Sony game group down $2 billion

PS3 maker's game division posts $914 million loss for the first three months of 2007--and more than twice that for the full fiscal year.

880 Comments

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."

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syam32245340

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And I read this article 3 years later :lol:

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Great_Ragnarok

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sony should start releasing games in large numbers! thats the key! and it seems that X360 is achieving this. there system is a lot easier to program to.

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keaton32

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Think about this for a sec, Xbox 360, PS3 and Wii are all great systems that provide choices for gamers. It's not about Microsoft vs. Sony or Nintendo, but more about gamers' choices. Each has it's own advantages and faults (especially since I own an xbox 360 and a PS3, and I got the Three Rings of Death on the 360 after two weeks of owning it and had to pay to get it fixed PS. Not very nice PR microsoft) and it's up to us the gamers to decide what we like better and make it known to the companies what we want to see in games.

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ss3zolo

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Ouch

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bamafan3414

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Ok so I was just on the 360's (them losing 1.8B) part of this and what the hell.... PS3 has almost lost 1B and they didnt have a warranty extension that cost them just over 1B.... so if they didnt have the extension then sony would of lost more money

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theKSMM

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I'm not surprised by any of this news except the rapid falloff in the sale of PSP systems. I don't know if that means that the market is relatively saturated with PSP gamers. It's still a great device with a library of games worth boasting about now, but maybe the people who want one already have one at this point. I certainly think that they could sell more if they close the price gap with the DS, but I'm also aware that unlike the DS, the PSP's base is mainly among hardcore gamers. The DS's ability to generate broad, mainstream appeal (and its low price) is what has kept it flying off shelves. Still, if Sony can reduce the production cost of the PS3 (bye-bye, Emotion Engine) and close the gap in price with the XBOX 360, they may be able to see a few more gamers who will lean toward the PS3 in lieu of the 360 or (perhaps more likely) gamers who will add a PS3 to their shelf next to the 360.

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oliver_475

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not suprised, to us teenagers its just 2 much to ask

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Terry_Foxman

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The truth of the matter is that altough sony is selling at a loss the price is still to high, sure its better that 1,000$ but a consumer doesn't know that it could have cost a grand. Plus the Wii with its staggering 250$ really cut into the PS3 demographics. Casual gamers as well as gamers to young to make their own cash and must rely on the parents are all getting the Wii for its price and revolutionary controller. This news really does bode well for Sony because although this was to be a predicted loss on the console the come back was going to be with great exclusive games and with so few consoles sold, theres a problem Sony has no money to make and the company may see the game branch as a liability and get rid of it, or downsize it. So lets see what happens, i would personally be very upset if they did get rid of it, but then again i have a WII and not a PS3 (no cash for me)

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chozodude

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"TTDog - you can still see mountains of ps3's unsold in most UK game stores" here in the Netherlands it's the same story.... in the biggest multimedia store chain they're piled high...like....mountains xD

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TTDog

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"XYZVector - People are voting with their wallets. The PS3 is breaking records in the UK" It did well for the first 2 weeks then dropped off big style, you can still see mountains of PS3's unsold in most UK game stores.

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skirlnik

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Anyone who says that buying a PS3 is bad for Sony needs to get a clue. I'd explain the difference, but if trying to take Sony down (for jollies, I guess) gets you off and puts a PS3 in your home (hello?), who am I to stop you?

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smoothn00dle

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some people said marketing. There is no games. Marketing is just waste of money *v*

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getoconnection

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bone1264 ------------------------------------------------------------------------------------------- Well my friend we can agree to disagree on some things. I'm just happy our conversation didn't degenerate into the cesspool of flaming fanboys. I have been known to partake at that table on this website. However, I have to tread lightly as I mentioned in the onset of our exchange. I can understand your pain as it relates to the Wii. I have supported Nintendo for so long that I'm used to waiting for good games on their systems. So if you find me ranting on other threads don't be surprised if you see me playing the role of the biggest Nintendo fanboy in the fray.

