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Sony hopes to stop losing money on PlayStation 3 next fiscal year

The PlayStation 3 is an expensive piece of hardware for both consumers and SCEI. The entry price of the PlayStation 3 fell significantly in 2007 – and while component costs also went down, Sony was still selling hardware at below cost.

At the time of the PlayStation 3 launch in mid-November 2006, iSuppli estimated that Sony was losing $240 on each 60GB PS3 and $300 on each 20GB PS3 that it sold.

Sony’s gaming division chief Kazuo Hirai spoke at a news conference at CES revealing hopes of turning a profit in the next fiscal year.

"We want to get to the positive side of the equation as quickly as possible," said Hirai in a Reuters report. "The next fiscal year starts in April and if we can try to achieve that in the next fiscal year that would be a great thing. We are going through the budgets right now. That (profitability) is not a definite commitment, but that is what I would like to try to shoot for."

The introduction of the 40GB PlayStation 3 SKU brought the entry price of the system down to $399 – a price that managed to entice buyers to finally put down their money. Sony said that it sold 1.2 million PlayStation 3 consoles throughout the holiday season, representing two-thirds what it sold in the rest of the year.

Given Hirai’s sentiments that the company is looking to "get to the positive side of the equation," gamers will likely see the $399 (for the 40GB) and $499 (for the 80GB) price points sustain throughout the foreseeable future.

Hirai’s comments also inadvertently reveal Sony’s failure to meet hopes of turning a profit by the end of this fiscal year, which ends March 2008. Sony said in July 2007 that had hoped to eliminate the negative margin during this period.

“For the negative margin to go away, the big trigger would be the cost-down in the Cell and RSX semiconductors. They are the key, and also optical pick-up is another factor, significantly,” Sony executive VP Nobuyuki Oneda said in 2007.

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too ambitious?
By dome1234 on 1/8/2008 10:40:37 AM , Rating: 2
sale of ps3 is trailing both 360 and wii, and it's still the priciest box out there gaming-wise (it's a bloody good bluray player to be fair). Instead of pursuing profit, a price cut might be more 'profitable' in the long run.

RE: too ambitious?
By FITCamaro on 1/8/2008 10:45:59 AM , Rating: 2
Honestly I see $400 as a good price for the PS3. The real reason I haven't put down the money is the games. You people who own one can cry all you like, but I already have a 360. There's just not enough exclusive games that I want to buy.

Heavenly Sword wasn't rated that highly and is extremely short. Ratchet & Clank doesn't appeal to me. And the few other exclusives just aren't drawing me to it either. About the only thing that's got a shot is Final Fantasy and Metal Gear Solid. But then I'm not sure I want to drop $600 when it's all said and done just so I can play those games. And MGS4 might come out on the 360 anyway. So that just leaves Final Fantasy.

If Square Enix releases a new Final Fantasy based MMO as a sequel to FFXI though, that'll get me to buy a PS3.

RE: too ambitious?
By SirLucius on 1/8/2008 11:05:15 AM , Rating: 2
There's just not enough exclusive games that I want to buy.

Nobody can argue with that. If the games don't appeal to you, than that sucks for Sony. But at least you're not saying nothing is available.

RE: too ambitious?
By jjabrams on 1/15/2008 7:37:10 AM , Rating: 2
Having that one killer title really makes you WANT one but otherwise the wallet/missus decides that you just dont need one because its going to burn that huge hole in your wallet.

RE: too ambitious?
By ajfink on 1/8/2008 11:55:16 AM , Rating: 2
I might buy a PS3 when they drop to the $299-$350 range. There just aren't enough worthwhile titles for it yet that I can't get for my 360. That might change, and if it does...hell, I'll have a Blu-Ray player.

RE: too ambitious?
By HighWing on 1/8/2008 1:18:35 PM , Rating: 1
I love the PS3 and think it's a great piece of all in one Hardware, but as much as I hate to admit it, there just aren't that many games out there for it that I am interested in other then GTA4 and YES I am interested in the @Home (if it ever launches).
Other then that, I would have to say I bought mine as a Blue-Ray player and replacement for my PS2.

