Print 56 comment(s) - last by EasyC.. on Aug 31 at 12:31 PM

Sony loses money on hardware, but the platform as a while is profitable

Sony unveiled the new PS3 Slim officially last week at Gamescom in Germany. The new console was officially announced after months of speculation swirling about not only the slimmer PS3, but a price cut as well. Thankfully, both the price cut and new PS3 console became reality.

Times Online sat down with Sony Computer Entertainment's Kazuo Hirai and had a talk with him about the PS3 and the success of Sony as a whole. Hirai said that the time was right for the slimmer PS3 because Sony wanted to pass the savings on to the customer since it had to put less hardware into the PS3 than it was when the console first launched. The pressure from game developers to cut the price of the console likely figured into the decision as well.

When asked if the price cut was an admission that the PS3 sales have been disappointing, Hirai said sales were slower than the PS2, but on track with what Sony saw with the original PlayStation. He also says Sony looks at things on a 10-year life cycle and with the third anniversary, now coming it's too early to say how well the trajectory for the PS3 is doing.

One of the more telling questions in the interview was whether Sony is still losing money on the PS3. Hirai said, "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 t o that question is yes on a gross profit level since the last fiscal year."

Hirai said in the interview that the "magic wand" motion controller for the PS3 is set for release in the Spring of 2010. He also said that Sony is working hard to be sure that software supporting the controller is available when it launches as well.

Hirai also says that Sony will not be ditching physical media altogether as some expected with the announcement of the UMD-less PSP Go. He points out that in many countries and locations downloading a full PS3 game would take inexcusably long to do.

He said, "We are committed to the PSP 3000 and the UMD business. A lot of people like to speculate that we're getting out of that business, but nothing could be further from the truth. We're not going to deprive consumers in all those other countries."

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By invidious on 8/25/2009 1:24:16 PM , Rating: 1
If they couldn't make money on the old one how can you expect them to make money on a smaller, cooler running, and less expensive model? Clearly that was not the goal of the slim PS3.

RE: Still?
By StevoLincolnite on 8/25/2009 1:55:03 PM , Rating: 2
They make money from the Games, Peripherals etc, which hopefully nets enough money to cover the costs of selling the console. (Which it is now).

RE: Still?
By Motoman on 8/25/2009 2:25:59 PM , Rating: 2
The point was never to make money on the console sale. Frankly, if any vendor makes money from the console sale, it's just a bonus.

They are more than willing to take a hit in the initial sale to get the console in the user's hands - because then they make money off games and peripherals.

All these articles about how much somebody is losing on a console sale are utterly useless. The vendor doesn't care about losing money on the console sale.

RE: Still?
By Master Kenobi on 8/25/2009 2:35:30 PM , Rating: 4
Nintendo does. They have always sold their consoles at a profit. Maybe Sony should take a page from the Nintendo book of business.

RE: Still?
By Motoman on 8/25/09, Rating: -1
RE: Still?
By SPOOFE on 8/25/09, Rating: 0
RE: Still?
By epobirs on 8/25/2009 9:05:23 PM , Rating: 5
That is because the early intent was for the PS3 to contain multiple Cell chips. One of the things most heavily promoted about Cell early on was that it would easily gang together to scale on the fly. Sony made some absurd pronouncements about enlisting other household appliances containing Cell chips to help run games better. All of which sounds like a developer nightmare, especially in testing.

None of this became part of the reality. IBM couldn't get the multi-socket scaling to work as intended. Worse, the Cell, which was claimed to be all-new but is really a PowerPC variant, was realy hard to manufacture as the then available process node. This meant low yields for the chip, making it very expensive and plagued by supply issues if each PS3 were going to use several of them.

The decision to go for a more conventional architecture in the PS3 came very late in the process. If you look back at the E3 Press Conference where the PS3 was first supposedly demonstrated, there were no actual PS3 demos. There were Cell demos and there were Nvidia demos. No developer had enough time to do much of anything with the combined platform.