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bone1264

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geto, I think I agree with what you are saying. You could definitely be right about the toy issue--I think its really a problem with their marketing. I think it interestingly highlights the ps3 vs. wii argument, because the wii is clearly a toy, but the ps3 is an attempt to segway into other markets, but they haven't been completely successful in this yet. It's a weird thing, because Ps3 has put itself in a different market than wii based on price, but you are correct in that it has to justify itself being there. It's not so much about affordability, but the fact that the ps3 has to compete with every combination of goods in the basket between 200 and 600 in a general market, so parents, when looking for toys this comes into play. Sony has to convince them that dad needs a 1080p tv also and a bluray player will be nice also. They are now ever so slightly wining the format war with hddvd, but the ps3 was definitely a good stepping stone, if although it hurt them in the toy side of the market, it may have given them a leg up in the a/v side. I'm 99% percent sure bluray will win in the long run. HDdvd needed a huge head start because it's advantage over bluray in the first place was that it was cheaper to produce, but in a couple of years this will be moot, and the production capabilities of bluray will prevail. The ps3 is definately running through the crossfire of the format war. I am rare in that I have a SACD player (and I loooove it), and I am definitely excited about bluray in the a/v department. I think overtime, interests went more towards audiophilia than gaming, although I definitely still love video games. I like sony in this battle (formats), because although own a wii already (a little bored with it atm), I definitely see myself getting a ps3 within the next year for games and a/v stuff, and I feel like there are more people out there like me. Interestingly enough, I think sony could ride the 'green trend' when they talk about bluray, because the discs are like 98% corn. But with the whole ends justify the means stuff and analyst stuff, I'm definitely not trying to create an equation and make a prediction for everyone. Rather than point out every possible variable etc (which is impossible--statistics is an art not a science), I'm simply trying to point out what are not key factors, or at least what are not as key as some would make them out to be. Like with the sales issue--sales would hurt the bottom line on this quarterly report, not help it because they sell at a loss. Low sales could definitely hurt next years quarterly report at this time, but we will meet that road when wait come to , and sony definitely still has time to work stuff out. In contrast, microsoft's lackluster vista sales still give them huge profits now, (because like drugs they sell with enormous profitability), they could be really hurting in the future because they have no way to profit off it then. When you sit down and look at everything, "grim and bad" don't seem like accurate descriptions of sony's situation. The long term marketability and short term internal revenue stats are two completely different issues, and we pretty much agree that sony conceded the internal revenue side of things when the decided to make ps3s many years ago. Ultimately, I get mad a gamespot or anyone else for stuff like that when they over-simplify an issue to make a point (additionally, as I've pointed out in my last posts, they've left out key info from the bloomberg article, and this one a journalist just wrote himself based on a report by sony). I've kinda had enough of that kind of stuff after the last 6 years or so with Iraq and whatnot, so when I see it happening, and I know a thing or two about it, I tend to pounce. XyzFactor, It's definitely a catch-22 with the blu-ray player, because you don't feel like you need/want that at that price, but ultimately you may want it sometime in the future. Perhaps this is most attractive if it competes on solid footing with HDdvd. For this to happen, they have to bundle and produce as many blu-ray related things in order drive production costs down in the future. Sony's interests in the long run and consumers really meet in this interest, because both feel like they are 'getting it' in the short run. It will be worth it in the future if we can burn 50gb disc at a cheap price, although with DRM, that might be a whole 'nother bag of worms :P

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subrosian

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Marketing matters, but no matter how much you advertise, if all you're doing is making people aware that you have a product they can't afford, you're simply breeding resentment. I find it hard to swallow a $600 price tag from a company that chooses to spend millions telling me about its product - and judging from the PS3 sales, I'm not the only one.

