Sony: PS3 will never make a profit, but don’t blame the Wii
By Dave Parrack
It’s been well documented how much Sony spent developing the Playstation 3 and bringing it to market. It’s also been well documented that each PS3 console sold actually causes Sony to lose money. But can that $3 billion spent so far on the Playstation 3 ever be made back? And if not, whose fault is that?
I’ve said it before and I’ll say it again: the PS3 is a fine machine. No really, it’s a games console capable of some truly astounding games, a Blu-ray player, and an entertainment centre all rolled in to one. And it’s available to buy for a very affordable price. But being a fine machine doesn’t actually guarantee anything in this day and age.
The PS3 is currently stone dead last in the sales battle of the current-gen consoles, with the Wii massively on top, and the Xbox 360 managing to hold on to second by virtue of that extra year’s worth of sales.
And even in last place, Sony is losing money on every console it sells. That’s a big problem, and it’s one that doesn’t look like being rectified any time soon.
Sony CEO Sir Howard Stringer recently spoke to Welt Online about a whole gamut of issues surrounding Sony products, and one of those was the difficulty in making any money on the PS3. He was asked if Sony would ever make back the investment ploughed in to the Playstation 3. He said:
Not for as long as I live (laughs). It will certainly take some time. The traditional business model for the Playstation envisaged us making a loss with the hardware in the early years until the production costs had decreased to a point that enabled us to break even. In the meantime, we earn money with the games. We are currently at the stage in which we need to get a grip on the production costs. That takes time. We are already making more money with the games than we are losing with the hardware.
So as a business, Sony is making enough money on the games side of things to justify the expense of the hardware. But I detect concern in Stringer’s language over whether the production costs of the Playstation 3 will ever allow the console on its own to be sold at a profit.
While Microsoft seems keen to keep cutting the price of all models of the Xbox 360, Sony has so far resisted for quite some time to follow suit. Stringer confirms that there will be no price reduction for the Playstation 3 before Christmas by simply stating “I think not.”
Stringer was then asked about the best-selling console currently on the market, the Nintendo Wii, and his views over whether that success has hindered the potential of the PS3 to gain ground in the market. He said:
The Wii is a well-made device that has found a new target group. For a while, we held the same target group with the SingStar karaoke game. But perhaps we neglected to pursue that avenue. Playstation games are rather designed for those who play a lot. Although it’s a different strategy, it pays off. We currently have a production bottleneck with the Playstation 3.
The major difference lies in the fact that Nintendo makes money with the hardware alone, which may be a superior business model. But the Wii is not succeeding at our expense – it is not hurting us. We decided years ago to build a game console that offers much greater functionality. The Playstation 3 has an enormous processor; it is gradually emerging as the central server in our users’ homes.
The first point is an obvious aside about how Sony started catering for the casual market first, and then lost its nerve and gave Nintendo the chance to jump in and steal its thunder instead. Maybe Stringer regrets that. There are certainly signs that both the PS3 and Xbox 360 are now being marketed more towards the casual gamer than ever before.
Stringer may not think the Wii is harming the Playstation 3 at all, but I beg to differ. How many of those parents who bought their kids a Wii last Christmas would have bought a PS3 or Xbox 360 instead had the Wii not existed? My guess would be quite a large number, and that is just the most direct way in which the Wii has harmed the PS3.
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August 29th, 2008
Uh my question is, do you respect Howard Stern’s penis?
August 29th, 2008
What are you babbling about?
August 29th, 2008
CAD’s gamer tag is CAD1344
August 29th, 2008
The Wii is hurting the PS3 by taking the PS2 gamers (except for the Sony loyalists).
The Wii is doing now what the PS2 did last gen. It’s weak, much weaker than the other two consoles, but the number of games makes for some good ones, and that is a reason for nearly everyone to buy it. The Wii is this gen’s PS2.
And, what’s more, its always been like this. The most advanced console on the market never wins, the weakest almost always does (last exception was the SNES beating Genesis, I believe!), and the people eat up what they want, not what is the top-of-the-line model.
Nintendo learned from Sony these last 2 generations, and now Sony will need to learn. The Wii might be owned along side the PS3 for most PS3 owners, but a lot of PS2 owners have and are upgrading to the Wii, which is like the PS2 last gen, when they may otherwise go to the PS3 out of brand recognition.
August 29th, 2008
Good article.