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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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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.

"People Don't Respect Confidentiality in This Industry" -- Sony Computer Entertainment of America President and CEO Jack Tretton

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