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gaiaterra

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dwilson65, I think you do make a good point about fads and yes products do shift better if the marketing is good. But a product must still be worth spending money on, there are a lot of things in the world you would not buy regardless of how good marketing is, for example 6 month old milk, membership to the Torries and the Nokia N-Gage Mind you, I must admit the marketing for the PS3 has been rubbish (at least in the UK) and it is probably having a negative effect on sales.

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darkride66

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Also, the more PS3's they sell, the more money they lose! It'll be years, if ever, before they turn a profit on the actual console sale. Right now they're just establishing their user base. Won't plunk down $600 for a console, well there's people who have paid much more for a Blu-Ray player, and that's what you get here as well. With well over 2 million units sold it looks like people are voting with their wallets, and they (as well as myself) likey!

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darkride66

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XYZVector - People are voting with their wallets. The PS3 is breaking records in the UK and selling strong in Japan and in the US. This loss was expected. It's an investment. The PS3 is widely viewed as a bargain for the technology, even with the current pricetag and Sony is building their market share. And has the stock price suffered with this news? It hasn't. It's up 40% from a year ago and recently S&P upped their target another 10% above current trading levels, and believe me, they know full well the current financial shape of Sony. That's their job. The 3DO came out for $700 in '93 and it lasted 3 years before being discontinued. And they weren't posting record sales. The demise of the PS3 is greatly exaggerated. Come on, people! It's only been a few months and it's selling great!

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Gen-Gawl

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by making the ps3 $600 they alienated a lot of potential customers.

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epking

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getoconneciton wrote: "No one can justify buying a 600 dollar toy." I agree. i think this basically sums up much of the ps3's problems. $600 plus a couple of $60 games plus tax = $750ish. That is a lot of jack! Add to that mediocre game selection, and it's no mystery why sales SUCK. anything above the $500 mark is a lot for anyone including the wealthy, to pay for a games machine. I'm single, in my early 30s, so i have quite a bit of disposable income, but it just pained me to drop $500 on an x360 plus some games. The $500 mark was just a lot to overcome. Make that $700 and have no really must have games......and there's your reason why the ps3 is tanking. $700 is a lot of money for the average consumer to drop on a games machine. plain and simple. Sony is outpricing themselves out of this gen.

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XYZVector

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What is up with the PS3 fanboys, 2 billion dollars is a lot to lose, and sony is in the red bigtime. The investors & CEO are the ones that call the shots. If it is decided that the PS3 will not have a future or the stock prices go down to far then they will have no choice but to nix the PS3. The PS3 is just to expensive for the amount of content it has. This wouldn't be a problem if they didn't have 360 or WII to contend with. However sony got to arrogant, and stopped listening to it's customers needs and wants in a console. Instead sony decided to put thier intrestests in the PS3 (bluray player), and the cost of the PS3 skyrocketed. I just don't see how the PS3 will do well against such tough competition. Nintendo taking all the casuals away, and the 360 offering a very compelling, and having more content, and installed base. The 3rd parties are moving away from the PS3, and this trend will continue. If they could bring the PS3 = 360 price there would be no reason not to chose the PS3, even with less video game content but a movie rich bluray library to hold you over untill the content shows up. Sony made some very large miscalculations, and now they will pay the price for it. People are voting with thier wallets, and as much as the PS3 fan community doesn't like to admit it the PS3 is a red herring.

