PS3 pushing SCE $1.71 billion into red

Sony CEO tells press conference that the game division's fiscal-year losses will be double previous estimates.

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Last week, Microsoft announced its financial results for the quarter ending September 30, 2006. As usual, its game division lost money--a lot of money. For the July-September quarter, the company's Entertainment and Devices division, which makes the Xbox 360, lost $96 million--an improvement over the $173 million the company lost during the same quarter in 2005.

Today, one of Microsoft's rivals in the game arena announced that it too would take a loss on its own game division. Speaking at a press conference in Tokyo, Sony CEO Sir Howard Stringer announced that losses at Sony Computer Entertainment are expected to now total 200 billion yen--or around $1.71 billion--for the fiscal year ending March 31, 2007. The figure is nearly twice the shortfall Sony originally projected.

"Considering some of the additional costs of PlayStation 3, we have to generate some excitement and profits from elsewhere in the company to offset the performance of PlayStation 3," Stringer told the Reuters news service.

One reason cited for the increased costs is Sony's decision to drop the price of the lower-end PS3 model in Japan. At last month's Tokyo Game Show, the company announced it would lower the price of the 20GB version of the next-gen console from 60,000 yen (about $515) to 49,980 yen (about $429).

Despite the increased cost, Stringer expressed confidence that the PS3 will be a success. "The point really is that PlayStation 3 is already finished and has been tested in America and has been deemed a creative success," he said. "In the end that is what counts."

The executive also expressed apparent befuddlement about some gamers' anger that the PS3 launch was pushed back to March 2007 in Europe. "I think the idea of worrying about a delay in PlayStation is slightly strange to me," said Stringer. "Every complex technology runs the risk of delays."

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