WHY?

All things are pointing to Ps3 breaking even on one game or controller or less. It's even possible that with Home, Sony breaks even on every console sold since Home's release. So, why am I saying Sony Computer Entertainment is going to be in the red?

Because SCE is making money now, and with that comes a lot of the expenses that they were forgoing because of their money crunch. This means:

1. New commercials: There are about 3 Playstation commercials running around the media at the moment. This is 2 More than what they've been running throughout most of the PS3's lifetime.

2. R&D: Move to PS3slim. With any move to a new design, even if it uses cheaper materials, there are a lot of costs associated in it. New molds, new contracts with initial downpayments, new machinery, and so on.

3. New exclusives: As we have all been seeing, PS3 is aquiring quite a few new JRPGs and a lot of other exclusives. Almost every day I come and lurk on the chartz I see a new post about some new ps3 exclusive. What this suggests is that Sony is doing exactly what they used to do. They are helping to develop new exclusive IPs from the ground up with their own programmers. Not to mention that they have also dropped the cost of their dev tools by 75% or so. What this means is a lot of new games, but also a lot of expenses.

I actually think they may hit the black, but I've noticed a lot of movement within the company and it all points to increased spending. What do you think?

They have to pay their employees. It doesn't matter if their products break even or not, their employees require a good sum of money.

I thought the employees were already factored into the reason the products weren't breaking even in the first place? Won't "manufacturing costs" include wages to plant employees or is it just raw material costs?

I'm not sure what you're saying. I think they may be working their employees more due to their help with 3rd party devs, and I think they may have even been hiring. But then again, they also just merged themselves with the (walkman or ericcson) group I can't remember which.

I think their employees are probably paid solely from the profits of the ps2.

EDIT: Pristine, yeah that's what I didn't get about his post. There may be increased costs from development and R&D, but a lot of costs for payment have already been considered. Even dev costs are incorporated into the margin of their games. Which is why they only make like 30 or so per 1st party game. Most of everything is accounted for already except for the increased costs I mentioned like paying for marketing, third party development, and new R&D

I doubt it. You have to remember that there are employees who don't develop or create products, such as customer service workers.

hmm, you've got a point there. I didn't think about customer service workers.

@montana
Maybe this is me being arrogant, but I'm pretty sure all the higher paid employees are accounted for. Customer service can be outsourced, and is generally very inexpensive as compared to things like sales, manufacturing, and research. Of which, two of those things are for sure included in the overhead cost of ps3 and games.

EDIT:

what I mean is that customer service reps are paid between 7-12$ here in the US for the most part. As compared to devs at 40$+/hr manufacturing 28$+/hr, and marketing @30-80/hr. On top of that a lot of customer service is outsourced to countries like India where the costs per hour per employee drop to something like 4$-/hr.

Keep in mind that they are doing R&D on far more than just a ps3 Slim. They're always working on hardware redesigns for all of their products, and they're doing plenty of development on the PSN and ps3/psp firmware.

Then there's all the costs associated withe SCEWWS. They're paying for not only the developmentof new games, but the maintainence of servers and the like for old games. This last quarter was one of their weakest in terms of first party releases in a long time (only InFamous was released, compared to Killzone 2 and MLB 09: The Show the previous quarter, and a plethora of titles the quarter before that), so they had less revenue covering their expenses in this area.

exactly. I think that maybe in the past 6 months they opened the floodgates for R&D. I think they said, "ok, we made it. We're making money, we're past the storm, let's focus on the future."

I think GT5 will help lessen the (possible) loss this FY by alot.