Again my point which was missed was every single PS3 that is sold to date has made Sony lose money. They lost over $3Billion on it in the last two year. If Sony make $900m a year (according to forbes list) it does not take a genius to work out that $900m is a lot lower then $3B. How long can a company in todays world really go that long leaking money like that? If you look at the actual situation you see that Sony are having to cut costs a lot, they have already said they are sacking a 5th of their workforce (18k), selling factories and so on. If your company is losing money that means you have to borrow it from either backers or the banks. If the share price has fallen to its lowest ever falling over 76% in the past 6 months alone how long until the backers think about not putting their own cash in anymore? Then add to that the world financial problems of the world with the banks in every country of the world will mean banks will not lend money to each other so why would they lend it to a company that is losing so much money?! That is business suicide.

The reality is Sony is in a very dark place right now, the same as so many other companies around the globe. It is simple maths if your outgoings are higher then your ingoings it is just a matter of time before your so far in the minus you wont ever get back to zero. Sony are not in a position to cut the price of the PS3 simply because that would mean even more loses. If they are losing over $50 a PS3 they will not want to increase PS3 sales and lose even more money. And if they do cut just $50 to be losing $100 on every PS3 will most likely mean they go bankrupt. Imagine it like this. Say Sony do cut $50 that means every PS3 sold = a loss of $100. If in 2009 things stay as they are and they sell 9m consoles with the $100 loss would mean a loss of $900m in just a year.

The point people miss so much is that Sony is a shareholders business, they are not fanboys. They want profit and are yet to see any on the new generation. So what this and other financial analysts is really no brainer. As things get older they get cheaper to make. The question then becomes how long can Sony go on bleeding money? The 360 and Wii are making profits and have for well over a year. They can both drop prices further and still make money. If Sony drop their price of the PS3 and instantly the 360 and Will follow suit that could seriously damage Sony for the longterm like with Sega. I dont think they will risk that at all. Money is whats important not saying your first place. Because neither PS3 or 360 will ever be first place this gen.

bdbdbd said: @senseinobaka: Official line may differ largely from reality. If there's no R&D for PSP2 or PS4, you can be quite sure there will be no such things. Sony is propably aiming 2011-2012 for PS4 release, so if they don't have the R&D going already, they are going to be very late. R&D isn't something you "just start when you need it", it's a continous process. PSP3000 required R&D, removing the BC from PS3 required R&D, PS3:s white colour required R&D, new power brick required R&D, cutting the power consumption required R&D and even the different bundles require R&D and the list goes on. If Sony didn't have R&D going for PS4 and PSP2, their R&D costs would be down a lot. Things don't "just happen" you know. We agree, R&D is a proactive measure but we are taking about 2 different endeavors. I'm talking about large-scale R&D into new technologies and marketing strategies. This kind of R&D is traditionally started several years before a console launch and costs 100's of millions per year. You are mentioning fairly simple changes that dont require factory retooling, new tech, and vastly new components.    If game developement is outsourced, why does Sony own so many studios? If Sony has a large number of studios and all they have in the studios is executives, you can be damn sure that layoffs will happen, since all they'd do is pay for byrocracy for nothing (=high administrative costs). Sorry, I didnt mean it that way. Sony employees are at an administrative - executive level. So sony will not be laying off those needed to run the game division. Manufacturing is outsourced, Sony outsources development to 3rd parties by function as a publisher, and sony owns lots of studios as you mention. However, if sony cuts the budget to their owned studios then we will here of layoffs from them, not from sony. ie. Naughty Dog (I believe sony owns them) will layoff x amount of employees. I personally doubt that this would happen since software remains their profit generator.

 Comments in blue

 

arsenicazure said: @bdbdbd Would you classify it as a DVD disc if it were non readable in a DVD ROM drive?

Absolutely.

Have you ever burned a DVD-R or DVD-RW that didnt run on a particular DVD player? Encoding is what makes sure data on a DVD can be read by a player. Nintendo, in order to protect the IP of itself and liscensees, uses very beefy encoding and DRM to make sure that the Wii is the only player capable of reading whats stamped on their DVDs. I believe if you flipped a Wii case over, you should see a DVD-9 stamp some where.

 

There's no reason to believe that Microsoft will again "raise the bar" in the HD console race with the next generation. Why should they burn a lot of money on a demographic which is clearly not their target?

Microsoft's XBox is a defensive measure, against "invasion" in the home, against the Windows-based PC, from the livingroom.  MS can't have browser-based office products being run from consoles which never required Microsoft's OS in the first place, now can they?  MS couldn't care less whether or not they capture the hearts of the 13-25 male demographic, now that its been proven (via the Wii) that the real contender for livingroom dominance has less to do with shooting games, and much more to do with casual/Everyone games.

I think the "next" XBox will BE the X360, albeit in a new package, and with a new controller. The PS3 will be able to sustain itself against such competition in much the same manner. "10-year plan" -- Sony and MS have both said it, and they are serious.

@Arsenicazure: It depends. If it's black with 30cm diameter, i wouldn't call it a DVD, but if it's physically a DVD and can't be read on a DVD drive, i'd call the DVD drive lacking the firmware.

@senseinobaka: If we are talking about Sonys 1st party studios, then the layoffs would be Sonys layoffs. Also notice that selling a studio is count as layoffs.
Look, it's no different whether you call the studio as SCE Santa Monica or Clap Handz, as long as it's an internal studio.

Going into smaller chipsize, changing the desing, switching to new powerblock, they all require retooling and possibly even new tech. If the change doesn't seem big for the consumer, it doesn't mean it wouldn't be one.

