Sony to break-even with PS3 in 2009
A Sony exec for the PAL territories dropped a big hint recently as to when the company expects to break-even with the PS3 business. The exec also dispelled rumors of a pending price drop despite the current financial crisis. According to the executive, Sony is on track to breaking even sometime in 2009.
I wrote a story back in October where I stated that Sony was indeed very close to breaking even, after studying the company’s financial reports. If you read the story here, you can see that some of our readers accused me of making “unsupported speculation.” Even though I clearly pointed out that the financial report indicated a reduction of 60% in operating loss.
When a company reduces operating loss by that much while software sales have been comparable (shift from PS2 software sales to PS3 software sales) you can bet that the company is very close breaking even by reducing manufacturing costs. According to MCV, SCEE President David Reeves stated that getting the Computer Entertainment business back into the black after two years of reporting losses is their top priority.
He also indicated that despite rumors of an imminent price drop, it will not be happening anytime soon. Reeves said that the company will focus on providing a more value added package rather than drop the retail price of the system.
“As soon as we got the manufacturing price down on PSOne we lowered the price. Same with PS2. But we’re not doing that on PS3 – that’s not the model, even if people are expecting it.”
The reason Sony won’t be reducing the price as soon as manufacturing costs have been lowered is to reach parity with a break-even cost of manufacturing. If Sony constantly reduced price as soon as manufacturing costs have been lowered, the company would never break-even.
However, once the break-even point is reached, the company can start aggressively competing with price. Reeves stated, “Next year we are probably going to be a little bit more aggressive when we reach the break-even point.”
Reeves also indicated that the PS3 is currently outselling the Xbox 360 by 300k units in Europe. Considering that the PS3 launched 16 months after the Xbox 360 in Europe, that is an impressive feat. It is too bad for Sony that the marketing team in the U.S. hasn’t been as competent.
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December 5th, 2008
WOW REALLY!!!
I dont really care… cus it affects me in no way… but I will say this… it would be nice to see Sony getting a little rewarded (by breaking even)… Im glad the PS3 didnt dreamcast upon itself… I dont think it will ever sell as many games as the 360 exclusives… but atleast… they get a lil reward so we keep getting resistance and god of war… and killzone 2… yay!!! wanna play that game so bad..
what I heard about killzone 2 from the podcasts were… the game is done… they have just been holding the date back so they dont have any competition that month… good strategy… cant wait…
December 5th, 2008
hahahahahahahahahahahahahahahahahahahaha
December 5th, 2008
I thought the PS3 broke-even years ago, perhaps around 2004. Sony just hid it because they are modest.
December 5th, 2008
Cue mike ferro is a stupid fanboi who doesn’t know anything about economics or games posts.
Good to see they will break even. Maybe games like the getaway and 8 days wouldn’t have been canceled then.
December 5th, 2008
..”you can see that some of our readers accused me of making “unsupported speculation”…
By “some of our readers” you mean xbots, right?
December 5th, 2008
phranc – you’re 1/2 right..which is closer than ever. the fact mike is confused on breaking even on hardware costs vs. breaking even on the 3 billion in losses sustained by sony due to the ps3, shows once again, how clueless and easily sold this fanboy is.
1. cost targets come from sony’s hq…. not some european division manager.
2. he did NOT state they WILLl break even… only he thinks they may…but mike skewed the title into a certainty….again..fanboy move.
3. sony hasn’t put up any sales numbers to substantiate their EU sales…again..only his “belief” they are ahead of the 360…
4. the fact sony won’t lower the price guarantees continued abysmal sales rate..nullifying the author’s idea of increased money flow to increase revenue.
it doesn’t really matter anyway…once proven wrong, mike, like davep, won’t have the cajones to put another article stating sony failed to meet their projections….
ps3 fanboys…gotta love ‘em… lol.
December 5th, 2008
ps…more salt for the wound.
if they are breaking even in 09, they are set to be profitable soon after right?
Howard Stringer has already stated the ps3 will never be profitable…
i guess you guys just “forgot” that part…
December 5th, 2008
Kev
I’d really like to know what exactly they’re all talking about (Stringer included). Nothing ever seems to be crystal clear with any of these companies.
