Sony Profits Double, PS3 Division Losses Down To Hardware Costs

RC Cola · Jul 26, 2007

http://www.gamasutra.com/php-bin/news_index.php?story=14849

Electronics giant Sony has announced Q1 financial results showing that profits have more than doubled, thanks to a depreciating yen against the dollar and Euro, and strong sales of LCD televisions and digital cameras.

However, Sony also said its "strategic pricing" of the PlayStation 3, which is lower than its production cost, is leading to game division losses.

The company reported a ¥66.5 billion yen ($540 million) profit for the quarter, up from ¥32.3 billion yen ($270 million) in the same quarter of the previous fiscal year, adding that sales of semiconductors to the game division assisted the boost. Overall revenue was up 13.3% to ¥1.98 trillion yen ($16.6 billion).

The company commented that revenue in its game division increased 60.5% compared to the same quarter of the previous fiscal year, attributing the increase to sales of Playstation 3 consoles. Its overall increase in sales and operating revenue was 13.3% over the same quarter in the previous fiscal year.

However, Sony also admitted operating losses in the game division, attributed primarily to "strategic pricing of PS3 at points lower than its production cost", a key phrase admitting that the individual parts making up the PlayStation 3 cost the company more than their current combined retail price.

On the heels of its last financial announcement, which yielded Sony's worst quarterly loss in four years, the tech giant opted to leave its ¥320 billion ($2.7 billion) net profit forecast for the March 2008 fiscal year unchanged.
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Here are the hardware numbers from the last quarter:
PS2 - 2.7 million
PSP - 2.14 million
PS3 - .71 million

Software:
PS2 - 31.1 million
PSP - 9.9 million
PS3 - 4.7 million

FWIW, they expect to sell 9M PSPs, 10M PS2s, and 11M PS3s when their fiscal year is over. Good luck on those PS3 numbers.

tested911 · Jul 26, 2007

WTH 11 Million PS3 million sold by the end of the year?? They haven't even hit 1 million sold here in the States and Canada combined??

KaiSeR SoZe · Jul 26, 2007

maybe its 1.1 million??

tinman · Jul 26, 2007

the problem is PS2 has guitar hero and PS3 doesn't.
why upgrade when u can buy guitar hero?

RC Cola · Jul 26, 2007

tested911 said:

WTH 11 Million PS3 million sold by the end of the year?? They haven't even hit 1 million sold here in the States and Canada combined??
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They've sold more than a million in North America, and they did so several months ago IIRC. Probably closer to 2M than 1M at this point.

DonkeyMagic · Jul 26, 2007

i dont think they will sniff 11 mill ps3s unless they drop the price again...they will be lucky to get to 9 million by the end of the year, imo. they dont even have an "console seller" games coming out until october right?

psps 9 mill?? are you still expecting that turd to actually take off one of these days? I dont think 33% thinner and lighter will revive that thing.

RC Cola · Jul 26, 2007

DonkeyMagic said:

they dont even have an "console seller" games coming out until october right?
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What games are you referring to that come out in October? They won't have a MGS or FF for a while, but they will have what I would call system sellers starting in August with Lair (or even now in July with NGS...though that is more of a niche title, but it seems it does attract a lot of hardcore gamers). Additionally, they'll probably get games of similar caliber for each of the remaining months of the year, as well as going into early 2008, when they will finally get MGS4 (and maybe MGO...unless it comes out in late 2007).

Not that the PS3 hasn't already had a "console seller" game (or games), but we've already discussed that before.

DonkeyMagic said:

psps 9 mill?? are you still expecting that turd to actually take off one of these days? I dont think 33% thinner and lighter will revive that thing.
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You haven't been paying attention to recent PSP sales, have you?

RC Cola · Jul 26, 2007

BTW, Sony plans on breaking even on PS3 hardware at some point during this fiscal year:
http://www.next-gen.biz/index.php?option=com_content&task=view&id=6573&Itemid=2

During a conference call Sony executive VP Nobuyuki Oneda said the firm may be able to break even on PS3 hardware this fiscal year, which ends in March 2008.

He said that the main cost-downs would have to occur in the Cell processor, RSX graphics chip and Blu-ray optical components.

“The removal of the negative margin will be when all of these factors have come out. Maybe, marginally, we could achieve this during this year,” Oneda told a Citigroup Securities analyst during a Q&A session. Oneda still couldn’t specify exactly when this break-even point may happen.

“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,” he said.

Oneda confirmed that Sony is working on transitioning the PS3’s chips from 90nm to 65nm, which would reduce costs significantly. He said the Cell would be the first PS3 chip to make the migration, followed by the RSX chip.

Game console makers typically sell hardware at a loss, and make up for this through software sales. Nintendo, however, has made it a point to sell its hardware at a profit.
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chow_yun_fat · Jul 26, 2007

DonkeyMagic said:

i dont think they will sniff 11 mill ps3s unless they drop the price again...they will be lucky to get to 9 million by the end of the year, imo. they dont even have an "console seller" games coming out until october right?

psps 9 mill?? are you still expecting that turd to actually take off one of these days? I dont think 33% thinner and lighter will revive that thing.
Click to expand...

