Think you paid too much for your Playstation 3? Don’t expect any sympathy from Sony.
In the company’s fiscal 2008 annual report, Sony revealed that they’ve now lost roughly $3.3 billion (that’s billion with a B) on the Playstation 3 since its launch. That breaks down to $2.16 billion in 2007, followed by a notably smaller but equally daunting $1.16 billion loss in 2008.
The reason? Pricing the console below its production cost. That’s right - that hefty $599 you paid for the PS3 back when it first launched was significantly cheaper than the cost of producing it in the first place, and while the retail price has come down some, the losses keep piling up.
Investors have reason to sweat. In a statement, Sony claimed “the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered.” They went on to note that they’ve invested a great deal of money into R&D for the console, a sum they might not be able to recoup if the PS3 “fails to achieve such favorable market penetration.”
Sony fanboys should take heart, however. Losing money on hardware is relatively common in the video game biz, as companies routinely lower prices to sell more units and thus stimulate software sales. Sony’s game division saw a 26% sales spike last quarter, a trend they expect will continue on the strength of strong exclusives like the recently released Metal Gear Solid 4 and the upcoming sequel Resistance 2.
umm if your selling it for below production price how do you expect to EVER make money? Even if you sell every unit you’ve produce your still taking a loss by doing that. Seems like sony barried themselves
Well I can see why they might do it. If they price it too high, and don’t sell any at all, then that will get coupled with not selling any software or other products involved with it as well. And long term, people just won’t invest in a PS3 and it would have never got any attention anyway.
Kinda sucks, but at least they priced it accordingly for the market. I wonder why the production cost was so high.
You do realize that the PS3 is why Sony won the High Def DVD war right?
3.3 billion is a great investment when you consider that they’re going to get royalties for every bluray player and disc sold for probably the next decade or more until bluray is replaced by the next format.
And electronics prices always come down the more you produce. If they were losing money at the launch it probably won’t be long before they’re selling the console at a profit too.
didn’t sony skimp out on the latest generation too? From what I remember reading, the last ones made can’t play ps2/ps1 games since they took the emulation layer chip out to save on cost, among other things?
I completely forgot about this. Royalties received from this should well exceed any “losses” they claim to have endured from r&d/production of the ps3…
I believe by 2010/2011, blu-ray will be in millions more homes, and at a few hundred bucks a pop, I don’t presume Sony will have any kind of financial issues
actually, for the last generation (ps2-xbox) it cost game developers somewhere around 5-10 million per title and with new, more complex technology, it’s easily topping that. The games, once developed don’t cost much to make but the console makers pay a premium to the developers to keep certain titles console specific. (and not only that, but game publishers have to pay the console companies to license the product)
In the future, I can see almost every title, with the exception of in house dev studios, being cross platform to recoup the most they can.
