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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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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.

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