PSP sold 9 million last year. Their underestimating sales at 9 million for this FY with the new redesign. I'll pick up a redesigned PSP (maybe the FF collectors edition) when their released. Monster Hunter Freedom 2 is the system seller for me. FF7 something something? is also a must buy.

tested911 said:

WTH 11 Million PS3 million sold by the end of the year?? They haven't even hit 1 million sold here in the States and Canada combined??
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End of the fiscal year, which is March 08 I believe. It's unpossible to sell 11 million by FY08 unless they lower the price to $399 for the 60/80 gig before the winter holidays. I'm really impressed with how Sony has been able to cut costs on the PS3 so quickly. Maybe a $299 PS3 will show up next winter

I just came home from my trip in Asia and updated my PS3. I love how quickly they implemented many changes to improve xmb. I don't have to plug in my controller after every update anymore and I can now have multiple downloads!! They've added some customization features, but I don't really care about them. I like how I can download all the psn games my friend purchased. The only problem I have right now is Super Rub A Dub doesn't work? It's weird, the games only 100kb too.

DonkeyMagic · Jul 26, 2007

RC Cola said:

What games are you referring to that come out in October? They won't have a MGS or FF for a while, but they will have what I would call system sellers starting in August with Lair (or even now in July with NGS...though that is more of a niche title, but it seems it does attract a lot of hardcore gamers). Additionally, they'll probably get games of similar caliber for each of the remaining months of the year, as well as going into early 2008, when they will finally get MGS4 (and maybe MGO...unless it comes out in late 2007).

Not that the PS3 hasn't already had a "console seller" game (or games), but we've already discussed that before.

You haven't been paying attention to recent PSP sales, have you?
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i was referring to GTA in october, but i forgot they dont have exclusives. Lias could sell but its unproven. But like you guys mentioned MGS4 and FF wont be out till 08. i just dont see 11 mill moving, especially when the 360 will be dropping in price and will have marquee titles out...not to mention the Wii with mario and SSB coming out in november and december respectively. (not to mention metroid).

psp sales have gone up. i think a lot of that has to do with the price drop (mind blowing i know)... but we will see if its sustainable. I also think they are getting a bit of "luck" from the DS being sold out all the dam time. Heck, when i went to hawaii earlier this year i went to get a DS to keep me entertained on the plane but of course they were sold out. And i was really close to getting a PSP, but the price turned me off. If the price was lower i may have got one. I wouldnt be surprised if other people have had similar experiences, but the drop in price may be enough for them to settle and get one.

RC Cola · Jul 26, 2007

DonkeyMagic said:

i was referring to GTA in october, but i forgot they dont have exclusives. Lias could sell but its unproven. But like you guys mentioned MGS4 and FF wont be out till 08. i just dont see 11 mill moving, especially when the 360 will be dropping in price and will have marquee titles out...not to mention the Wii with mario and SSB coming out in november and december respectively. (not to mention metroid).
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11M isn't happening, unless another price cut occurs and/or I'm totally underestimating how many PS3s they will be launching in countries they've yet to launch in or just recently launched in (NCSoft announcement makes Koreans buy 5M PS3s in the next 9 months ). They have a great 07/early 08 lineup (easily the best of the 3 IMO), but they won't come close to that figure w/o another price cut IMO; even if they had GTA (exclusive) and FF coming out, I doubt they could reach it.

BTW, I don't think it is an absolute certainty that we will see a 360 price cut this year, although it is extremely likely (of course, if it is just $50, may not be much point...though it will be hard to tell how much of an impact it will have anyway).

DonkeyMagic said:

psp sales have gone up. i think a lot of that has to do with the price drop (mind blowing i know)... but we will see if its sustainable. I also think they are getting a bit of "luck" from the DS being sold out all the dam time. Heck, when i went to hawaii earlier this year i went to get a DS to keep me entertained on the plane but of course they were sold out. And i was really close to getting a PSP, but the price turned me off. If the price was lower i may have got one. I wouldnt be surprised if other people have had similar experiences, but the drop in price may be enough for them to settle and get one.
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Even if sales dropped back to what they were, it won't be dead and it will probably end up selling quite a bit when it is all said and done (for example, MS would probably be happy if 360 sales reached PSP sales...and probably ecstatic if they could get the profits).

KePoW · Jul 26, 2007

DonkeyMagic said:

i was referring to GTA in october, but i forgot they dont have exclusives. Lias could sell but its unproven
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what's Lias?

chow_yun_fat · Jul 26, 2007

KePoW said:

what's Lias?
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Lair. Dragons. Pretty. Heh.

