The idea behind the 10 year cycle isn't that Sony won't release a PS4 until 2016. The idea is that the PS3 will be around and supported throughout the PS4 generation. However, this won't happen, and here is why it worked for the PSX and PS2, but will not work for the PS3:

(1) The PSX/PS2 dominated the competition and continued to sell very strongly after they were obsoleted. The PS2 is dropping heavily this year, and may or may not really have a 10 year cycle.

(2) The cost of the systems was way, way lower than the PS3. Sony cost reduced them much faster and was working with much smaller, much more profitable numbers. They were able to sell at a profit for very low costs ($99 and $129) 5 years after launch. There's no way that will happen with the PS3.

So while I agree that the 10 year plan for the PS3 is clearly rubbish, it's for the reasons I outlined above.

Focusing R&D on software could have bigger impacts on the PS4 than the PS3.

Honestly, I don't think Sony would discontinue the PS3 -- though it probably has been discussed/considered. The PSP meanwhile may be in a much worse predicament since it is not a software seller.

Mike from Morgantown

TheBigFatJ said: The 10 Year Life Cycle will never happen. There is no way it can. Since Microsoft is batteling Sony on symetric grounds, they will have to respond when Microsoft announces a console. Sony wont have much longer to sit on the PS3. Sony is also notorious for having large loses when developing a console. If Microsoft pushes, Sony will fall. The idea behind the 10 year cycle isn't that Sony won't release a PS4 until 2016. The idea is that the PS3 will be around and supported throughout the PS4 generation. However, this won't happen, and here is why it worked for the PSX and PS2, but will not work for the PS3: (1) The PSX/PS2 dominated the competition and continued to sell very strongly after they were obsoleted. The PS2 is dropping heavily this year, and may or may not really have a 10 year cycle. (2) The cost of the systems was way, way lower than the PS3. Sony cost reduced them much faster and was working with much smaller, much more profitable numbers. They were able to sell at a profit for very low costs ($99 and $129) 5 years after launch. There's no way that will happen with the PS3. So while I agree that the 10 year plan for the PS3 is clearly rubbish, it's for the reasons I outlined above.

This should have been common knowledge for some time now. We all know the 10-year plan won't work for them. I laughed when I first heard it because it tells me Sony is in denial.

 

Smashchu2 said: There are some problems though First, Sony can't re-enter the market with a PS3. You claim that Sony can do something similar to Nintendo and not advance the hardware much. This is true if there wasn't disruption at play. Sony needs to adapt to the new market values (more in a bit). Since Nintendo is fighting the HD Bros in an Asymmetric war, they will have to counter attack That's just not true.  Sony could very well release a new platform that was an "entry level PS3", targetted at the blue ocean, was much cheaper to produce, and would provide forwards compatibility with the current PS3.  Sony can (and does, with the PS2) "compete" with themselves, Microsoft, and Nintendo, through all sorts of means, and from a huge number of angles, even with minimal R&D for new hardware. 2. The 10 Year Life Cycle will never happen. There is no way it can. Since Microsoft is batteling Sony on symetric grounds, they will have to respond when Microsoft announces a console. Sony wont have much longer to sit on the PS3. Sony is also notorious for having large loses when developing a console. If Microsoft pushes, Sony will fall.  You're making the assumption here that MS will bite the bullet on upping the bar for the next gen... losing billions in R&D for a new console, when the main competitor is a generation behind their current console, and winning the console war by a landslide.  MS... they're not dumb either.  They know where the money is, and its not in upping the bar anytime soon.  10 years... both MS and Sony have said it, and both are quite serious. 3. You are right they are getting cloer to profitability, but it is "too little too late." The sales of the PS3 are starting to level off which may force them into a price cut. This will only prolong the loses. Also, if the boost is not enough then they may never make a profit. Merely selling the PS3 at-cost will ensure profitability for SCE.  They make lots of money on software -- and hardware manufacturing costs continue to drop, year after year.  You don't need to dominate the market to be profitable.  If PS3's stopped selling this moment, there would still be 20 million in existance, and that's far from a small userbase.  The 360 would have to outpace the PS3 by a more than 3-to-1 margin (> 60 million 360s, if PS3s just... stopped selling right now) before 3rd parties would stop bothering with cross-platform ports.  That was true last generation, and it will continue to be true this generation -- especially since the PS3 and 360 are so close, in terms of technical specs. 4. Many fanboys think that once Sony makes a profit that all slates are clean. This is not how it work. That mean they have to start digging themselves out of this hole. From there, they have to some how find a way to erode the loses they have accumulated. Since the lifespan is short, they probably won't make up their loses. The next system will encure bugger loses in R&D, and if that loses money out of the gate, then it will be a lost cause. Sony is a huge, far-reaching company.  The R&D that the entertainment division spent on effectively winning the High-def format war is not some sort of "oh noes, look how bad the Entertainment division did!" mar.  SCE is one of Sony's very best divisions.  They are not going to close it down, even if they don't even out the SCE-specific books over the next 6 years.  Its the bigger picture that matters.  For SCE, any profitability is all that matters, while Blu-Ray cements itself as the next major format over time. 5. Sony is in the worst possition of any company right now. They have to fight a symmetric war from Microsoft (one on similar valuies) and the asymmetric from Nintendo (one of different values). The last asymmetric war was between Atari and Nintendo. Nintendo, the disruptor, unlimatly won. Sony can not fight on two fronts. Mircosoft can unveil a new console which could push Sony over the edge. Nintendo will innevitably challange Sony in the higher tiers and well as eat away at their market. There is no safe spot. If Sony knows Nintendo is at their doorstep then they will cut the Playstation brand. E3 2008 was their last chance to counter attack Nintendo's disruption and they failed. Nintendo will come and the battle against Microsoft continues. There really is no hope for Sony. I think that Sony is a lot more clever than you give them credit for, and frankly, what you see as "two fronts" in a war they are "losing", they may very well see as multiple openings for future profitability.  Nintendo has extended the demographics of the console market by a huge margin -- there's no reason to believe that people who purchased Nintendo Wiis this generation will not go out and purchase a "Sony FamilyStation" or "Microsoft XBob" in the next generation instead.  There's also no reason that an architecture as ready for growth as the Cell couldn't be easily upgraded in the next generation to provide HD gaming at a mere fraction of the R&D costs of this generation.  Who says that "two fronts" doesn't actually mean a foothold in the entire game console demographic, rather than just the traditional demographic, or just the "blue ocean"?