Are they specifically talking about the console itself? Are they talking about the PS3 division including game sales to say the console finally turned a profit? Are the talking about the Sony game divisions all together, and factoring in the fact that they are dealing with three consoles at the same time (ps3, ps2, psp) to increase profitability? Do they think to factor in the increase in HD media sales gained from the inclusion of blu ray, driving up the hardware cost while simultaneously increasing profits for their movie divisions.
While MS says they are turning a profit, we know that to be BS from all the money MGS lost last gen on the hardware, and the three year warranty costing them 1.3 billion. Or does MS specifically mean the division is profitable due to all the games they sold somehow countering the lost revenue from hardware.
These companies spin so much shit they practically make cotton candy crap on a stiq.
Oh and btw. If Sony is anywhere near MS in Europe, that’s a big plus as the 360 was out for 16 months prior. I think the tally I heard was ps3 is 300K ahead. That’s really nothing in the grand scheme of things however.
December 5th, 2008
We all know that the only reason the PS2 is still alive is because it ofsets the cost of the PS3. Without the PS2 they would be in big trouble. I can’t believe people still buy that machine. Why go backward. I guess price is everything.
December 5th, 2008
DWH
It’s funny that Sony will hold back a title for a weak month so it can look good. It was the same thing they said about LBP when it released and looked stupid amongst the rest of titles that made more money then and overshadowed it.
December 5th, 2008
@CAD.
I think they simply don’t want R2 and Killzone 2 to compete against each other. It has nothing to do with any other console games but PS3 games.
Think about it.
MS would never..I repeat never, release a Gears of War game the same month as a Halo game.
LBP will have it’s place. I do believe its lifetime sales will be great, as it’s a word of mouth title.
Shadow of the Colossus didn’t have great sales but it can never be denied its place as one of the greatest games last gen.
December 5th, 2008
HAHAHA . . . PS3 at Home crap is still not released . . .
too funny.
December 5th, 2008
Even if Halo and Gears released the same Month I would still buy both. A true fan makes no excuses. But it will never happen because Microsoft knows how to stagnate their releases because their not tied up in development with screaming fanboy impatiently waiting for a good game to finally be released.
December 5th, 2008
Ugh…
Why post the same trolling garbage in 2 threads simons…
December 5th, 2008
phranc – i swear, getting you fanboys to understand the console business model is like trying to explain calculus to 1st grader.
so ms STATES they are making profit with the 360, reported so in official filings and quarterly reports, knowing that lyinjg about it would create a huge SEC investigation, but that doesn’t count becuase you don’t believe it… pathetic…
last gen’s money is gone in last gen. before the xbox even launched, robbie bach/ms stated they were prepared to “invest” (read: “lose” by you fanboys) 6 billion to create a userbase. they did exactly that… it’s over..it’s done… it has NOTHING to do with this gen…. with your math, the billions in losses created by the ps3 is moot since LAST gen they profitted from the ps2… you = joke.
it’s hilarious you claim the early launch is why the 360 is out in front, when Kuturagi, Hirai and Harrison all stated, prelaunch, the first to market for the 360 would do NOTHING since sony had “120 million loyal ps customers”…. the question is: where are they now and why has the PS brand fallen so low?
“Do they think to factor in the increase in HD media sales gained from the inclusion of blu ray, driving up the hardware cost while simultaneously increasing profits for their movie divisions.” so far sony has NEVER state their media arm has been profitable BECAUSE of bluray..
you clowns just make this crap up as you go, don’t you….?
you guys have realy lost your minds when you think you know more about sony than Howard Stringer/CEO/Sony….
i’m still wating for sony to confirm this flunky’s “belief” it will break even on the hardware…. there is no indication of this… not one….
but there it is in black in white, writtne by another gaming “journalist” who knows zip about gaming….
December 5th, 2008
phranc – “I’d really like to know what exactly they’re all talking about (Stringer included). Nothing ever seems to be crystal clear with any of these companies.”
no dude, he was very clear. you just don’t have the education to understand it. the ps3 WILL NOT make sony a profit due to high hardware costs. you forget, toshiba is in charge of the cells manufacturing..if you forgot toshiba and sony don’t get along (sony even had to buy toshiba out of the hddvd/bluray war by selling them the cells production), and as such, toshiba is in no hurry to reduce production costs. sony’s hosed…stringer knows it, harrison knew it, kuturagi found out the hard way by getting fired for coming up with such a stupid idea as the ps3 in the first place…
gaming is not, was not, their intention with the ps3…theirs was a trojan horse strategy for bluray…… that failed…
December 5th, 2008
Above is the reason blorge needs to stop with this silly post delay crap. Very easy to double and triple post.
