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Sony loses $3.3 Billion, Xbox Price Drop Imminent?

Munkey

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#1
There is one truism about video games that most people don't know - Buying a console at or near launch is usually a steal. In order to get the best market penetration they can, most manufacturers release their consoles at a loss. This has historically been the model. That money is made back as production is ramped up and costs decrease and (mostly) through software sales. Sony has the added benefit of making money on Blu-ray disc sales as well since they are one of the founding members of the Blu-ray Disc Association.

That hasn't stopped them from losing an estimated 3.3 billion dollars in console sales alone.

Yes, that's billion. How is this possible? Well, the PS3 has cost more to produce than almost any other console in history. At launch, the 20 gig version cost nearly $806 but was sold at $500, the 60 gig cost $840 and sold for $600. Doing the math there, all those that paid $100 for the larger drive lost $60 in the transaction.

Nintendo has been famous for selling consoles at or near cost and their Wii is no different. At launch it was selling for $250 but only cost $158 to produce. Xbox 360 has been making about $75 per unit but when you factor in the estimated $1 billion in losses from the "Red Ring of Death" failures, it probably means that Microsoft is "in the red" so to speak. Microsoft is reporting that failure rate has officially dropped but "dropped" doesn't mean "stopped." Expect that $1 billion number to get a few decimal places after it at the very least before all this is over.

Don't kid yourself, these estimated costs don't factor in the years of research and development that took place to get the console to market to begin with.

At this time it seems like manufacturing costs for the PS3 have almost halved which means that Sony's losses have reduced from a gushing artery to a oozing sore. As much as the hardcore PS3 fans like to tout the hardware advantages of their console of choice, most of the best selling games have either been Xbox 360 exclusives or released on both consoles. This will make it harder for Sony to convince their potential customers that their console is the best choice. With the hype around Metal Gear Solid 4 and some of the great ratings that it is getting, Sony is surely seeing a bit of a boost in sales (reportedly up to 700% increase in Japan though only 7% in the UK).

Microsoft probably isn't going to sit on its laurels, however, and very well may lower prices to force Sony either to lose more money and follow suit or risk the 360 outselling them as it has whenever the price difference has been large enough (2:1 when the difference was $200). With Sony's Chief Executive Howard Stringer promising not to lose money this year on the PS3, the stage seems set for an Xbox 360 price drop.

http://www.audioholics.com/news/industry-news/sony-loses-3-billion-xbox-price-drop
 
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#2
When the 360 was released, and for a good long time afterwards it was a loss maker. MS was able to shift the cost around its other product line ups.

The same for Sony, they simply shift the cost of the PS3 onto other sectors. So if they lost $3billion, its not just down to the PS3...

Sony have also announced they will be manufacturing cheaper, cooler PS3's recently as well. Which again will offset any loss they incurred on the first versions: http://kotaku.com/5020039/playstation-3-graphics-chip-shrinks-to-wee-65nm-this-fall
 

janobi

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#3
This is the reason that Sega dont make consoles anymore. Lost too much on the dreamcast.
 

Munkey

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#5
When the 360 was released, and for a good long time afterwards it was a loss maker. MS was able to shift the cost around its other product line ups.

The same for Sony, they simply shift the cost of the PS3 onto other sectors. So if they lost $3billion, its not just down to the PS3...

Sony have also announced they will be manufacturing cheaper, cooler PS3's recently as well. Which again will offset any loss they incurred on the first versions: http://kotaku.com/5020039/playstation-3-graphics-chip-shrinks-to-wee-65nm-this-fall
The PS3 is not as loud as the 360 but its a step in the right direction. Maybe they should be concentrating on how to actually use the power of the PS3 instead of just evolving the CPU architecture.
 
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#6
I am not entirely sure Sony are thay interested in furthering the architecture, didnt they just relinquish any rights they had to it?

When it comes to harnessing the power of the PS3, all they need to do is concentrate on getting the SDK right for the games companies. After that, its pretty much up to everyone else.

Granted, they will do a smaller version, as they normally do, to squeeze as much cash out of it as possible.

I think they took some knocks early on, especially with the 20gb versions, and the PS2 compatibility etc.
 

ice2004

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#7
And what about the fact that the PS3 hasn't been hacked yet so your only choice is to buy official games.

The PS3 being sold at a loss doesn't seem any different from printers and ink cartridges or razors and razor blades etc.
 

witchy

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#8
Sega did the right thing and got to fook out of the rat race.

Their games are selling shitloads and they don't need to worry about hardware losses.
 

wozzo

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#9
Ths ps3 fault from the start has been the lack of big titles, apart from Metal gear solid i cant think of anther game which is ps3 exclusive, wear as the 360 has had some excellent titles consistently since its launch.
 
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#10
nonsense. The 360's success is purely down to MS taking a risk.

XBLA, Xbox Live - these are defining moments for consoles on the whole, these are just a few things that make the 360 great. Add in the wireless controllers - something we take for granted now, but no manufacturer was bundling them with a console at the time, plus HD graphics and you have a winner.

Remember that when this made it out, all there was in the form of competition was the PS2.

However, the PS3 is a marvel, it will out last the 360 forcing MS to make something very very special for its next console (if they even do one?). The ease at which it can be hacked is by the by, this doesnt make any one console more popular than another - the games industry is a very rich place to be, if everyone was buying £300 consoles and never buying a game for it at all, then there would be nothing happening.

When it comes to exclusive titles, the 360 didnt really get that much did it? No console will now for a long while. Granted, you have the Halo franchise and the Gears of War franchise, but what else? the PS3 has MGS, Gran Turismo, Final Fanstasy, Tekken, God Of War... These are all well established names, something that MS is still working on now.

Now, dont get me wrong, the 360 is a great console, but it doesnt come close to the PS3 in terms of what it can actually do. I think the demise of HD DVD also hurt this console quite a bit, however I am reading with great interest on the reports of third party 360's, I have seen some great rumours of a Toshiba 360 and a Samsung plasma telly with a built in 360. If these things happen, it can only be for the better.

But, MS is now saying it wants tto focus on the casual games market, and why shouldnt it? It has to be the richest section in the games industry. The have pioneered it so far with XBLA and XNA, however if they continue down this route, dont expect many eye candy titles...