RE: too ambitious?
By Tiamat on 1/8/2008 3:31:00 PM , Rating: 2
True, I dont mind the 400$ price at all. But, the games available now don't appeal to me either. I bought the PS2 solely for FFX, then got roped into Gran Turismo 4, and other games. For the PS3 to be justifiable for me, I need at least Gran Turismo 5 and one of the FFXIII titles. Looks like I might be buying a ps3 this next christmas, but not much sooner than that.

RE: too ambitious?
By Chris Peredun on 1/8/2008 4:09:36 PM , Rating: 2
Assuming it makes the rumoured launch date of November 15, 2008, God of War III will bring in another bumper crop of PS3 sales next year at around the same time.

RE: too ambitious?
By reader1 on 1/8/08, Rating: -1
RE: too ambitious?
By dwalton on 1/8/2008 11:12:57 AM , Rating: 2
It not a question of outselling the 360 worldwide (the PS3 has done that before), its a question of maintaining the current sales advantage.

Spring is the time of traditional price cutting and if the MS knocks off an additional 50 dollars off the 360 and Sony can't follow we might see an reversal of position again.

Sony has cutoff 33% of the original retail price within the first 12 months. While MS just trimmed 6.7% off the Core/Arcade and 12.5% off the Premium in the first 26 months. MS should have more flexibility in price cutting this year.

RE: too ambitious?
By FITCamaro on 1/8/2008 12:17:43 PM , Rating: 1
How do you figure that when Microsoft sold 4.3 million 360s over the holiday season and Sony only sold 1.2 million PS3s?

RE: too ambitious?
By Future145 on 1/8/2008 12:32:23 PM , Rating: 2
i doubt that they sold 4.3 million in 2 months, overall yes but not in 2 months

RE: too ambitious?
By FITCamaro on 1/8/2008 12:40:52 PM , Rating: 1

3 months.

Sony sold it looks like around maybe 300,000 PS3s at best worldwide in October. So if their 1.2 million figure was November-December, 1.2 million + 300,000 = 1.5 million. Hell lets call it 1.6 million.

Still a far cry from the 360s sales.

RE: too ambitious?
By reader1 on 1/8/2008 12:48:20 PM , Rating: 2
That's 4.3m worldwide for the 360 from Oct-Dec. The 1.2m is North America only for the PS3 from Black Friday to New Year's.

I made a mistake, vgchartz now only shows the PS3 has been outselling the 360 since Christmas by a small amount.

RE: too ambitious?
By deeznuts on 1/8/2008 12:56:26 PM , Rating: 2
Please please do not use VGChartz. Just wait for the earnings report from each company. Those are the numbers I only truly trust. They come out end of this month I believe.

RE: too ambitious?
By deeznuts on 1/8/2008 12:55:03 PM , Rating: 2
Ehh, I think you've been corrected but yeah, 4.3M over three months worldwide for the 360. 1.2M from black friday to the end of the year (a little more than 5 weeks) just in North America for the PS3. 2 totally different numbers.

RE: too ambitious?
By SirLucius on 1/8/2008 11:02:33 AM , Rating: 3
You have to remember world wide Sony is doing pretty well. It's sales figures (globally) are about the same as or better than the 360's at a similar point in it's life cycle. Plus more of the exclusives that people have been waiting for will be coming out this year.

It may be tough, but with recent developments with the HD war and some of the big name games people have been waiting for set to come out, I think it's definitely possible for the gaming devision to turn a profit.

RE: too ambitious?
By defter on 1/8/2008 11:56:46 AM , Rating: 2
Wait until Bluray wins a HD format war. Suddenly $399 price for a PS3+Bluray player is not so bad compared other alternatives (console + separate Bluray player)...

RE: too ambitious?
By Flunk on 1/8/2008 12:36:01 PM , Rating: 2
If this happens, expect to see a Xbox 360 + Blueray player. Microsoft will do anything to compete with Sony.

RE: too ambitious?
By omnicronx on 1/8/08, Rating: -1
RE: too ambitious?
By tallcool1 on 1/8/2008 1:16:50 PM , Rating: 3
Sony themselves would not stop Microsoft from acquiring a BD license! There are 9 companies (Matsushita, Pioneer, Philips, Thomson, LG Electronics, Hitachi, Sharp, Samsung, and Sony) that form the Blu-Ray Disc Association that develops and license Blu-ray Disc technology.