Change is please blorge
December 5th, 2008
@Kev,
You are very clueless and you get your facts mixed up so easily.
Loss in division isn’t calculated from a total, but quarterly basis. You don’t say Sony lost X-amount of money on the PS3 so when they make up for that lost from the past 2 years they break even.
Case in point, Microsoft lost close to 3 billion during the same quarter the compay paid out for RRoD warranty, however the following quarter they posted profits from Halo 3 because its a little accounting scam to bundle losses into that quarter and start the next quarter fresh.
If you don’t believe me, Google this fact.
Reeves is talking about breaking even on the manufacturing cost of the PS3, he talks about why they can’t lower the price until it breaks even right there in most of the interview.
Also your confused, Stringer never said they won’t break even with the PS3 for a while, it was an Industry analyst that said that.
Stringer said, it will take a while to make up for the amount of money spent on research and devleopment which is different from breaking even on the manufacturing cost.
Breaking even on manufacturing cost means:
PS3 Selling price = cost to make PS3
Clearly, Reeves is saying that until they break even on cost to make PS3 they won’t lower the price until next year.
Get your facts straight Xbot. Your so anti-Sony it shows so clearly. Me on the other hand Im happy when I hear good news about the Xbox 360 or the PS3, you should be happy to hear good news about the PS3 becaue it only helps the video game industry to have strong competition.
December 5th, 2008
wow kevin.. Im so glad the people at Microsoft and Sony told you all these facts so you could “tell us off” in this website… looks like its a three way conspiracy between the japanese… phill harrison and that woman who quit from singstar to join atari… MUST INFORM THE LEAGUE NOW!!!
yeah shadow was one of the best games last gen… as was riddick… neither sold well… and riddick had awesome graphics…
sony dropped a lot of balls this gen… rumor was Mirrors edge and assassins creed were “supposed” to be ps3 exclusives… but then theree was no deal or something… or whatever… its a rumor… but look at this… doesnt Sony/columbia have the rights to Ghostbusters?? if they do… then they shouldve made it exclusive… meh… we still get the game…
and kev… do you honestly believe that all this quotes and figures make any difference… if you know so much and want to “show up the ps3 fanbois”.. start your own blog… I dont care about what MS or sony said… I dont care about there reports… I care about the games… and maybe blu ray… when I buy the dark knight in blu ray…
December 5th, 2008
http://kotaku.com/5102418/trine-casting-a-lovely-spell-on-psn
looks fucking awesome… cant wait
December 5th, 2008
Troll Kev,
Sorry, I’m just a 1st grader taking a break from my calculus homework and reading the blorge. But don’t companies usually expect a return on an investment? If they invested $6 billion as you say, wouldn’t they expect to make it back at some point? Also you repeat yourself about the “120 million loyal customers” every chance you get. Sorry, but I don’t think the 360 is getting those customers, I would say the Wii is winning over those customers.
Cad,
Why is it when MS stagnates games it’s smart business, but when Sony does it its not? I am referring to your comment on Killzone 2, not the usual Sony delays!
December 5th, 2008
Because Microsoft did not wait for a weak month to release Gears of War 2. If you read above DWH makes a comment about Killzone and Gods of War being done and Sony waiting for sometime next year to release them and it reminded me of the comment Sony made about LBP being released to soon because it did not so good amongst the other titles that came out and it should have waited for a month not so heavy with releases. The whole thing basically say Sony is willing to wait because they look bad when faced with the compitition. So choosing a month that is not stacked will make them look better not realizing that your fans are ready and willing to buy them Now. Microsot put up Gears of war 2 in a heavy titled month and it’s not afraid of the results because I’m sure next week when the NDP come out Gears 2 will be on top. It’s bascially the same strategy they played with Metal Gear Solid 4. It shined because there was nothing else to look at when it was actually garbage.
