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PS3 Lost Sony Nearly £2 Billion

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PS3 Lost Sony Nearly £2 Billion

Sony's financial report for the last financial year (i.e. 1st of April 2007 to the 31st of March 2008) shows that the PS3 really wasn't money-spinner that, well actually no-one thought it would be from launch. Apparently selling the console below cost lost Sony about 1.10 billion and £589 million in 2007 and 2008 respectively. Hardly pocket change - even for a company of Sony's size.

Specifically Sony recorded "losses of 232.3 billion yen and 124.5 billion yen within the Game segment for the fiscal years ended March 31, 2007 and 2008, respectively. These losses arose from the strategic pricing of PS3 hardware at points lower than its production cost".

The report further comments that "The large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered" continuing that "in addition, even if Sony is able to sufficiently recoup its investment, significant negative impact on Sony's operating results could occur during the introductory period of the platform. Further, even if the platform is ultimately successful, it may take longer than expected to recoup the investment, resulting in a negative impact on Sony's profitability.

In layman's terms: Sony gaming division lost quite a bit of money developing and introducing the PS3 before then selling it at a loss, but that's to be expected. This loss probably won't be recovered for a while or, in the worst-case scenario, at all. Sony's overall profitability is, obviously, going to be effected by this.

It isn't all bad though as "although there was a loss arising from the strategic pricing of PS3 hardware at points lower than its production cost, the operating losses of the PS3 business decreased as a result of successful hardware cost reductions and increased sales of software".

So, while profitability hasn't exactly been a strong suit of the PS3 thus far, that should change going forwards as the console is now cheaper to make. Moreover, software sales are at least making Sony money and will continue to do so increasingly as more people buy more games.

Interesting reading!

Link:

Full report. (PDF warning!)

GoldenGuy

June 26, 2008, 1:50 am

Not a clever or original question but I have to ask : Dear {Whoever on TR is the Most Die Hard Gamer}, the line from PS3 supporters (that includes me) has been very much, "Stay the course", that it's the one console that has futureproofed the best and will prove to have the longest shelf-life to the extent that it could actually win the console war? Is that just fanboy naivety? I do have to concede that it's now mid 2008 and it's not made any drastic move toward pole position, so is it too late to win or is there still much of the console war to come?

Hugo

June 26, 2008, 2:09 am

Personally I think that the idea of a "winner" or a "loser" is a misperception of what is actually going to happen. If you want the Xbox 360 exclusives, say Gears or Halo, buy one of those. If you prefer the PS3 games, such as the brilliant MGS4 and (hopefully) Final Fantasy buy a PS3. If you're interested in only in games available on both platforms, buy a PS3 - for not much more money it's a much nicer bit of kit, and it's being improved <i>alot</i> all the time. And you can hear your TV over it's fans!





The only real winner, if you'll forgive the clich&#233, is the consumer.

GoldenGuy

June 26, 2008, 8:19 am

I see what you're saying - it is a fantastically varied console market, where they all cater to slightly different needs.





I also think the mark of 7/10 was harsh for the PS3. Expensive on release, yes, but it's a great, robust looking machine and you were paying for a 1080p Blu-Ray player as well (whether you want it or not is something else).





I actually think something like the iPhone was more deserving of this rating because in my estimation, the significant premium was not fully justified by the features on the device. You may think that's an unfair comparison, but I'm merely thinking of when the critics should have the product take a hit on price and when it shouldn't. In the case of Apple the fact their product was a gamechanger with the interface, they felt that excused them from missing out a ton of features that now come as standard. The PS3, though still dear, still provided virtually ALL the expected features of a luxury device. I would have given that an 8/Recommended, and the iPhone the 7.





(But hey, obviously I'm not the expert.)

Superdynamite

June 26, 2008, 11:23 pm

The licensing for Blu-Ray is worth $300 billion over the next 10 - 15 years.





Do the math.

GoldenGuy

June 27, 2008, 2:32 pm

Maths.

Tommy K

June 29, 2008, 2:53 pm

well said golden guy

adr25

March 19, 2009, 12:19 am

I think Superdynamite has a point though. Sony used the ps3 as a bit of a trojan horse to get blu-ray into consumer homes and ultimately beat HD-DVD (becoming the de facto standard in the process). I don't know how accurate those numbers are but even if they get a fraction of that amount Sony should benefit in the long run.





Now the argument regarding physical media's lifespan is a whole different kettle of fish! :-)

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