there aren't companies that make serious money from hardware, most of them are happy to sell at even or even at a slight loss because it's all about software and peripherals. Psp's problem is not the PS3, but it's piracy. How much didi it cost a PSP at launch back in the day? Exactly

Sony's gaming department problem is that they cannot afford to loose money this fiscal year so they are hanging on with high prices as much as they can, the lack of sw sales for psp oblige them to be prudent on psp hw price and try to get some profitability from that, in the meantime they are trying to shift do digital delivery some of their costumers to involve 3rd parties in the psp business again so to get some safe money form software too; moreover I think a $/€ 100 price cut in the last quarter of the calendary year is so predictable for Ps3 (they predicted to move from 10 to 13 millions hw sales with this economy), they cut to $399 in that same period in 2007 and still found a way to have a profitable quarter despite HUGE hardware losses

Well, they wouldn't ONLY be selling PSP Go's. They would also be selling regular PS2s and PSPs. Let's ignore them for a moment, though.

Say they slash the price by $100. By the time they get around to that, it would be a $90 loss or so (perhaps less, but let's stick with that). Let's say they sell 7 million PS3s from then until April.
7*90 = 630. $630 million lost.

Perhaps they sell 2 million PSP Gos. $180 million back. $450 million left.

Let's say they get $30 from a first party game sale. They would need 15 million first party games sold to perhaps 4 million new PS3 owners. That's a bit ridiculous. If they get $20 from third party game sales, that makes things easier.

So I would say a price cut would still be a good move- some of the losses would be offset by the GO, some by extra software sales (and extra accessory sales).

Kantor has the right mindset. However his estimate is fairly conservative. With the 120GB PS3 slim coming out next quarter, which will feature multiple cost cutting revisions such as the 45nm Cell, a matte finish, and reduced size of the shell and most likely the motherboard, the cost of manufacturing a PS3 shouldn't be more than $375 if even that. At that point, if Sony were to sell 7 million units they would be making a loss of about 525 million. Then we need to take into consideration the hundreds of millions that Sony is making off the PSP Go, the PSP-3000, and the PS2 and that should come out to at least $250 million and that's again being extremely conservative. The PSP Go also offers the benefit of Sony reaping more software profits from digital distribution rather than ratail as well as the fact that it uses propietary assessories. Then we need to take into account all the additional PS3 games and assessories that will be purchases due to the increased marketbase. Then there is the PSN and Home profits. Finally, even on top of all this Sony still isn't expecting their Computer Entertainment division to be profitible.

No matter how you spin it. Sony has already more than prepared themselves for the $100 price cut coming to PS3. They've done the math. They no how much they will lose and have already made that ammount public with their fiscal forcast.

No. I can't remember in which thread this was discussed, but there is some fairly good analysis of what they make on hardware elsewhere, with software taken into consideration. You also have to consider the software boosts associated with elevated hardware sales, and the fact that downloads provide more revenue than UMD sales

Ther are a number of things we have to consider:

1. If they are releasing a slim ps3, how much would they be losing on that? Probably not $40 + whatever the size of the price cut is.

2. Gran Turismo. How well will GTPSP do this year? Will GT5 hit this year? Let's say GTPSP hits this year and sells ~1.5 million over the holidays. Assuming they get around ~$25 per copy sold, that's another ~40 million in the bank. Now let's say GT5 hits this year, and sells 3-5 million, depending on when it releases. That's another 120-200 million. And then there's Uncharted 2, which should sell a million.

Really, if GT5 hits this year, they'll have a stacked holiday quarter in terms of first party releases, something they haven't enjoyed in quite some time. But that's *if* it hits this year.

There are several things people MUST consider with the PS3 price cut/PSP GO.

1. Retailer margins are likely higher.

2. PSP Go!'s total sales will probably be 1/3rd of the PSP 3000s sales as its much more expensive.

3. Rolling out a content delivery network is expensive.

4. Any price cut on the PS3 loses Sony the money that people would have otherwise willingly given them. Say 7,000,000 people would buy PS3s at $400, 10,000,000 people would have bought a PS3 at $350 and 14,000,000 people will buy at $400. A $100 price cut loses $700,000,000 in revenue from the first group, $150,000,000 extra from the second group. So the total revenue gained from the $100 price cut must offset any hardware losses and the opportunity cost of $850,000,000 that they could have gained otherwise from not cutting the price. Its quite an involved calcuation.

At one point marketshare is going to come into play in the equation. I'm not so sure it's all just about profits, Sony also has marketshare goals to be met. If it comes down to the point that they can't completely balance the calculation toward the more expensive of the three price points, Sony may feel that the substantial increase in marketshare may be worth a relatively minor loss in direct revenue. Especially if substantial third-party support is on the line.

I'm not sure how Sir Howard Stringer or Kaz Hirai will be able to get shareholders on board for such a plan, but if Ken Kutaragi can convince them to launch a $840 console at a $240 loss per sale, then I don't think they should have too much of a problem. Then again, I'm comparing apples to oranges with the state that the company is in right now.

@Squilliam point 3 - The infrastructure is already there, anyway, sure it will need some upgrades for the new levels of demand, but upgrade costs will be easily combated by any profit made on the Go.

Squilliam - I disagree with point one. Sony were talking about good retailer relationships and how they understand how the go wont sell the SW so they are planning on releasing PSN cards.

It seems crazy to me that they would deliberately choose a price point for the PS3 which was unprofitable in the long term. So any price point they choose would have to meet the criteria that its most profitable price point they can select. Third party support isn't going anywhere any time soon, they ported to the PS3 when it had very low relative share with the Xbox 360.

They told their shareholders that they were aiming for profitability with the PS3.

@Sam: What about the direct download kiosks, PSN servers, software etc to allow people to download their games into the PSP?

@JEDE3: The thing is that a PSPGO owner may be able to completely bypass retail for games/movies etc. They have to give them more compensation for stocking the PSP. PSN cards aren't enough, most people in the target market for the handheld would have a credit card.