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getoconnection

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bone1264 Your car analogy is a little removed from my explanation of tiered markets. You ultimately have never addressed the issue that this is not that big of a deal, and no one in the financial world cares if their loss was 2 billion instead of 1.6 or whatever they predicted beforehand. ----------------------------------------------------------------------------------------- I get what you are saying. Yes Sony made money (do in part to realestate sells), the stock went up, sales of the Wii shouldn't be in the Bloomberg article because it's not in the same market as the PS3. Basically a 2 billion dollar loss is not bad because their projections were not that far off (ie they sold a few more systems), so all this media attention is moot. I get it. But you have now compared the videogame market to 3 other markets that don't have anything to do with the gaming market. Nuclear power plants, medication, and cars oh my. With the exception of cars the products that you have mentioned are necessities (sometimes a car is a necessity). A videogame console is a toy. A want. And the PS3 just happens to be a 600 dollar toy. If dropping the BR isn't an option then it probably is worst than you would have everyone believe it is. If they drop the price then they are still ultimately in the same boat even if it will cost them less to manufacture. The media is comparing the 2 machines(wii) because they are both toys. Any one who can afford a Wii60 can afford a PS3. My point is, what appears to be happening (look at the top sold games chart). No one can justify buying a 600 dollar toy. Even with the projected game line up people will either wait for the price to come down or look else where. In either case Sony is screwed. IMO having the income (ie the ability to be in the "market") for the PS3 has little relevance with wanting to buy the system in most cases. Consumers haven't attached any value to it because it falls in the category of a "want". I can't say "the PS brand isn't in trouble" with a straight face knowing that they are not pushing any compelling software right now. The future will be two little to late. I made the analogy of the car because you made the horrible comment that an inexpensive car can't be compared to expensive car because they are not in the same market. They certainly compare them in crash tests and mileage, space etc. So if X car gets "better" gas mileage then Y car, I will probably get the one that waste less gas because that is my priority. It's funny because I just traded in my E320 benz for a hybrid. Go figure. I could buy a PS3 if I wanted to as could most so-called hardcore gamers. But I don't see a need to knowing Sony will be hard pressed not to drop the price just to stay in the race. The more time goes buy the more people will adopt the 360. Sports games and GTAs and wrestling games sell systems to the average Joe. All of which can be played on a cheaper system. The projected games that Sony has coming out are not system sellers which to "ultimately address the issue" is why the media is making a big deal out of Sony's abysmal numbers. I know analyst approach problem solving using mathematical solutions and equations so you should be able to appreciate me adding other variables to Sony's projected forecast. The end justify the means in your case. But you are flaming a news article that reported a companies huge loss due to it's inability to sell it's gaming products and services.

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TTDog

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Good comparison dwilson65.... PS3 and a pet rock... one can give you hours of enjoyment... and the other is a PS3. Although with so many people referring to the PS3 as a paperweight I can see the similarities.

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dwilson65

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Gaiaterra " to turn a profit you have to have" no to turn a profit all you have to do is turn a profit every thing that compines make off a product (gross profit) subtract the cost to make ,market & distribute a product is your net profit. The product dosn't have to be different or better if its marketing is better.Thats called a fad ,look at pet rocks or any other useless product

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Gen-Gawl

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yep champhf, you are 100% right. competition is a good thing for us gamers. If it ever gets to a point where one company has a monopoly on it we are in trouble. I don't know about anyone else but I don't want any console to be a "winner or loser". I want two or three good alternatives to choose from. Right now I think we have that. I also like the way that third party developers are going. Spread the games to multiple platforms so we can still play all the great games if we decide to only buy one console.

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WGR_Darrin

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Sony knew they'd be losing money on the PS3 when they priced it at $600, but anything higher would've meant even lower sales. Don't get me wrong, I don't like the PS3 because right now there's literally nothing on it that I want to play; I'm just playing Devil's Advocate here. Nintendo's dominating everything right now: game sales, system sales, handheld sales. Sony is falling behind and if they don't want to go the way of the Jaguar or the Dreamcast as far as the PS3 is concerned, they need to consider some way to make the PS3 cheaper to make and cheaper to buy.

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LiquidSanek

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One would figure they would have learned from sega...

