PS3 costs Sony $4.7 billion on the way to profitability

Sony HQ.Sony’s Q2 fiscal-year earnings report reads a bit like a good horror story. The most interesting for our purposes is that “networked products and services” division, which includes the Playstation brand. It also includes a whopping $654 million loss this quarter, which Sony attributes to declining PS2 sales and appreciation of the yen. The PS2 sold some 600,000 units less this year than last. Ouch.

Maybe worse, though, is that the numbers have given math nerds around the web enough info to figure that the PS3 has cost Sony roughly $4.7 billion over the course of its life. That’s a monstrous figure, particularly since this is Sony’s third-gen console. Microsoft lost about as much with the original Xbox, but the 360 hasn’t hurt Redmond nearly as badly.

There is some hope, though. As manufacturing costs continue to plummet and sales rise with the PS3 Slim, Sony thinks the brand will become profitable as early as next year. That would be a hell of a turnaround, and frankly one I doubt we’ll see, but I’m willing to hope a little for Sony’s sake.

  

PS3 Slim Will Lose Money For A While

Kaz Hirai.Everyone knows the console hardware business is not the place to make money. Not at first, anyway. After the cost of the internals start to come down you might see some profit, but even then, it’s small. That model holds true for Sony’s new PS3 Slim, a leaner version of the PS3. Sony exec Kaz Hirai told the Times Online that the PS3 Slim will lose money, just like the earlier model.

That really doesn’t come as a surprise. Sure, the technology is a few years old, but the size is not. I think anyone reading this blog knows that shrinking an existing technology is the most surefire way to increase the cost.

Hirai’s response when questioned about profitability is certainly strange, though.

If you’re just talking about the hardware alone, the quick answer is yes. That makes good headlines, but I don’t actually know that that’s the true nature of the business that we’re all in, whether it’s PlayStation, Xbox or the Wii. I think the better indicator is to look at the business as a whole platform, to ask: are you profitable in terms of the hardware, software and peripherals. And the answer to that question is yes on a gross profit level since the last fiscal year.

I’m not sure when this kind of news made for a great headline, but I am writing about it, so I suppose what he says is true. I just think it’s odd that he words things like this is a new concept to anyone who would be inclined to read the article. We know that, and sometimes we read about stuff we already know.

  

Related Posts