For the which level the R&D costs should be at. Since the costs aren't severely down and PS3 had very high costs, i see that supporting the argument of PS4 being in developement. If Sony doesn't up the costs in similar fashion, it only means that they don't have a project relatively on the same scale going on. It still can have hardware projects eating hundreds of millions per year (not literally). Also notice that the upgrades/changes in design are just as well R&D for the next gen, as they are for the current gen.

Hyruken said: Again my point which was missed was every single PS3 that is sold to date has made Sony lose money. They lost over $3Billion on it in the last two year. If Sony make $900m a year (according to forbes list) it does not take a genius to work out that $900m is a lot lower then $3B. How long can a company in todays world really go that long leaking money like that? If you look at the actual situation you see that Sony are having to cut costs a lot, they have already said they are sacking a 5th of their workforce (18k), selling factories and so on. If your company is losing money that means you have to borrow it from either backers or the banks. If the share price has fallen to its lowest ever falling over 76% in the past 6 months alone how long until the backers think about not putting their own cash in anymore? Then add to that the world financial problems of the world with the banks in every country of the world will mean banks will not lend money to each other so why would they lend it to a company that is losing so much money?! That is business suicide. The reality is Sony is in a very dark place right now, the same as so many other companies around the globe. It is simple maths if your outgoings are higher then your ingoings it is just a matter of time before your so far in the minus you wont ever get back to zero. Sony are not in a position to cut the price of the PS3 simply because that would mean even more loses. If they are losing over $50 a PS3 they will not want to increase PS3 sales and lose even more money. And if they do cut just $50 to be losing $100 on every PS3 will most likely mean they go bankrupt. Imagine it like this. Say Sony do cut $50 that means every PS3 sold = a loss of $100. If in 2009 things stay as they are and they sell 9m consoles with the $100 loss would mean a loss of $900m in just a year. The point people miss so much is that Sony is a shareholders business, they are not fanboys. They want profit and are yet to see any on the new generation. So what this and other financial analysts is really no brainer. As things get older they get cheaper to make. The question then becomes how long can Sony go on bleeding money? The 360 and Wii are making profits and have for well over a year. They can both drop prices further and still make money. If Sony drop their price of the PS3 and instantly the 360 and Will follow suit that could seriously damage Sony for the longterm like with Sega. I dont think they will risk that at all. Money is whats important not saying your first place. Because neither PS3 or 360 will ever be first place this gen.

One of the smartest things ever said.

Neither is Microsoft. Yet they provide a 360 for 160Euro and they loose money on each sale for sure.

The thing is each console sold makes money. 10$ for each game sold, more for first-party games. Add to that BluRay discs, second controllers, ps eye, ... and you come out at much more than 50$ per console. That's how the console business works. Now this wouldn't be so bad if people simply waited, but they buy a 360 instead and this results in money lost for each game that was bought for the 360 and not for the PS3.

I would suppose that dropping the price now would be better for them overall but it would of course hurt them in this quarter. Most likely something they don't want to stomach right now after being pummeled by the financial crisis in their other company parts. Stupid nontheless.

Kyros said: The point people miss so much is that Sony is a shareholders business, they are not fanboys. Neither is Microsoft. Yet they provide a 360 for 160Euro and they loose money on each sale for sure. The thing is each console sold makes money. 10$ for each game sold, more for first-party games. Add to that BluRay discs, second controllers, ps eye, ... and you come out at much more than 50$ per console. That's how the console business works. Now this wouldn't be so bad if people simply waited, but they buy a 360 instead and this results in money lost for each game that was bought for the 360 and not for the PS3. I would suppose that dropping the price now would be better for them overall but it would of course hurt them in this quarter. Most likely something they don't want to stomach right now after being pummeled by the financial crisis in their other company parts. Stupid nontheless.

On the other hand, Microsoft's entertainment division is profitable and likely still will be during this quarter. Although the Arcade is selling a lot, they also sell a lot of Premium and Elite which don't cost much more to produce than the Arcade. Also, Microsoft seems to be selling as much software as PS2+PS3+PSP combined, when 360 games are more expensive than PS2/PSP games. Finally, Microsoft doesn't have any declining platforms, while Sony has one or two.

My point? There's no useful comparison with Microsoft here. Microsoft and Sony couldn't be more apart than they are regarding financials, especially if you look at the companies as a whole.

 

Of course there is a useful comparison to be made. I won't argue that the gaming division of Sony is in much better shape than the gaming division of MS. (Although only having one horse that is at its peak is not exactly a great strategy) But the poster I was answering to was saying that Sony cannot loose money on each console because they are a public company. Which is bullshit as can be clearly seen by the Arcade of the 360.
The question is more if you can make the money you loose back by selling games and peripherals. This was clearly not the case with the PS3 when it launched when the price was set to grab critical marketshare. (Which may also be the reasoning behind the Arcade). If you do this you need to have a sound business to stand on. But keeping the 400$ price tag at christmas was bone-headed.

Kyros said: My point? There's no useful comparison with Microsoft here. Of course there is a useful comparison to be made. I won't argue that the gaming division of Sony is in much better shape than the gaming division of MS. (Although only having one horse that is at its peak is not exactly a great strategy) But the poster I was answering to was saying that Sony cannot loose money on each console because they are a public company. Which is bullshit as can be clearly seen by the Arcade of the 360. The question is more if you can make the money you loose back by selling games and peripherals. This was clearly not the case with the PS3 when it launched when the price was set to grab critical marketshare. (Which may also be the reasoning behind the Arcade). If you do this you need to have a sound business to stand on. But keeping the 400$ price tag at christmas was bone-headed.

I agree with some parts of your post, but keeping the price at $400 was not bone-headed. I can assure you there's a lot of gloom inside Sony right now, so executives don't want to assure 1 more billion dollars in losses. Especially when they promised they'd focus on profitability to shareholders. Even without a price cut, profitability is already hard to attain, a price cut would make it impossible for one more year at least...