In fact, I would be willing to think that they would allow it. All 9 companies would stand to profit from it.

RE: too ambitious?
By omnicronx on 1/8/08, Rating: 0
RE: too ambitious?
By ElrondElvish on 1/9/2008 5:04:54 PM , Rating: 2
Thats a silly argument... Sony could *never* deny Microsoft a license to BD, as there are hundreds of millions of Windows PC's in the world (for business and pleasure). To do so would be suicide... its hard enough when Microsoft 'accidentally' breaks support for any tech it doesn't explicitly control on Windows, let along giving them any excuse to pull support outright.

RE: too ambitious?
By BrownJohn on 1/8/2008 1:17:43 PM , Rating: 3
That is what Microsoft wanted all along. They really don't care much about the blu-ray/hd-dvd war. They want people to purchase movies on Live, not through disc based medium where there are a lot more licensing fees. If Microsoft really cared about the war, they could have swayed many of the movie studios with sacks of cash.

RE: too ambitious?
By Alexstarfire on 1/8/2008 1:32:07 PM , Rating: 2
First off, it's not over yet. Secondly, like 90% of the population doesn't give a sh!t about HD. I'm in that group as well. Great for my computer maybe, but I don't have no HDTV and don't see myself being able to afford one within the next 5 years. You have to bring HDTV prices and HD player prices down as well. It's too damn expensive for most people.

RE: too ambitious?
By omnicronx on 1/8/2008 12:40:58 PM , Rating: 2
It's also now the cheapest BD player in many countries. I just bought one last night after the HD-DVD fall out news. In Canada the 40G PS3 is only $399, at Bestbuy the cheapest BD player is $450. Sad part is it took me 10 minutes to pick out a game, as I already have a 360, and the PS3 game selection is terrible. Unfortunately in my instance it proves that the PS3 may no longer only be bought for the gaming console, as it appears BD is going to be the winning High Def format.

RE: too ambitious?
By The0ne on 1/10/2008 12:17:51 AM , Rating: 2
You can't afford to lose on both ends. Usually when you're cutting the price of the system you're expecting to make some of it back or more from the software side. This is the case for PS3 or xbox. A company cannot survive if they keep losing money on the hardware and software side.

Having said the above, I'm not sure what Sony plans to do to be profitable this year. They really can't cut the prices down more. One option I do see is if they have the software support they did on the PS2 to drive everything, including the crappy ones. This time around though is much more difficult as Wii and Xbox are popular as well. There's only so many gamers out there of which specific regions are were not even consider in their plans. Wii has that covered :D

My freaking whole family loves this Wii! It's amazing to see people who had complained about gaming playing games AND having fun lmao.

The PS3 will be profitable.
By BrownJohn on 1/8/2008 1:27:52 PM , Rating: 2
Yes, it will. Lets look at a few key aspects:
1) The costs to manufacture each component have come down greatly, and those costs continue to fall. The blu-ray drive is no long nearly as expensive as it was, and neither is the Cell, which iirc were the two most expensive components of the system.

2) Blu-ray is on the rise and people will continue to see the PS3 as a great value, especially with the cost of a stand-alone blu-ray player at or near the cost of a PS3. With the Warner anouncement, and the potential fall of HD-DVD, things are definitely looking up for the blu-ray camp.

3)Now, the most important part to making the system profitable, the games. There are many games that are scheduled to be released this year that should prove to be very popular for the PS3, including, but not limited to, Metal Gear Solid 4, Devil May Cry 4, Final Fantasy (each of them), Gran Turismo 5, and Little Big Planet. Those are not all PS3 exclusives, but they all are pretty much guaranteed to sell a million copies (at least) a piece. Lets not forget all those EA rehashes coming out this year. If Home actually turns out to be what Sony says it will, and we have something that can legitimately compete with Xbox Live, then things get even better.

When it all comes down to it, the PS3 will start making money for Sony.

RE: The PS3 will be profitable.
By sweetsauce on 1/8/2008 2:21:25 PM , Rating: 2
The real question is how long can sony continue to milk the high cost of stand alone br players? If br does become the only format available, theres going to be pressure to lower the entry cost into the format. My guess is it would definately affect ps3 sales if similar hardware is available that plays br and is half the cost of the ps3.

