Sony - Kaboom - Financial Meltdown etc

[teddymeow]

^There's not really much else they can take out of the PS3 to make it cheaper though is there? Maybe the in built wireless (release an adaptor like MS) but the Blu-ray drive is integral and there aren't many more USB ports that they can take out!

Oh dear, not best times for console makers (unless you're Nintendo who must be chuckling with glee at these reports. Especially if they turn out to be true).

[Brats]

I was shocked at how much the PS3 has cost Sony. Here's a graph from Sony's own accounts showing the performance of the gaming division in relation to the actual company.



If you look at the positive dark blue bars in 01 to 05 and compare them to the negative dark blue bars in 06 to 08, the difference is massive. Every yen of profit from the PS2 has been wiped out (and then some). And that's not taking into account the losses made in the first half of the PS2 era.

I still can't see them dropping out of games though. They have too much invested. They own numerous studios, have invested billions in Cell and still have to convince most people about Blu Ray.

[MattyD]

The investment in the Cell was all part of their push on consumer goods as well though - the idea was that eventually every Sony device would have some kind of Cell or Cell-derivative inside and you could network your life to the Nth degree. That idea seems to have died of death though, presumably due to to the cost of the chip itself and the investment necessary to make it happen.

Also - all the profit from the PS2 = mind-boggling amounts of cash. I can't believe they've lost it all

[charlesr]

Judging by this real usage survey, Sony could have skipped the PS3 for a good few years and still be making money. Maybe.

[Brats]

Being played doesn't make Sony money though. Although the PS2 is still used loads, game sales are low and the price of games is very low too.

However the idea that Sony could have skipped a generation is an interesting one. Had they waited and continued to support the PS2 themselves and encouraged support from third parties, would they be in a better financial position? As you say, maybe.

I'm still amazed Sony haven't released a waggle add on for the PS2 to compete with the Wii. Given that everyone of the planet has a PS2, why not create a waggle add on with some thrown in games and charge $50 for it, whilst packaging it with new machines? They would benefit from all the games being developed for Wii being developed for the PS2 too, meaning a slew more income from software sales.

Seems like a complete no brainer to me. Although Sony say they are still supporting the PS2, all they are doing is making new hardware and selling it. They aren't actually supporting the machine in anyway, which seems so odd given the huge potential.

[belmondo]

The trend on that graph would suggest that Playstation is about to start making money again, so closing the division now would be madness.

Sony originally said the PS3 was going to have a 10 year cycle, I would think they would be more inclined thann ever to follow through with this now.

[teddymeow]

I'm still amazed Sony haven't released a waggle add on for the PS2 to compete with the Wii. Given that everyone of the planet has a PS2, why not create a waggle add on with some thrown in games and charge $50 for it, whilst packaging it with new machines? They would benefit from all the games being developed for Wii being developed for the PS2 too, meaning a slew more income from software sales.

This is an interesting idea but would it sell all that well or increase hardware sales of PS2?

I think the main issue with them doing something like this would be how they go about positioning the product after spending so long saying "you don't want a PS2 you want a PS3 with true HD and all these amazingly expensive bells and whistles".

Maybe Sony could develop a time machine using cell technology and beat Nintendo to the punch with waggle control and the like.

But...if they go back in time and develop their own version of the Wii then reality as we know it wouldn't exist so Sony would have never developed the Cell so they couldn't have developed he time machine using the cell and...oooh...paradox...my head!!

[teddymeow]

The trend on that graph would suggest that Playstation is about to start making money again, so closing the division now would be madness.

Sony originally said the PS3 was going to have a 10 year cycle, I would think they would be more inclined thann ever to follow through with this now.

Surely though, their 10 year cycle was founded during more economically stable times when massive banking and corporate entities weren't imploding around them. I agree that the graph suggests a soon to be profitable PlayStation division but sales of hardware and software will eally need to ratchet up if they want to be sitting in the healthy black like they were during the days of PS2 - certainly now games take that much more money to make but are still selling for around the same price as PS2 software.

[Brats]

This is an interesting idea but would it sell all that well or increase hardware sales of PS2?

I think the main issue with them doing something like this would be how they go about positioning the product after spending so long saying "you don't want a PS2 you want a PS3 with true HD and all these amazingly expensive bells and whistles".

