The games industry is going through a great period at the moment, with sales up and optimism widespread. But in hardware terms at least it seems that the Wii is going to be the only profitable console this generation. The PS3 and Xbox 360 are actually costing Sony and Microsoft heavy losses to even get them on to store shelves.
One little news tidbit to emerge from the Games Convention Developers Conference earlier this week was about how much Sony has spent on developing and manufacturing the PS3 so far this generation. It turns out Sony has lost more money on the hardware side of the PS3 than it made from the stupidly successful Playstation 2.
Dave Perry, legendary game designer best known for his Shiny Entertainment brand, gave his opinions on how the games industry was shaping up at this stage of proceedings and while skilfully managing to stay neutral, he spoke knowledgeably about the hardware side of the industry and how hard it is to actually make any money.
It’s already accepted that console manufacturers lose money on the hardware in order to make it back in game sales, but the PS2 went against that trend by making money for Sony on every unit sold. Now Sony has piled all of that money, and much more, back in to developing the PS3, and it’s unlikely that the deficit will ever be dragged back to the black.
Perry didn’t make this point to make Sony or the PS3 look bad, but instead tried to indicate what a huge investment Sony has made in this, and every other, generation it has been involved in. And it isn’t alone, with Microsoft also doing the same, and losing money as well. Microsoft reportedly lost $4 billion on the original Xbox and the Red Ring of Death cost $1 billion to put right on its own.
This generation is seeing Nintendo actually turning a profit on every Wii sold, regardless of how many games Wii owners do or do not buy. And it’s likely that Nintendo will be the only one of the three companies to do well from hardware sales alone.
This kind of explains why both Sony and Microsoft have committed to 10-year-lifespans for the PS3 and Xbox 360 respectively. So much money is spent developing these behemoths of gaming that it takes that long for the machine to actually make any kind of profit for the company behind it.