RE: The PS3 will be profitable.
By BrownJohn on 1/8/2008 2:39:20 PM , Rating: 2
if stand alone players do come down in price enough to cause a decline in the PS3's sales, Sony could potentially lower the cost of the PS3, because, like I said, the hardware costs continue to fall.

Not bad
By Mach Omega on 1/8/2008 2:19:52 PM , Rating: 4
I'm not saying it was intentional, but the moderate sales of the PS3 have actually been an advantage to Sony. If it had been selling like the Wii, that actually could have broken Sony as it was taking a bath on each unit. The PS3 has sold well enough to get decent market penetration and snuff out HD-DVD. Now that component prices have fallen to the point that Sony may start to break even on each unit, the upswing in sales is well timed.

I've gotten WAY more use out of my PS3 than my PS2 (or Xbox). The damn thing is built like a tank and quiet as a mouse even after hours of gaming. Now that some decent games are available for it, I'm using it even more. Uncharted was incredible and Ratchet & Clank kicks ass (and I almost never play platformers). Plus, I don't have to pay to play CoD4 online so that's a nice bonus.

My PS3 purchase looks smarter and smarter as time goes on. I won't deny that I feel a twinge of envy whenever I see BioShock or Mass Effect on the shelves but at least I have Haze and MGS to look for to. Free online play, wi-fi, BD and added value for my PSP, which has found new life with my PS3, has definitely made it worth the purchase. If the games coming out for the PS3 are as good as expected, I wouldn't be surprised if it starts to outsell the 360 this year.

RE: Not bad
By rudy on 1/9/2008 2:16:27 AM , Rating: 2
I don't think so, if they had been selling like the wii, they would have been able to keep the same models they debuted with for the same prices and possibly be profitable already. Through several price cuts from sony and MS the wii has stayed the same and stores have actually looked for tricks to get people to pay more.

Justifies Sony's stance
By psychobriggsy on 1/8/2008 8:35:23 PM , Rating: 2
Gotta say that is Sony can start turning a profit on the PS3 hardware even by the end of that time that's a huge win for them. The PS3 is going to have a long lifespan, like the PS1 and PS2, and if 2/3rd of those years are profitable at the point of sale (and also when the bulk of sales are, pushing the PS3 from some 20m by then to 50m) then the PS3 will have been a resounding success for Sony. And they'll have won the HD media war as a bonus.

If they have any sense then PS4 will be a next generation Cell with 4 PPUs and 32 SPUs at ~5GHz, and whatever is a decent GPU at the time. Quad-layer Blu-ray drive and bobs your uncle, new games console with free backwards compatibility and far lower losses from launch.

RE: Justifies Sony's stance
By Belard on 1/9/2008 3:28:12 AM , Rating: 3
Consider this... xbox360 and even Xbox have yet to turn a profit... they are very deep in the red, especially with the 33% failure rater of older Xbox360s. The newer 360s are supposed to be more reliable.

Still, overall - the PS3 *IS* cheaper than the XBOX on the feature<>PRICE scale. Their software titles is pretty much the same amount when XBOX hit 1year of age.

Example of price:
Jan 2007 prices:

$500 - PS3-20GB : Blu-Ray, 20GB HD, wireless controllers.
$600 - PS3-60GB : Blu-Ray, 60GB HD, Wireless networking too.

$280 - 360-core : DVD, no networking, NO HD, wired control.
(Add 20GB HD, Networking = $480 total)
$350 - 360-Prem : 20GB HD, DVD, wirless control.
(Add HD-DVD, Wireless networking = $650.)

Lets remember how much space is left for the end user for the 20GB model. The 120GB HD upgrade (took over a year to come out) was $180 (still is)... so a usable Xbox was about $850! Sony's HD is user replacable ($90 = 160GB) with any notebook HD.

Today's prices haven't changed much for Xbox360... its still $350~400 for a 20GB version ($50 for HALO3 colors)! Then add $180 to an HD-DVD drive for some reason = $530~580 which has an external add-on to stick somewhere. The $400 PS3-40Gb is looking mighty good - with its wireless networking.

