Tuesday, June 24, 2008

Sony Lost $3.32 BILLION Dollars Thanks To The Playstation 3

Much has a already been said about Microsoft losing over a billion dollars thanks to the 3 Red Lights of Death / RROD...this time Sony is in the news because they've lost even more money than Microsoft!


"Sony Lost Over $3 Billion To PS3 Cost, Pricing Imbalance

Pricing the PlayStation 3 below its production cost caused Sony to lose $2.16 billion in 2007 and $1.16 billion in 2008, the company revealed today.

Sony's fiscal 2008 annual report delineated potential risk factors to its investors, outlining that "the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered." The loss figures were provided as an example of the "significant negative impact" introducing a new platform can cause at first.

"In the past, large-scale investment relating to capital expenditures and research and development for the manufacture of key components, including semiconductors supplied for [PlayStation 3] was also recorded within the Electronics segment," the company said.

In order to stay competitive, said Sony, it had to invest large amounts of money in research and development to introduce the PlayStation 3 into the market, and these sorts of expenditures don't always get recouped, especially if a platform "fail[s] to achieve such favorable market penetration... resulting in a significant negative impact on Sony's profitability."

Even if it can recoup its investment, Sony said, it's still possible to have lost large amounts of money on the platform's introductory period, and even a successful PS3 might take a while to replace what it cost to produce. These possible outcomes are currently a risk for the company, Sony said."

I'm sure a lot of gamers don't really care about this news or how it might affect them, they're only after the games, after all. But personally I see this as a huge loss for Sony; perhaps this might explain why they've been losing game exclusives left and right.

Was it worth it? I think a big reason why the PS3 is costing Sony so much is because they're more concerned about spreading the Blu-Ray format over actually competing in the games business with Microsoft or Nintendo. The attach rates for PS3 games shows that most people at this time buy PS3s to watch Blu-Ray movies with them and not really to play games, so in part, Sony's strategy has worked. But their position in the market is so confusing. Is their device a movie player? Or is it for playing games? Even on the development side, companies have complained that it is quite difficult to make games for the PS3, and companies that have managed to release games have taken a lot more delays than developers making games for the Xbox 360.

The only other thing Sony has going for them is their positive reputation with most of the games press, which never really points out the company's mistakes. On the other hand, Microsoft always gets called out for 3RL/RROD, despite the fact that it is a non-issue already in first-world markets, where MS provides a 3 year replacement warranty, and where you can easily just go back to the store, complain, and get your console replaced. Also, the Falcon revision of the Xbox 360 has significantly reduced failure rates, and yet 3RL is still cited by the mainstream game press as Microsoft's main crutch this generation.

The problem with ignoring Sony's mistakes this generation is that they may repeat them later on, or could ultimately put them out of the games business, much like what happened to Sega back in 2001. Sony's rival Microsoft is putting up a stronger fight against them now, with a much larger installed base, a much better lineup of games and exclusives already available in the market, and an overall more profitable business (because of Microsoft's higher game attach rate, where it is estimated each Xbox gamer has more than 6 games. Sony's ratio is far lower than that).

1 comment:

  1. hi, I've stayed between both first world and third world countries and sum up a very simple logic after my visit back home,

    Xbox 360
    moddable - yes, chipped and re-packed into the box ready to go
    pirated games available - yes
    price - just a bit more than a modded wii
    availability - sold out

    playstation 3
    moddable - still no
    pirated games available - no
    price - slightly higher than a modded xbox
    availability - collecting dust on shelves

    I have an unmodded xbox with original games to play online. But that's just where I am. In Australia everyone buys original. Look at the main market - Asia. With tons of population growth in the third world countries, that's where the money lies. The main reason why Playstation 1 and 2 did so well in Asia I am pretty sure you can figure that out, and the same reason why Wii is doing superbly well in Asia and probably Europe.
    We just can't ignore that it all boils down to choices. People love choices, and cheaper ones if possible. To say that games sells consoles is partially true. It does contribute towards console sales in the end when the library grows quickly with lots of variety and is available at a much lower price point (regardless if its original or pirated). If the growth of xbox 360 games library becomes twofold of the PS 3, then I would say in time, the xbox 360 will become the true successor to PS 2. All M$ needs to do now, is to continue pumping out games, re-design a slimline console without a power brick, price it at the Wii level, and Sony will have an even tighter competition ahead...

    2 weeks back in Asia, I was watching store vendors playing MGS 4 by themselves, no one talks about it, no one has it, no one plans to buy it, maybe some hardcore fans will work OT to save the cash to play just one game who knows....