Dr of Dunk · Jul 26, 2007

Yaaaaay, now release some damn games I want to play...

meh · Jul 26, 2007

DonkeyMagic said:

psp sales have gone up. i think a lot of that has to do with the price drop (mind blowing i know)... but we will see if its sustainable. I also think they are getting a bit of "luck" from the DS being sold out all the dam time. Heck, when i went to hawaii earlier this year i went to get a DS to keep me entertained on the plane but of course they were sold out. And i was really close to getting a PSP, but the price turned me off. If the price was lower i may have got one. I wouldnt be surprised if other people have had similar experiences, but the drop in price may be enough for them to settle and get one.
Click to expand...

Just a note on the PSP. It's actually selling ridiculously well here in China. So much so that the price has gone up(!) No, I'm not kidding here. The fact that people can rip UMDs into iso so easily has made it THE handheld console of the country. Of course, it's really hard to find non-pirated games here. For example, I have get my FFX international(just got my PS2 modded) from Hong Kong because there's no local sellers, and the pirated version is unplayable.

Invisible Fan · Jul 26, 2007

I can see them being hopeful for a massive 07 Xmas season, but they would have to introduce a crack like substance in their revisions for that to happen.

Brando2101 · Jul 27, 2007

I think SingStar might take everyone by surpise in sales. It continues to be overlooked. karaoke games have usually sold well and they are doing something really new here. It really feels like it could be a title that appeals to familes and casual younger gamers in much of the same way as a good # of wii games.

With all of the record companies that Sony owns, the game looks to see a lot of downloadable titles that I think come with the music video for the song as well. The playstation eye can also record performances and then they can be uploaded to an online Singstar community where they can seen by everyone. People can vote on their favorites etc. It's a really novel idea that I think will really surprise a lot of people.

Uncharted: Drake's fortune looks like it might be really cool and again, different from anything being released this holiday season. Some of the cinamatic camera angles reminded me of Gears of War and for the action/adventure Uncharted, it really makes the story seem more epic.

Lets not forget about Playstaiton Home. Yes Yes Yes, I know it's not a game and we are talking about the gaming power of a gaming console. Nevertheless, it really seems like it could create a big gap between the PS3 and 360 in how gamers are able to interact and cooperate. I hope I can get a beta invite

tinman said:

the problem is PS2 has guitar hero and PS3 doesn't.
why upgrade when u can buy guitar hero?
Click to expand...

Yea that really sucks. I just really got in to GH but I have to go to my friends place to play. At least GH3 and Rockband are coming out. I feel bad for you guys who have PS3 guitars though...

RC Cola · Jul 27, 2007

meh said:

Just a note on the PSP. It's actually selling ridiculously well here in China. So much so that the price has gone up(!) No, I'm not kidding here. The fact that people can rip UMDs into iso so easily has made it THE handheld console of the country. Of course, it's really hard to find non-pirated games here. For example, I have get my FFX international(just got my PS2 modded) from Hong Kong because there's no local sellers, and the pirated version is unplayable.
Click to expand...

If I'm not mistaken, the PSP has sold extremely well in Korea too (as well as some other region I'm forgetting). I don't know about China, but I think I read something about consumers in Korea really appreciating the multimedia functionality of the PSP. Probably doesn't hurt that the average consumer there can probably get more out of the PSP thanks to the widespread availability of broadband and Wi-Fi. I'd probably use my PSP 10x more if I could easily use Remote Play and other similar features.

Brando2101 said:

I think SingStar might take everyone by surpise in sales. It continues to be overlooked. karaoke games have usually sold well and they are doing something really new here. It really feels like it could be a title that appeals to familes and casual younger gamers in much of the same way as a good # of wii games.

With all of the record companies that Sony owns, the game looks to see a lot of downloadable titles that I think come with the music video for the song as well. The playstation eye can also record performances and then they can be uploaded to an online Singstar community where they can seen by everyone. People can vote on their favorites etc. It's a really novel idea that I think will really surprise a lot of people.
Click to expand...

Yeah, it is a bit underrated, although probably because it never really took off here in North America yet...though I don't think Sony has really tried to push it either. I'd be worried that it might lose its appeal by only being available on a $500 piece of equipment though. Still, some American Idol-esque contests could be pretty cool, if done right.

I wonder why it is taking so long to be released. It seemed like it was working fine months ago, and I think it was originally scheduled to be out in June or July IIRC. Maybe they're still working out some licensing issues, or something like that.

Brando2101 said:

Yea that really sucks. I just really got in to GH but I have to go to my friends place to play. At least GH3 and Rockband are coming out. I feel bad for you guys who have PS3 guitars though...
Click to expand...

Did they never get the PS2 version working on the PS3 via backwards compatibility? I knew there were some issues at first, but I thought they would have fixed that by now, either with a firmware update or an adapter.

In fact, I thought I even read there was a working adapter...

DonkeyMagic · Jul 27, 2007

i didnt know the psp was so popular in china.

whatever its case, it really is great little piece of technology it just hasnt sold well

RC Cola · Jul 27, 2007

What's your definition of not selling well? ~25M systems in a little over 2 years isn't too bad for a system that hasn't sold well.

Now if we're talking about PSP software...

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