Both are good consoles in their own right - Xbox better/more titles and a bit more powerful graphics engine (AMD/ATI). But the problems with the 360 has only given M$ more red for their console division.

Trouble at Sony
By crystal clear on 1/9/2008 8:21:31 AM , Rating: 2
To refresh memories-

Sony has agreed to sell the semiconductor factories responsible for making PlayStation 3 chips to Toshiba in a deal expected to be valued at about Y100bn ($865m).

"Dubai fund takes stake in Sony"

Sir Howard Stringer, Sony's chief executive, said: "We are happy that the DIC has recognised the strength of the Sony brand as well as our unique competitive advantage in having both entertainment and electronics assets to drive our businesses forward in the digital age."

Although Sony is on track to meet its 5 per cent operating margin target this year promised by Mr Stringer, analysts are concerned that the prolonged losses in its games unit - in the red for seven straight quarters - are stymieing more robust results at the electronics conglomerate.

Then came this news item from a respectable financial source in India-

Zapak set to buy out Sony Online for $300 mn- Internet -Infotech ...
NEW DELHI: Zapak Digital entertainment, the online gaming company promoted by
Anil Ambani-led ADAG group, is all set to buy out Sony Online Entertainment ...

This page has apparently been pulled down from their site for obvious reason,that "secret negotiations are going on &
both the parties dont want publicity"

Now what do they have in mind-to sell of their gaming business completely !

RE: Trouble at Sony
By crystal clear on 1/9/2008 8:30:59 AM , Rating: 2
Managed to locate it on another site-

Coming up in the next few days is a strategic acquisition of Sony Online Entertainment (SOE) by Reliance ADAG Group company and top player in the Indian gaming space, Zapak Digital Entertainment.

Sources familiar with the deal said Zapak is all set to acquire SOE for a whopping $300 million (Rs 1,200 crores). The deal, which has been brewing for the past two weeks or so, will be finalized in the next few days. Possibly by next week, Zapak will have full rights to all content owned and published by SOE.

The game- development and publishing- arm of Sony, California-based SOE, has come out with several games, including Everquest, PlanetSide, Star War Galaxies, and Vanguard.

Eighty percent of content in the gaming industry is created internationally. The acquisition makes sense for Zapak, which wants to cut costs by buying SOE studios, and relocating them to India. With a major part of gaming expenses being on content and marketing, Zapak hopes to cut costs from nearly $30 mn to just $10mn with the SOE buy-out.

Earlier on, Sony had signed a deal with 'Virgin Comics', a Bangalore-based collaboration between celebrated spiritual guru - Deepak Chopra, veteran film maker - Shekhar Kapur, and self-styled billionaire and head honcho of the Virgin Group - Sir Richard Branson.

By virtue of the acquisition, Zapak will gain control of all deals signed by SOE (past, present, and future).

PS3 Profitability?
By dwalton on 1/8/2008 10:58:56 AM , Rating: 2
Well, if Sony gaming division doesn't show a profit this quarter, I don't expect the PS3 to be profitable for a long time.

If Sony turns a negative for the quarter it means the cost associated with the PS3 brand including the production and sales of 1.2 million PS3 consoles has eaten up all the profits generated from the sales of 1.4 million PSPs, 1.3 million PS2s, and software/accessories sales from all three platforms.

Misleading headline
By defter on 1/8/2008 11:55:22 AM , Rating: 2
Sony hopes to achieve profitability in next fiscal year which will cover April 2008 - March 2009 time frame. Not in the next calendar year (2009)

By ChipDude on 1/9/2008 9:07:56 PM , Rating: 2
What are they suppose to say, we strive to lose money for another year. Like AMD they hope to make money every year, but like AMD I don't think they will make money on PS3 this coming year.

The reason, the major cost components are the Cell and the graphics engine, both need to migrate to the next node to become cost efficient. But there is a catch 22. Volumes aren't high enough to justify moving. Unlike the prospectivce of another poster, if they were lucky enough to have sales like WII they'd have the volumes and costs justfications to move to small process node and be in the money this year.

Sony will lose money this year and will still be in 3rd place. Too expensive, not enough games. Even with BR pulling ahead it won't help, soon sub 200 BR players will be there and the games aren't enough to justify spending another 200 bucks for a PS3

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer

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