two years, Sony and Microsoft have lost an almost equal amount of money in the video game industry: 2.3 to 2.7 billion in favor of Sony. However, this includes Microsoft's 1 billion dollar warranty write off, and thus it seems quite likely that within the next two quarters -- perhaps even before then -- Microsoft will surpass Sony in profits (or less losses) since 2005.

Sony used to be better at making money in gaming than Microsoft. That is no longer the case.

Bodhesatva said: TheBigFatJ said: Lost tears of Kain said: You know that microsoft mad somewhere of 14 billion last year or fiscal year (read it) microsoft is in this for the long hall they want to beat out sony and take its place. BTW sony is like microsoft they are loosing billions on the ps3 right now but they see that if they can win the blue ray war they it will come back as profit later years, its the same microsoft sees about the gaming industry   Sony is not like Microsoft because the playstation brand consistently generates a profit with no consecutive fiscal years of loss. Microsoft hasn't generated a single fiscal year of profit yet, and has lost an average of more than one billion per year on their xbox division. The problem, of course, is that Sony's trend of no consecutive years of fiscal losses is almost certainly going to be broken this year. Sony lost 2 billion last year, and they've already lost 300 million this year (which is an increase in losses over the same time last year). In the past two years, Sony and Microsoft have lost an almost equal amount of money in the video game industry: 2.3 to 2.7 billion in favor of Sony. However, this includes Microsoft's 1 billion dollar warranty write off, and thus it seems quite likely that within the next two quarters -- perhaps even before then -- Microsoft will surpass Sony in profits (or less losses) since 2005. Sony used to be better at making money in gaming than Microsoft. That is no longer the case.

 Depends on how much of the 300 Million are units produced and not sold (meaning Sony got money for it). Could be they begin to lower production, because they are good at stockpiling for Christmass. I would excpect much lower losses this quarter.

Now is not the time for them to stockpile for Christmas, for either MS or Sony. Both companies are planning major production cost reductions soon, but not yet.