Sony losing $260 on each PS3 sold?

Author: Joe Martin
Published: 15th May 2008
Comments (15) Stumble
Sony losing $260 on each PS3 sold?

Sony may be losing more on the PlayStation 3 than it would care to admit according to new figures.

That console makers lose money on every console sold is no real secret and the only real exception to that rule is Nintendo and the Wii - for everyone else it's a case of selling large amounts of games to recoup losses though.

Sony though may be making larger losses on the PlayStation 3 than they are willing to admit though, if an analysis of the recently release financial results is to be believed.

The Guardian had a quick look at Sony's latest spreadsheets and revealed that although Sony's game division has managed to reduce yearly losses from $2 billion to $1.2 billion, the news may not actually be all that good.

While Sony's figures indicate a loss of $130 on each PlayStation 3, The Guardian thinks it may be twice that and the figures are actually buoyed by the success of the PlayStation 2.

"[The PS2 and PSP] could easily have made a profit of $1.2bn in the year. In that case, the total PS3 loss would have been $2.4bn shared between 9.24m PS3 consoles, or $260 per PS3 — including any attached Sony games."

Ouch! It makes you feel even worse for any PlayStation 3 units that are still sat on shelves!

Is Sony fighting a losing battle in this generation of the Console War, or are still they likely to recover? Let us know what you think in the forums.
Quote Shielder 15th May 2008, 13:47
It's alwasy been known that the console makers don't make a profit on the consoles themselves, it is the games licensing that brings the money in.

Only when the component cost comes down significantly and R&D costs have been covered will they start to turn a profit on these systems.

Andy
Quote cjoyce1980 15th May 2008, 13:59
I would blame it on the blu-ray drive, but a 5x speed drive only cost around £85 (or $150 in the US, and that not at cost price) so where is the rest of the costs going???
Quote Tomm 15th May 2008, 14:06
The question is - do Sony care?

PS3 sales are (finally) on the way up, and - probably more importantly - millions of homes now have Blu-ray players. It's no longer game sales that recoup money for Sony as a company, it's the sale of BD films and players, too.
Quote lewchenko 15th May 2008, 14:30
Im not sure 'The Guardian's interpretation of the balance sheet figures is correct. They are simply interpreting figures that could be expressed any number of different ways, and coming to a conclusion which suits the title of the story. At this stage of the game there is no reason to doubt Sony's own interpretation of losing $130 per console. What with all those europeans paying over $600 per console... I really doubt Sony is losing $260 on each one sold! That would mean it would cost Sony over $860 to make each console.

I dont think so!
Quote TGImages 15th May 2008, 15:04
This selling at a loss has to also affect the price of games. If they need to make up $260 per unit, that is a combination of a large markup on each game and a number of games in order to have a chance at profit.
Quote mrplow 15th May 2008, 15:07
Quote:
Originally Posted by Shielder
It's alwasy been known that the console makers don't make a profit on the consoles themselves

except Nintendo, who clearly have brains in their heads.
Quote naokaji 15th May 2008, 15:15
wasn't there some statistic recently somewhere on bit-tech about how many games a console owner buys in average? I think it was something like 4.5 per year or close to that.
so, 4.5 games each at 40£, lets assume sony gets 5£ each, (40£ - 5£ = price of a pc game which does not have to give money to sony) that would mean with sonys number each ps3 buyer would have to buy 12 games (which means every ps3 owner would have to meet the avg number of games bought for 3 years) or with the number mentioned here (260$) for almost 6 years for the ps3 to actually be a profitable product.

no wonder sonys gaming division is making a huge loss every year.

of course, my math is flawed since it does not include their real cash cow (better known as small yet horribly priced accessoires like cables).
Quote Darkedge 15th May 2008, 15:45
Microsoft stopped making a loss on the 360 before christmas - at least on manufacturing, though probably still do due to the RROD issues.
I think the PS3 has the lowest game attach rate of any console in years of about an average of 2 due to most people buying it as a Blueray player - the 360 however has the highest attach rate - something like 8!
Quote shigllgetcha 15th May 2008, 16:25
Its ab interesting statistic, especcially with so many games bein bought pre-owned it must be hard to recoup even $130 dollars.
and sony is an "entertainment" company as apposed to microsoft making more than enough else where in the computer market.
buti suppose sony just has reeched the stage yet where they are making PS3's at a profit
Quote shigllgetcha 15th May 2008, 16:26
i mean hasnt reached
Quote ssj12 15th May 2008, 17:27
I;m going to say the guardian sounds like a piss poor news service. They are losing only $130. The cut costs everywhere.
Quote RedDethX 15th May 2008, 17:56
Quote:
Originally Posted by cjoyce1980
I would blame it on the blu-ray drive, but a 5x speed drive only cost around £85 (or $150 in the US, and that not at cost price) so where is the rest of the costs going???

Most likely the Cell and XDR RAM.
Quote devdevil85 15th May 2008, 19:56
In a 10 year lifespan even at 4.5 games per year they should be able to make up the cost on older SKU's.....it's the nature of the beast, right?....all the newest technology & R&D $'s going into creating new software development tools, newest interfaces, etc.....

I would want to know if the 360 console itself has brought MS profit or not due to all the RRoD's......w/o issues such as those Sony should be able to catch up soon in terms of profitability.....hell what was the story like back in PS2 days?......
Quote LordPyrinc 16th May 2008, 00:26
Consoles? I haven't owned one of those since the days of Super Nintendo (though I did buy a used Nintendo 64 for my dad). If I had kids though, the Wii would be my console of choice. I have bought some handhelds in the last few years, a Gameboy Advance and a DS Lite, but the GBA was for traveling and the DS was for my girlfriend. I'm not a Nintendo fanboy, but I think they are doing a pretty darn good job at making money right now.

Silly Rabbit... consoles are for kids. PCs are for serious gamers.
Quote bahgger 16th May 2008, 14:43
Quote:
Originally Posted by mrplow
except Nintendo, who clearly have brains in their heads.

You probably haven't picked up a book in pricing strategies any time in the last 20 years have you?

The captive pricing method used by Sony and Microsoft enable them to obtain a customer base that will have to buy software that only works on a single platform.

Pricing strategies > You
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