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champhf

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does anyone remember the 3DO ? well i imported it from japan when it first came out and it was a super powerful machine. due to the price it never sold and lost so many developers that it was discontinued. im not a fanboy i got a next gen system, i have my PC (upgradable :) ) and i have a psp ( still playing tekken :( ), and i just picked up my XBOX 360 i am still considering buying the PS3 but for those that don't have a system please stop the madness. sony lost money but competition is great for the consumers, sony will be forced to drop prices by Christmas but it won't be much. im still looking to see when APPLE will enter the gaming world with a game system for those that think im crazy just watch.

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Sassal

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Lol @ PS3

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Gen-Gawl

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@razu_gamer. of course sony's goal is to turn a profit. they didn't put out the ps3 for the benefit of the video game industry. they put in the extra hardware because they thought there was a market for it, nothing more, nothing less. they didn't purposely set out to hurt or risk the sony brand name to boldly crusade for us poor gamers. that was an accidental side effect from poor market research.

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kappareign

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never have i seen such long comments i cared so little about

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player_leo

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Ready Fanboy........?? FLAME ON !!!!!!!!!

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swyg

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Sony loosing huge amounts of money ... and SYWG is still stanning ... uhhh What exactly is "stanning"? *looks at way user name is spelled too* *sighs* Aside of that, you do know that Sony lost money with the PS2 when it came out, right? It's the same for the 360, they lose money to gain money in the long run. The Wii and Nintendo are profiting the most simply because of the price of the Wii is EXACTLY what they need.............for now. It took time for the PS2 to profit and get farther and farther etc. Time is all Sony needs. The only thing that the Wii will do in the long run is make the same sales and profit for Nintendo at a steady pace. It's smart, but by doing that, Nintendo will have to produce more Wii units than any console for the whole generation these next few years, and hope to still sell them with the least amount of backfires. Right now, Nintendo is having problems meeting the demand and can't supply enough units. They need to continue meeting the demand for a long period of time if they want to win this generation , that's they're only hope of winning in the long run. It seems like all three consoles are faltering which is a first, you'd think that Nintendo and Microsoft would be moving ahead at an alarming rate. Guess not.

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unbreakable4534

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All I have to say is, if Sony fails, no one really benefits, except the extreme 360 fanboys. I like having an option between the two "powerhouses" of Xbox and PS. I mean, if the Xbox had no Sony competition, it would probably turn into a tyranny of the video game market. They could charge whatever they wanted for Live Content, Games, Hardware, etc, because it'd be the only brand out there. MS has been known to abuse it's power with windows, I'd hate to see it do the same to the VG market. Not to mention, the PS3 has the potential to be a seriously fun system, it's just a matter of time before it happens... it certainly has the potential of the 360, and more in my opinion. Oh well, would it hurt to still have the Dreamcast around today??? What about Atari??? More systems means more games and more choices for the gamer. Why does everyone want to see Sony go away??? EDIT: I didnt mean to not include Nintendo in the argument... I just meant between the powerhouse systems.

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gaiaterra

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To turn a profit you have to have something to set you apart from the competition, if Sony only put in sub par technology they would still not do so well. "potential of permanently harming the PS brand-name, losing alot of the fanbase, losing third party support and making a shed load of loss $$$$" is not caring its is called a cock up, one they will hopfully put right, i like Sony's products its just the PS3 at the moment is dead in the water and no amount of spin will change that, only action by the company can change their fortunes.

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TrumpyTheDog

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"s_king7: Can't wait till PS3 is selling more than the Wii and 360." That could be like waiting for the second coming of Jesus the way things are going at the minute, the only place its outselling the 360 is in Japan, and the PS3 isn't selling too well there itself.

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s_king7

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Can't wait till PS3 is selling more than the Wii and 360. i know its probably a bold statement to say but seeing what happend at Sony's Gamers Event then i see it happening. Whoever saying that they can play PS3 games on the 360 gosh wake up: << LINK REMOVED >>

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getoconnection

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bone1264 I'm glad this isn't a forum for nuclear power plants--they cost billions of dollars to start and take 10+ years to turn a profit. -------------------------------------------------------------------- Spoken like a true analyst. You know what I noticed about you. You like to compare the videogames market to other markets when they are essentially different. Look at the top games spot over on the other news. I addressed every argument you threw out there but you didn't address any of mine.