RE: Still?
By SPOOFE on 8/25/2009 10:20:21 PM , Rating: 2
An excellent summary. Looking back at the run-up to launch, and going off of Tretton's comments afterwards, it's clear that Ken Kutaragi was just spouting his mouth off without ever getting significantly concrete information from the engineers actually building and designing the thing. They started out on the wrong foot and are only now correcting themselves. They can still pull out a good chunk of profit for the PS3, but I'm really hoping they learn from their errors and focus on the gaming capabilities of the successor.

RE: Still?
By noirsoft on 8/26/2009 1:06:04 PM , Rating: 2
(in fact, Sony used to boast that Cell was so great, they didn't even need a GPU for the system. Then they added a GPU and stopped talking about that, hoping everyone would forget).

Actually, you do have to use the Cell (the SPU parts) if you want good graphics performance out of the PS3. The dedicated GPU is pretty weak. AFAIK, it's just there to help people get up & running quickly before porting the real graphics code to the SPUs.

RE: Still?
By SPOOFE on 8/26/2009 9:36:47 PM , Rating: 2
Actually, you do have to use the Cell (the SPU parts) if you want good graphics performance out of the PS3.

Of course, every GPU needs the CPU to send it data. Nobody every said Cell was superfluous.

RE: Still?
By afkrotch on 8/27/2009 3:13:34 AM , Rating: 2
Of course, every GPU needs the CPU to send it data. Nobody every said Cell was superfluous.

If you think the SPU in the cell does nothing more than push data to the GPU, you're sadly mistaken. There's quite a lot of deferred rendering being done on the PS3 to make up for the GPU's lacking performance.

RE: Still?
By epobirs on 8/27/2009 5:00:28 AM , Rating: 2
That is simply not true. The GPU is a derivative of the best Nvidia had to offer at that time for the PC market. This was the 7800/G70 design and many PC users are still happily gaming with it today.

While the GPU market has been through several generations since the RSX design was locked down, the console environment offers developers a greater ability to fully exploit the GPU and having a dedicated gaming platform means the OS overhead is very light compared to a full function system, allowing a seeming, by today's standards, minuscule amount of memory to be used more effectively.

PS3 developers wouldn't be adverse to the system having a gigabyte of total RAM rather than 512 MB but that has always been the nature of the console. You can have a platform that is identical and performs predictably across tens of millions of units or you can have a platform that is expandable and highly variable, with the average unit being more powerful over time.

Choose one. You cannot have both.

RE: Still?
By rudy on 8/25/2009 5:47:17 PM , Rating: 2
This is true and one other thing sony was in a rare position of also pushing a new medium the blue ray. And the PS3 was a big part of the win. So even if the PS3 was still losing money to this day as a whole Sony would see it as worth it. Sony really had an amazing position they own half the moving industry and had the ps3 and so they were all set to win the HD optical disk war but it may be costing them in the console market. In the end I think it is net positive for them. It is sad though that businesses have to have so many loss leaders now days with the only intent to trick people into getting ripped off somewhere else.

RE: Still?
By Alexstarfire on 8/25/2009 9:48:37 PM , Rating: 2
Based on the sales Nintendo has made so far I'd say your assessment that "fanboys" are the primary market is quite false.

RE: Still?
By xti on 8/26/2009 10:32:31 AM , Rating: 3
exactly, 'fanbois' are no where near the majority. They are maybe the majority of loud people on message boards, but that is about it.

RE: Still?
By afkrotch on 8/27/09, Rating: 0
RE: Still?
By EglsFly on 8/25/2009 7:19:48 PM , Rating: 2
Nintendo does. They have always sold their consoles at a profit. Maybe Sony should take a page from the Nintendo book of business.
You could have said the same thing about Microsoft. They also where (not sure if they still are as of today) loosing money on the sale of their console (XBOX360), not just Sony (PS3). So, whats your point? Should Microsoft also take a page from Nintendo book of business?

