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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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RE: Still?
By Motoman on 8/25/2009 3:07:39 PM , Rating: -1
...that's the only one, I think, that does.

Anyway, all you have to do is listen to the fanbois whine about how "far behind" the Wii is hardware-wise to the Xbox 360 and PS3. Ergo, Nintendo can make a profit at $250 while Sony can't at $399.

Sony, obviously, built the PS3 to push the envelope technology-wise. Which of course is fine, and appeals to fanbois. But it means that their console costs an awful lot more to build than Nintendo's. My point is that that fact is accounted for in the business model. Sony never intended, ever, to make money on the PS3 itself - it was always intended to be a loss-leader to get them to the point where they can sell games and peripherals.

If Sony took a page from Nintendo's book, and built a console like the Wii, they could make money on the console sales - and if it was like the Wii, I might be interested in it. But the fanbois wouldn't. And fanbois are their primary market.

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
"If you mod me down, I will become more insightful than you can possibly imagine." -- Slashdot
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