 

 

@Groucho: Sonys issue may not be whether it makes profit or not, but the margin it makes profit. It's not in common that companies close/sell their profitable ventures due to profit margin not being what they'd want it to be.

BD is pretty irrevant for PS3:s future, since HD-DVD already died from the market and PS3 isn't needed to fight that fight anymore, it just takes away sales from the profitable standalone players.

In any case, if the rumour holds water, it's really interesting to see what Sony will do. But one thing is certain; the divisions that can't make a "profitability strategy" for the next few years, is going to be cut down.

@NJ5: Since you're a handy guy, could you find SCE:s revenue numbers since the late 90's?

bdbdbd said: @NJ5: Since you're a handy guy, could you find SCE:s revenue numbers since the late 90's?

There's more Sony financial data than one could possibly want right here:

http://www.sony.net/SonyInfo/IR/library/hist_fy08_Q2.xls

 

@NJ5: Thanks. Though i'm on my mobile (as usual) and can't open exel files.

The thing i'm looking for, is the revenue to see how big slice Sony has and the changes in revenue over years to compare how SCE is doing at the moment and in the future. If the revenue isn't high enough, or isn't expected to grow enough, SCE may be in even worse trouble than we are thinking. If you have high revenue "all you have to do" is to cut costs in order to make profit.

Some thoughts:
1: The Playstation brand name is dead. I'm not saying they'll discontinue the PS3 or stop making games, but it'd be foolish for sony to make another playstation-branded console. Non-'hardcore' gamers think the Playstation brand name is a joke.
2: The PS3 is in trouble. Unless they can radically change the financial condition of the division, it's at risk of going under.
3: Even if SCE or even the PS3 itself becomes profitable, it doesn't guarantee the survival of the PS3. Sony is in a bad way, and if their choice is to either sell a nominally successful franchise or to go under due to lack of available capital, they'll sell off the PS3.

Holy shit this recession sucks! I'll be pissed if i have to buy a Wii 2 next gen.

God please let Microsoft/Sony release a console next gen so I don't have to play another 50 mario sequels!!

