PS3 to Cost Sony $1 Billion in Loses in First Year [Archive] - Glock Talk

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RyanSBHF
12-28-2005, 10:53
PS3 to Cost Sony $1 Billion in Loses in First Year

While there is no doubt that Sony has a solid fan base with its PS3, there are doubts over the financial viability of the console, which is expected to cost the company around $1 billion in losses over the first year!

[/quote]Analysts have warned that the release of the PS3 could backfire on gaming giant Sony Computer Entertainment, bringing the Sony subsidiary to its knees. Merrill Lynch Japan has stated it expects Sony to lose more than $1 billion on hardware manufacturing alone during its next-gen console's first 12 months on sale, a figure that may prove unrecoverable.

Merrill Lynch Japan Securities, quoted in the latest issue of Toyo Keizai, states that it expects core production costs of PlayStation 3 to be around $500, with the machine likely to ship at $399 – equating to a loss of around $1.18 billion in the first year the machine goes on sale. It should be noted that these losses are based purely on manufacturing costs and do not factor in the colossal marketing budget SCE has undoubtedly prepped for it's next home console launch.

Merrill Lynch warns that these losses would normally be absorbed with ease by Sony as it has previously entered markets lacking any serious competition. This time however, it will put a new machine on sale, its most expensive to date, to consumers who, in the West, have shown eager acceptance of Microsoft's Xbox 360 and a worldwide audience showing interest in Nintendo's budget innovation machine. Analysts warn that should Microsoft cut the price of Xbox 360 when Sony launches, the entire project could backfire. Should consumers be tempted with a next-generation console at a budget price, complete with a significant library of high-quality software and the option to augment this with something new, as offered by Nintendo, Sony might find its space under televisions around the world, its own for more than a decade, has been usurped.

Toyo Keizai goes on to publish comment from SCE head Ken Kutaragi, who understandably refutes MLDS' analysis; "Whether consumers think a product is expensive or cheap all depends on the balance between its appeal and price," said Kutaragi, again hinting that the PlayStation 3 may indeed be a pricy piece of kit. "Our idea is for consumers to think to themselves, 'Right, I'll work more hours and buy it.' We want people to feel that they want it, no matter what. When Nintendo was selling its 16-bit machine at around 12,500 yen ($114), we sold the first PlayStation at 39,800 yen ($364). The press was saying that it was expensive, but it was a huge hit. It's the same thing with the PlayStation Portable from last year. The Game Boy Advance is a similar handheld gaming machine, and it costs less than 10 thousand yen ($91). On the other hand, our PSP had cost 25,000 yen ($229). And there were people lined up overnight to buy it, and it sold out on the day of launch. It all depends on whether people want it. Of course, I'm confident that PlayStation 3 is a product that people will definitely want."[/quote]

Source (http://www.maxps3.com/node/84)

Tvov
12-28-2005, 11:01
It seems like every launch of a new game system has been a big gamble. So far, they have pretty much paid off. We'll see what happens.

epsylum
12-28-2005, 21:48
Yeah they will lose money on each system for the first couple of years, the PS2 was that way also. But they also aren't taking into account accessory and game sales. They make their money back in those 2 departments. Not to mention if it does become a hit, Sony will have also installed Blu-ray disc players into those homes too, so Blu-ray video sales would also rise.

Sony isn't dumb. They know how much money they will lose per system. It's also a hit they are plenty willing to take.

Now if they can just get enough systems ready for launch is another thing.

gunz
12-29-2005, 01:05
When is the launch date? I have not been able to get a straight answer.
Thanks

RyanSBHF
12-29-2005, 19:30
Originally posted by gunz
When is the launch date? I have not been able to get a straight answer.
Thanks




Here's the best answer I could find:

During its E3 presentation, Sony confirmed the PlayStation 3 will be available around early 2006. Reports quoting high-ranking Sony officials suggest the PlayStation 3 may be launched simultaneously in Japan and North America (not worldwide), a tactic that would differ significantly from the PlayStation (launched December 1994 in Japan and September 1995 in North America) and PlayStation 2 (launched March 2000 in Japan and October 2000 in North America).

Some industry critics had speculated that due to many of its monumental technical challenges, Sony could delay the release of the PlayStation 3 up to early 2007. However, according to German website Gamefront, chairman and CEO of the European brand Sony Entertainment, Sir Howard Stringer has added confirmation to Sony’s E3 press release that the company indeed launches its next generation console in the first half of 2006. It should also be noted that in a recent issue of PSM magazine, the Sony President and Chief Executive Officer Kaz Hirai was interviewed and was asked whether the public could squash rumors about the PS3 being released in 2007. He responded with an affirmative "yes", unless there was no software available, which he said was highly unlikely. Hiral also reiterated the point that the PS3 is still on track for a Spring 2006 release.