December 5th, 2008
CAD… goddammit… I didnt say God of war 3 was done… only Killzone 2 was done… so what if it is delayed… whats the point of releasing resistance 2 and killzone 2 a month from each other… atleast they are giving it three months… a LONG time for people to get over the current glut…
though I have to say… feb has a rush too… Resident Evil 5 (i like left 4 dead more) and Street Fighter 4 (CANT WAIT) is coming out… s killzone 2 will have a decent competition… Im in no hurry… I have 7 games… and only finished one (GTA 4)… Im in no hurry…
ohh CAD… you havent played MGS 4… its not garbage… I have… I like to long cut scenes… the controls could be better… but I like it… and so does the rest of the gaming critics… its not garbage… you look like an ass when you make these kev comments… sigh…
and the Gears and Halo games will ALWAYS have sales in the millions… theres just no going over it… like GTA… like Fable… this doesnt mean that they are better than anyone else… quantity does not define quality…
Psychonauts… Ico … Shadow of the Collosus… Chronicles of Riddick… all great games… not a lot of sales… oh… No more heroes…
December 6th, 2008
Mike, please stop trying to read corporate balance sheets and discern “facts” from them. You clearly have no clue what you’re seeing and your conclusions are ungrounded in fact. Let’s talk about GAMING and leave economics to an appropriate econ blog.
December 6th, 2008
Microsoft has over 7 billion in losses from 2001 Xbox to the present day. So shut the fuck up.
December 7th, 2008
Ivan,
Are you sure you want to start talking about how much a system is losing for a company? From what I see, the PS3 is one big money pit, and the PS2 is keeping the figures respectable.
December 8th, 2008
“Sony to break-even with PS3 in 2009″
Not when the economy takes a massive dive next year and they end up only selling at best 1/2 of the numbers they expect to.
December 8th, 2008
Sony is right where they need to be with the PS3. It has been pacing the 360 in terms of the consoles life span. The PS3 is actually 300K units ahead in PAL territories, which is quite an achievement since it came out over a year later.
December 8th, 2008
Barnabe Jones:
“The PS3 is actually 300K units ahead in PAL territories”
Sure it is.
Feel free to try to prove it, if you’re confident.
You can’t.
This only came from a Sony mouth-piece (SCEE president David Reeves) who said it was so but that’s hardly a reliable verifiable fact or proof of anything.
They’re always talking up their own junk but especially after the recent XBox price-cut I doubt they’re convincing anyone but their devoted flock.
December 9th, 2008
but if people would freakin realize that 360 is a money pit with all the add ons that ms offers…they (xbox) tie people to having to buy there products wen ps3 u can use any hard drive with limitless memory lol an developers are bebefited by hard drives witch noy every 360 has one. anyways u can use any bluetooth headset u want wen u have to use 360s. plus blu ray witch will be a big deal for games in 2009 wen 360 fanboys see it only 4 movies lol wait an see…ps3 has wifi, chargeable controllers (NO BATTERIES) hdmi support, 0.02% failure rate… quality over quantity….an exclusive titles will sell this console an with addition of psHome… so 4 a money pespective ur gettin a better deal wit ps3 therefore sony should do well in the near future. experts are recommending them. PEACE
December 9th, 2008
dirk – thanks for proving ps3 fanboys are the most ignorant of the bunch…. if you’re gonna root for a team, at LEAST know what you’re talking about…
play.tm/wire/2088418/sony-ceo-wii-business-model-superior-sony-won-t-recoup-ps3-investment
like i said..it’s funny when you ps3 fanboys think you know more than the ps3’s CEO… lmao…
i can’t wait to see how you twist this one to meet your fantasy…
December 9th, 2008
“0.02% failure rate” – can i get a link to support this claim, fanboy..?
i’d like to believe you, but IvanPSP has proven ps3 fanboys LOVE to lie…. a LOT…
December 9th, 2008
Obviously this PR BS went out before the 16,000 redundancies clouded the picture.
Sony is in deep sh!t.
The outlook is not good for Sony.
December 9th, 2008
actually i like both systems but the way ms rips ppl off pisses me off so i go sony an 0.02% isn’t accurate but u get the point.. the only thing that will hold sony back is the fact that it costs money to manufacture systems and cant afford a price cut until they break even an slow economy wont help but ppl should be happy 4 systems to get business… only drives the compitition to a further extent
December 9th, 2008
kev
actually i like both systems but the way ms rips ppl off pisses me off so i go sony an 0.02% isn’t accurate but u get the point.. the only thing that will hold sony back is the fact that it costs money to manufacture systems and cant afford a price cut until they break even an slow economy wont help but ppl should be happy 4 systems to get business… only drives the compitition to a further extent