I think not.

The Wii hardware (console) is very basic and not on the same level and the graphics leave little to be desired when compared to what Microsoft and Sony are offering.
What they did however was offer a new spin on the controller and at the lower price point and family angle gives them access to a larger market.

It in no way takes away from what Microsoft and Sony are offering as they are in a different league IMHO.

Comparing the Wii to the PS3(or 360) is like comparing a Cobalt to a Corvette. Two CARS but two different markets. Just as these are two CONSOLES, but also different markets.

RE: Still?
By Silver2k7 on 8/26/2009 4:38:37 AM , Rating: 2
Tried the new Wario game its kind of like Super Mario but a little different.. pretty cool game.

but yes its a cheaper machine, with less graphical horsepower, but there are still some fun games on the platform.

But I still wish for Nintendo to come up with something with graphic thats competitive in the top of the line, for the next gen.

RE: Still?
By Hiawa23 on 8/25/2009 3:25:38 PM , Rating: 2
Not surprised if Sony is still losing on the Slims. Sony claims they have lost more on the PS3 than they have made on the PS2, so I think the goal is to lose less money on the slim & hopefully increase the install base, which should increase games sales, peripherals & whatnot that hopefully will help offset some of the hardware losses.

Perhaps, Sony, MS should adopt Nintendo's philosophy & maybe make the consoles alittle less powerful & more efficient. This is another reason why there is no reason for Sony or MS to rush new consoles out the door. At the end of the day these companys are in business to make money not take losses making fanboys happy.

RE: Still?
By Silver2k7 on 8/26/2009 4:40:14 AM , Rating: 2
maybe the goal is to sell games, periphals, and online content such as extras for the games.

RE: Still?
By afkrotch on 8/27/09, Rating: 0
RE: Still?
By jrb531 on 8/28/2009 3:50:19 PM , Rating: 2
The problem is, as always, that a console is pretty powerfull at release but year after year loses ground.

At the time of release the Xbox 360 and it's ATI x1950 xt with 512meg was pretty powerful. Who today would use that type of hardware in their system???

So they need "cutting edge" just to try and get some life out of a system. Sure the Wii has "some" fun games but 90% of the Wii games are utter crap that were quick-ported over just to take advantage of the systems popularity.

Let me ask an honest question here...

How many 360/PS3 owners here would buy a Wii and play games on that if the 360/PS3 were not available as opposed to moving back to a computer based gaming system?

Real gamers might have a Wii but it's always a secondary system to either a computer, PS3 or 360. Some of the games on the Wii are very fun but some games just cannot be done correctly on the Wii because it's basically a slightly upgraded Gamecube.

The real insult is that Nintendo is making a huge profit (it costs less than $90 to make a Wii) and they will not budge one bit as the more powerful consoles (with a larger selection of "quality" games) cost about the same.

What Nintendo is doing is a great business decision. As long as the teaming masses of "fools" keep paying $250 for something that costs them under $90 to make... why drop the price?

How many "quality" Wii games come from companies other than Nintendo? A few maybe but look at all the crap that is on the Wii? The half-assed ports and 10+ year old games from dead systems.

So let's keep buying the Wii in record numbers. Let's show everyone that they can put any old crap out there and as long as it's the "in" thing (rem pet rocks???) we'll buy it :)

RE: Still?
By EasyC on 8/31/2009 12:31:01 PM , Rating: 2

I've had all three and I would definitely prefer a PC over a Wii if no 360/PS3 were available.

You are dead on with the marketing. It's all about supply and demand. Since they set their sites on the largest group of consumers (read: Lemmings), they have no need to lower the price until their sales start getting affected since the demand is still there.

Most of the people I know with Wii's don't even use them anymore, except for the occasional party.

"Well, there may be a reason why they call them 'Mac' trucks! Windows machines will not be trucks." -- Microsoft CEO Steve Ballmer
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