Source (http://en.wikipedia.org/wiki/Playstation_3#Cost_and_release_date)

DreamWeaver88
12-30-2005, 07:00
Here's a link to another story that predicts a delayed launch.

http://www.kotaku.com/gaming/ps3/rumor-ps3-riddled-with-issues-delay-likely-145801.php

Bikewer
12-31-2005, 06:59
There have been a couple of stories to the effect that he X-Box360 is a "loss leader", costing more to build than they charge for it. MS hopes to profit from game sales and online services charges.
May be the same for SONY, the gaming division is just part of the empire.

DreamWeaver88
12-31-2005, 17:33
Originally posted by Bikewer
There have been a couple of stories to the effect that he X-Box360 is a "loss leader", costing more to build than they charge for it. MS hopes to profit from game sales and online services charges.
May be the same for SONY, the gaming division is just part of the empire.

Yeah, popular figures being thrown around on the xbox forums is that Microsoft is losing about $116 on each premium bundle being sold. Not sure how true that number is.

Console makers usually don't make money on the first design of a console. When production costs come down and chipsets are consolodated they start to turn a small profit on the console.

DW

fastvfr
12-31-2005, 22:08
With consoles they'll sell the unit at a loss and then the customers must buy the overpriced software and peripherals that are offered.

Car makers are the same way--no profits are realized from the manufacture and sale of your car, but if your car were composed solely of parts purchased from the Parts Counter, you would be driving around in $100,000 plus!

So it takes very little time for the situation to become profitable, but if they tried to profit on the actual appliance they'd probably sell about three of 'em and go broke in short order.

jason10mm
01-01-2006, 09:38
Well, Microsoft has more than enough money to absorb the loss, but Sony is gonna be in trouble. I love the current batch of 360 games, and they are only using 1 of the 3 processors. The only thing holding the 360 back is the limited DVD space and the small hard drive, something that could be fixed with multiple disc games and aftermarket stuff.

RyanSBHF
01-01-2006, 19:53
Originally posted by jason10mm
Well, Microsoft has more than enough money to absorb the loss, but Sony is gonna be in trouble. I love the current batch of 360 games, and they are only using 1 of the 3 processors. The only thing holding the 360 back is the limited DVD space and the small hard drive, something that could be fixed with multiple disc games and aftermarket stuff.




What's the capacity of an XBox 360 DVD? IIRC, the XBox has 8GB disks.

epsylum
01-01-2006, 22:46
Originally posted by RyanSBHF
What's the capacity of an XBox 360 DVD? IIRC, the XBox has 8GB disks.

I think they are full sized double layer DVDs so 8-9 gig is about right. The PS3 has the Blu-ray disks though which I believe are like 20gb.

That's all he was talking about is that the 360's disc doen't hold as much info as the PS3s and the fact that a 20gb HDD is pretty weak.

DreamWeaver88
01-07-2006, 23:08
Originally posted by epsylum
The PS3 has the Blu-ray disks though which I believe are like 20gb.



It's going to be interesting to see how much the PS3 is going to cost. Samsung just announced their Blu-Ray movie player due out in April to the tune of $1,000. Matsu****a just announced their blank Blu-Ray discs that are due out pretty soon to the tune of $42 for a 50GB re-writable disc.

So $1,000 for a movie only player and $42 for a blank disc......should make for and expensive PS3 and PS3 games. Also, should make for some pretty expensive Blu-Ray movies.

DW

epsylum
01-08-2006, 13:08
Originally posted by DreamWeaver88
It's going to be interesting to see how much the PS3 is going to cost. Samsung just announced their Blu-Ray movie player due out in April to the tune of $1,000. Matsu****a just announced their blank Blu-Ray discs that are due out pretty soon to the tune of $42 for a 50GB re-writable disc.

So $1,000 for a movie only player and $42 for a blank disc......should make for and expensive PS3 and PS3 games. Also, should make for some pretty expensive Blu-Ray movies.

DW

To be fair though, SOny invented and owns the Blu-ray rights. It will cost as much as they want to charge for it.

You have to remember the PS2 helped DVDs become popular. In Japan the PS2 was the cheapest DVD player you could buy when it came out. That helped establish thema as the one to beat. I think they are planning the same thing here.

DreamWeaver88
01-09-2006, 22:50
Actually, Blu-Ray was jointly developed by the Blu-Ray Disc Association. Many companies were involved.

We'll have to see which format comes out ahead in the years to come. I'm thinking it will be HD-DVD, mostly because of name recognition and lower cost. Blu-Ray sounds too cheesy and the casual movie buyer will probably relate to HD-DVD and not know what the heck Blu-Ray is.

DW

Tvov
01-10-2006, 04:49
Yep, I'd never heard of "Blu-ray" until reading this thread!