PS3 Could Cost Sony $2 Billion
Sony's third quarter results weren't nearly as bad as anticipated - the company even returned to their more optimistic annual revenue prediction, previously slashed last October - but that doesn't mean the PS3 isn't losing money. In fact, just the opposite.
Thanks to UK technology site vnunet.com, we have a good idea of just how much money we're talking about. Sony is potentially looking at a total loss of $2 billion, all related to the PS3's development and manufacturing costs. Sony has already lost $1.65 million on the PS3 endeavor.
One quote from Sony at a Japanese shareholder meeting (Sony's shares actually leaped 6% at the start of January, the biggest increase in more than a year) helps to explain their position...a little:
"This deterioration was primarily the result of the loss arising from the sale of the PS3 at strategic price points, as well as other charges associated with preparation for the launch of the PS3 platform."
Well, we could've expected as much. The losses are huge, but then again, thanks to strong sales in Sony's Electronics division (up 17% in the third quarter), the company can afford to take the hit. Furthermore, we're only talking about hardware here. As was the case with the PS2, Sony took huge losses on the "strategically priced console," opting to lose money on every system sold and make it up with the software and accessories. Furthermore, with manufacturing now in full swing, the inevitable is bound to happen- the cost of that manufacturing will drop, along with the losses.
But for now, it's a slow time of year for the industry, and that's that. Once the PS3 begins to fill out its lineup with some stellar titles, and the post-holiday financial woes for so many people begin to abate, the turnaround should ensue.
2/1/2007 Ben Dutka