Groucho said: Smashchu2 said: There are some problems though First, Sony can't re-enter the market with a PS3. You claim that Sony can do something similar to Nintendo and not advance the hardware much. This is true if there wasn't disruption at play. Sony needs to adapt to the new market values (more in a bit). Since Nintendo is fighting the HD Bros in an Asymmetric war, they will have to counter attack That's just not true.  Sony could very well release a new platform that was an "entry level PS3", targetted at the blue ocean, was much cheaper to produce, and would provide forwards compatibility with the current PS3.  Sony can (and does, with the PS2) "compete" with themselves, Microsoft, and Nintendo, through all sorts of means, and from a huge number of angles, even with minimal R&D for new hardware. 2. The 10 Year Life Cycle will never happen. There is no way it can. Since Microsoft is batteling Sony on symetric grounds, they will have to respond when Microsoft announces a console. Sony wont have much longer to sit on the PS3. Sony is also notorious for having large loses when developing a console. If Microsoft pushes, Sony will fall.  You're making the assumption here that MS will bite the bullet on upping the bar for the next gen... losing billions in R&D for a new console, when the main competitor is a generation behind their current console, and winning the console war by a landslide.  MS... they're not dumb either.  They know where the money is, and its not in upping the bar anytime soon.  10 years... both MS and Sony have said it, and both are quite serious. 3. You are right they are getting cloer to profitability, but it is "too little too late." The sales of the PS3 are starting to level off which may force them into a price cut. This will only prolong the loses. Also, if the boost is not enough then they may never make a profit. Merely selling the PS3 at-cost will ensure profitability for SCE.  They make lots of money on software -- and hardware manufacturing costs continue to drop, year after year.  You don't need to dominate the market to be profitable.  If PS3's stopped selling this moment, there would still be 20 million in existance, and that's far from a small userbase.  The 360 woculd have to outpae the PS3 by a more than 3-to-1 margin (> 60 million 360s, if PS3s just... stopped selling right now) before 3rd parties would stop bothering with cross-platform ports.  That was true last generation, and it will continue to be true this generation -- especially since the PS3 and 360 are so close, in terms of technical specs. 4. Many fanboys think that once Sony makes a profit that all slates are clean. This is not how it work. That mean they have to start digging themselves out of this hole. From there, they have to some how find a way to erode the loses they have accumulated. Since the lifespan is short, they probably won't make up their loses. The next system will encure bugger loses in R&D, and if that loses money out of the gate, then it will be a lost cause. Sony is a huge, far-reaching company.  The R&D that the entertainment division spent on effectively winning the High-def format war is not some sort of "oh noes, look how bad the Entertainment division did!" mar.  SCE is one of Sony's very best divisions.  They are not going to close it down, even if they don't even out the SCE-specific books over the next 6 years.  Its the bigger picture that matters.  For SCE, any profitability is all that matters, while Blu-Ray cements itself as the next major format over time. 5. Sony is in the worst possition of any company right now. They have to fight a symmetric war from Microsoft (one on similar valuies) and the asymmetric from Nintendo (one of different values). The last asymmetric war was between Atari and Nintendo. Nintendo, the disruptor, unlimatly won. Sony can not fight on two fronts. Mircosoft can unveil a new console which could push Sony over the edge. Nintendo will innevitably challange Sony in the higher tiers and well as eat away at their market. There is no safe spot. If Sony knows Nintendo is at their doorstep then they will cut the Playstation brand. E3 2008 was their last chance to counter attack Nintendo's disruption and they failed. Nintendo will come and the battle against Microsoft continues. There really is no hope for Sony. I think that Sony is a lot more clever than you give them credit for, and frankly, what you see as "two fronts" in a war they are "losing", they may very well see as multiple openings for future profitability.  Nintendo has extended the demographics of the console market by a huge margin -- there's no reason to believe that people who purchased Nintendo Wiis this generation will not go out and purchase a "Sony FamilyStation" or "Microsoft XBob" in the next generation instead.  There's also no reason that an architecture as ready for growth as the Cell couldn't be easily upgraded in the next generation to provide HD gaming at a mere fraction of the R&D costs of this generation.  Who says that "two fronts" doesn't actually mean a foothold in the entire game console demographic, rather than just the traditional demographic, or just the "blue ocean"?

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   You obviously don't understand the Blue Ocean strategy. An HD console can't be a Blue Ocean as Sony overshoot the market. Also, Sony is in a much higher tier. To move downward would lose them the support of their core market and their investors. Sony can't make a Blue Ocean product. Even then, they would have to fight with Nintendo, a battle they can't win (Nintendo is an integrated software and hardware company. They will out preform anything Sony makes in this regard).

2. Microsoft is not interested in making money. They have yet to make a cent off of the Xbox line (a least to my knowledge). Their whole goal to to fend of Sony. Sony was trying to breach computers with their PS line, so Microsoft made the 360 to counter them. They haven't bitten on any of Nintendo lines becuase their main consurn is Sony, not Nintendo. Sony is trying to turn profits; Microsoft doesn't care.
3. Ummm, I don't think you understand the situation. The system is slowing down. Even if the system turns a profit with each sold, it wont make money if it sells 0. The PS3 is slowing down quite a bit. Sony would either have to stay on price and wait it out, or drop the price and hope they can sell enough to get money back. The problem is when they can start making money and how well it will sell when that has happened. It's a lot harder then you make it out to be.
4. SCE use to be one of their strongest divisions. Now, they are bleeding. As I mentioned, if Sony realizes what Nintendo is doing, they will cut it. They will spend too much trying to battle Nintendo when they will lose anyway. The format wars will also lose them money as they overshot the market. The consumer sees no need in having Blu-Ray or HD. If it were the case, then the PS3 would bee the best selling system on the market. The entire brand is in shambles right now and the confidence is shaky. 
5. Again, you don't understand disruption. The reason Nintendo can disrupt is becuase Sony and Microsoft overshoot the market. They can not simply make a system and beat Nintendo. Nintendo is changing the rules of the game (the point of disruption) and Sony and Microsoft lack the skills to keep up. E3 08 was an offense had Sony or Microsoft brought out a system to fight Nintendo's Wii. Since neither company is an integrated hardware/software company, they can not make products that will appeal to down market consumers. If it was that easy, they would have done it by now. No, instead, Sony and Microsoft will retreat upstream has Nintendo pushes upward. They will like that as they will get 100% of their best costumers. The problem is Nintendo will eventually reach the last tier and Sony and Microsoft will be no more, if they last that long anyway.

I suggest you read more on Blue Ocean strategies and Disruption.