Sony game group down $2 billion

Some customers might think the PlayStation 3's $599 retail price is high, but that's chump change compared to what the machine is costing Sony. The electronics giant today posted its financial results for the fiscal year and fourth quarter ended March 31, and as analysts predicted, the game division racked up significant losses.

For the fourth quarter alone, Sony reported an operating loss of $914 million from its game division, attributable primarily to the PS3. Sony's new machine was also responsible for a bump in gross revenue, as the company's gaming segment racked up sales of $2.4 billion and helped push company-wide sales to $17.7 billion, up 12.6 percent from the previous fourth quarter.

The full-year picture for Sony's gaming division was similarly grim, with the PS3 driving an increase in revenue, as well as operating losses. For its full fiscal year 2006, Sony's gaming group posted revenue up 6.1 percent to $8.6 billion, but suffered an operating loss of nearly $2 billion.

According to Sony's financial report, "This deterioration was primarily the result of loss arising from the sale of PS3s at strategic price points lower than its production cost during the introductory period, as well as the recording of other charges in association with preparation for the launch of the PS3 platform."

Sony's figures peg PS3 shipments at 5.5 million systems for the fiscal year, with 13.2 million games to go along with them. As for how its older systems fared, Sony reported hardware sales were down for the PlayStation 2 and PlayStation Portable. The company shipped 14.2 million PS2s for the year, down 2 million from the year before, while PSP shipments totaled 8.4 million, down 5.7 million from the year before. Since then, PSP shipments have slowed significantly, with less than 1 million PSPs arriving in North America and Europe since September of 2006, and a negligible amount in the January-March quarter.

The software picture looked a little brighter, as Sony said 54.1 million PSP games shipped to retail, up 12.5 million from the year before. However, PS2 game shipments dropped 30 million to 193 million units.

For the current fiscal year, Sony expects its game division to post better results, but still lose money.

"An increase in sales is anticipated as a result of the full-scale expansion of the PS3 business in Japan, the US, and Europe," Sony said in its quarterly report. "In addition, a significant reduction in operating loss is expected due to rapid reductions in hardware production costs and an enhanced lineup of software titles in the PS3 business."