Sony Lost $3.31 Billion To PS3 Cost, Pricing Imbalance

[KTA]

Been awhile since we've had a cost zinger:

http://kotaku.com/5018899/sony-lost-...cing-imbalance

Pricing the PlayStation 3 below its production cost caused Sony to lose $2.16 billion in 2007 and $1.16 billion in 2008, the company revealed today.

Sony's fiscal 2008 annual report delineated potential risk factors to its investors, outlining that "the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered." The loss figures were provided as an example of the "significant negative impact" introducing a new platform can cause at first.

"In the past, large-scale investment relating to capital expenditures and research and development for the manufacture of key components, including semiconductors supplied for [PlayStation 3] was also recorded within the Electronics segment," the company said.

In order to stay competitive, said Sony, it had to invest large amounts of money in research and development to introduce the PlayStation 3 into the market, and these sorts of expenditures don't always get recouped, especially if a platform "fail[s] to achieve such favorable market penetration... resulting in a significant negative impact on Sony's profitability."

Even if it can recoup its investment, Sony said, it's still possible to have lost large amounts of money on the platform's introductory period, and even a successful PS3 might take a while to replace what it cost to produce. These possible outcomes are currently a risk for the company, Sony said.

[hdinred]

Wowsers!

Microsoft is in a prime position to cut the 360 price.. I wonder if Sony will be able to follow…

Makes the 1 billion hit Microsoft took on the RROD look small…

[Master X]

Wowsers!

Microsoft is in a prime position to cut the 360 price.. I wonder if Sony will be able to follow…

Makes the 1 billion hit Microsoft took on the RROD look small…

If they follow, theyll lose more.

[BDP]

Can someone cut and paste? Kotaku is blocked at my work.

[hdinred]

Can someone cut and paste? Kotaku is blocked at my work.

Pricing the PlayStation 3 below its production cost caused Sony to lose $2.16 billion in 2007 and $1.16 billion in 2008, the company revealed today.

Sony's fiscal 2008 annual report delineated potential risk factors to its investors, outlining that "the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered." The loss figures were provided as an example of the "significant negative impact" introducing a new platform can cause at first.

"In the past, large-scale investment relating to capital expenditures and research and development for the manufacture of key components, including semiconductors supplied for [PlayStation 3] was also recorded within the Electronics segment," the company said.

In order to stay competitive, said Sony, it had to invest large amounts of money in research and development to introduce the PlayStation 3 into the market, and these sorts of expenditures don't always get recouped, especially if a platform "fail[s] to achieve such favorable market penetration... resulting in a significant negative impact on Sony's profitability."

Even if it can recoup its investment, Sony said, it's still possible to have lost large amounts of money on the platform's introductory period, and even a successful PS3 might take a while to replace what it cost to produce. These possible outcomes are currently a risk for the company, Sony said.

[Jerri Blank]

Damn... Looks like Microsoft isn't the only company losing money. Can't wait to see how the SDF spin this one.

[capnmonkey]

Cost to subsidize affordable PS3 for 18 months: 3.31 billion dollars
Cost to win the format war and get paid a dollar for every blu-ray sold over the next 10 years: priceless

[BDP]

Thanks for posting the text.

[RedRedSuit]

Makes the 1 billion hit Microsoft took on the RROD look small…

Microsoft has lost far more than 3 billion on their Xbox and 360 businesses.

Damn... Looks like Microsoft isn't the only company losing money. Can't wait to see how the SDF spin this one.

Welcome to the HDD Console Smackdown forums, where it has been widely known and talked about that PS3 has lost lots of money for Sony, thus making your trollage completely futile.

[Praetorian]

This is just one side of it, I think it would be interesting to see what the opportunity cost would be if they didn't lower the price. Those are probably pretty confidential numbers though, doubt we'll ever get a look at those. Hell, they may even be much worse than this figure.

[wingnut]

Cost to subsidize affordable PS3 for 18 months: 3.31 billion dollars
Cost to win the format war and get paid a dollar for every blu-ray sold over the next 10 years: priceless

Close, but Blu has to beat out DVD before it's won anything. Sony better hope it does before the next big thing comes around.

Microsoft has lost far more than 3 billion on their Xbox and 360 businesses.

MS can take bigger hits than Sony, their pockets run much deeper. Sony makes tons of money but $3.31 billion is not pocket change to them.

These possible outcomes are currently a risk for the company, Sony said.


That right there says Sony is worried about this.

[Detroit Tigers Fan]

Cost to subsidize affordable PS3 for 18 months: 3.31 billion dollars
Cost to win the format war and get paid a dollar for every blu-ray sold over the next 10 years: priceless

So on the 19th month that number is just going to start to drop? Don't think so...Sony is going to keep on loosing money on this.

[hdinred]

Damn... Looks like Microsoft isn't the only company losing money. Can't wait to see how the SDF spin this one.

Umm… Microsoft is making money on the 360… Robbie Bach: Xbox Makes Money This Fiscal Year

[Master X]

Microsoft has lost far more than 3 billion on their Xbox and 360 businesses.

Point is PS3 lost more the 360 even with RROD, nice try tho.

[Jerri Blank]

Microsoft has lost far more than 3 billion on their Xbox and 360 businesses.



Welcome to the HDD Console Smackdown forums, where it has been widely known and talked about that PS3 has lost lots of money for Sony, thus making your trollage completely futile.

Ha you're exactly the type of person I was talking about. Thanks for the laugh.