I think it would sell very well. Loads of people want or bought a Wii. Loads of people spent $250 to get one or couldn't get one when they wanted. Loads of people own a PS2. A $50 add on thatturns the PS2 into a Wii would have sold like mad imo.

It's not about selling more PS2 hardware, it's about selling more software on the PS2, making more money and stopping people from buying your competitors product. Instead they stay with the PlayStation brand and when the price has dropped in a few years, they upgrade to a PS3.

I think Sony could have easily marketed all three oncoles together: The PS2 as the high end powerhouse for the enthusiast, the PS2 as the cheaper fun machine for all the family and the PSP as the portable machine that bridges them both.

[Brats]

The trend on that graph would suggest that Playstation is about to start making money again, so closing the division now would be madness.

But that graph runs to the the first half of 2008. Six months ago the PS3 was on track for a turn around. Since the economy going plop and the 360 price drop through, sales have declined a lot.

[belmondo]

Things may have slowed down in the second half of the year, but the expensive part (developing and launching a new platform) is done. Sony just need to keep selling boxes now. Sticking with this platform for 10 years should enable them to slowly build the business.

Re waggle for the PS2, if produced in response to the Wii it would have been too late capitalise on the initial excitement. Plus I think it would be hard to market this sort of thing as an add-on in competition against a brand new console.

[dataDave]

This time next year, the only contender for GOTY will be Bratz: Ponyz All Upz In Ya Face.

No different to this year then, or last tbh.

[Flabio]

Not to mention that trying to put out a waggle stick for the ps2 would run you head first into whatever patents Nintendo have on it (or whatever patents Nintendo licensed to make it)

[Brats]

Things may have slowed down in the second half of the year, but the expensive part (developing and launching a new platform) is done. Sony just need to keep selling boxes now. Sticking with this platform for 10 years should enable them to slowly build the business.

But if you sell less boxes, you get fewer economies of scale and the cost per unit increases. The general view is that Sony still lose money on the PS3 after they took a big chunk off the price. The unit cost increasing won't help them turn it around. But to sell more units they need to reduce the price which won't help them either.

Fewer machines also means less software being developed, which makes the machine less attractive than your competitors and you start to enter a self perpetuating cycle.

Sony are in a similar situation that MS were with the XBox last generation. They didn't predict how quickly they would have to reduce the price of the machine in order to maintain market share. If the current trend continues, they could end up losing money every year.

Sony need to get sales up whilst increasing the money made on each machine. That's not an easy task when you're in year three of the machine's life.

Re waggle for the PS2, if produced in response to the Wii it would have been too late capitalise on the initial excitement. Plus I think it would be hard to market this sort of thing as an add-on in competition against a brand new console.

They already had the technology from the sixaxis, so it's not like they were starting from scratch. They couldn't have copied the Wiimote exactly, but I don't believe it would have taken them long to develop an alternative that didn't break any patents.

The PS2's success in Europe was built on add ons like Eye Toy, Singstar and Buzz. Given the choice between paying a small premium to update their existing machine or buying a relatively expensive (and hard to get hold of) new machine I think a lot of people would have plumped for the former, especially as it was by Sony a name they trusted.

I'm not saying such a device would have been guaranteed success, but it wouldn't have cost Sony much to try. The main point is, they didn't even bother trying.

[belmondo]

Well according to Magicbox the PS3 is nearly selling at a profit, and will be in 2009. Of course Sony are marginalised at the moment, but I think the fact that they have not dropped the price in reaction to the 360 price cuts indicates they would rather have less sales and make some money rather than cut their own throats in a race for second place. I imagine they are relying on (semi)exclusives like FF XIII to boost sales throughout the year.

The problem with the 'waggle' option is not just the technology. Before the Wii launched, Sony either had no idea about what Nintendo were doing, or knew but didn't see it as a threat. Once the appeal of the Wii became clear, it would have taken a significant amount of time to develop a new controller and software for the PS2, during which time many PS2s would have been relegated to the loft/kid's bedroom as people bought Wiis (and 360s). Plus I imagine that Sony still had confidence that the PS3 would be a big success at launch.