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razu_gamer

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@gaiaterra -- ----yes by all means they don't want their investment to go down the drain, who does?? ---- LOL, their only concern is to make a profit?? What planet are you on?? If their only concern was to make a profit all they had to do is..... 1) include crappy processor 2) stick with 480p 3) around xbox+++ graphics 4) stick with DVD And it would have sold like crazy simply b/c of the PS brand name. Consumer would have bought it in droves and plenty of third party would be present b/c Sony have proved their worth 2 times a row....and they would remain exclusive. Get back to the real world fool b/c the above is 100% true. ---- rather sony has, 1) included Cell 2) blu-ray 3) wi-fi 4) hard drive with the potential of permanently harming the PS brand-name, losing alot of the fanbase, losing third party support and making a shed load of loss $$$$. If that is not caring for the industry then I don't know what is.

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gaiaterra

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I really do not think that video games will die if Sony fail, it will be a bit of the blow because competition between the different companies drives them forward to make better products. A lot of people thought that video games would die when Sega left the hardware side of the industry, instead it just got stronger and better. The industry is robust and one company failing will not bring it down. I realise that the PS3 fans need something to help them sleep at night but the death of the games industry is just plain moronic. Just hold on to thoughts of the good old days when Sony ruled and if your lucky someone will save your console. At least you still have the PSP you cant fail (finding it hard to keep a straight face whilst writing this).

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TTDog

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I don't see why non Sony fans should "give the PS3 time to settle in", I don't remember ANY Sony fans saying "we won't give the 360 any stick until its had time to establish itself", they went for the throat from day one like a pack of rabid dogs. Reap what you so and all that.

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cj_133

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Dont look good for sony. What i dont understand is why people are trying to claim a loss is a good thing. A loss is always a bad thing. sony better do something quick or they might just lose this generation.

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smoothn00dle

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People look at this the wrong way. Each PS3 sold cost Sony 240 dollars. The more the lost, the better! U understand *v*

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bone1264

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Stefanlek, getting told usually means that someone addresses at least half of your arguments. Geto, you've officially lost me 6 months = grace period for ps3, after which they will go into serious salvage mode if they don't shape up, but that's been true for any system ever, and this article, if anything, explains why that is. This is not sony's grace period, nor will they ever really have the option of dumping the ps3. Your car analogy is a little removed from my explanation of tiered markets. You ultimately have never addressed the issue that this is not that big of a deal, and no one in the financial world cares if their loss was 2 billion instead of 1.6 or whatever they predicted beforehand. Your really not the target of my criticism though--it really bothers me when people think a 10-20% prediction differential of a quarterly report = the ps3 is doomed ect. It doesn't matter one bit, and it will never affect anyone posting in this forum, unless you plan on buying / keeping sony stock, which the major recommendation is still buy. I'm glad this isn't a forum for nuclear power plants--they cost billions of dollars to start and take 10+ years to turn a profit.

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gamemaster43243

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watever but all u guys are just talking bullcrap because the ps3 has the highest tech in gaming right now and the game creators haven't got use to the tech yet but give it a year and the ps3 will be NO. 1

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KillerJamJam

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As for the Ps3 success ... personally im indifferent ... most people who would have used the Ps2 for casual games have either re-bought the Ps2 or the Wii ... Personally Sony's price - discriminatory practices annoy the hell out of me thats why i initially bought an xbox years ago ...

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KillerJamJam

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Sony loosing huge amounts of money ... and SYWG is still stanning ... uhhh

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virriador

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Losing money = no price off for the ps3 ,they r losin a lot , it will take a while for the price to go down :( too bad for those who r watin for that.

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beprice3

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You can try to make it look better all you want,but 2 billion is a lot,I dont care how you slice it.

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