PS3 profitability cast in doubt, 2008 earnings forecast grim

by Andrew Yoon { Oct 23rd 2008 at 9:45AM }

If you've opened a newspaper, turned on the TV, or looked at your stock portfolio, you must know the story: the global economy is in shambles. And that hurts large global companies, like Sony. Sony has updated their 2008 forecast, slashing profit expectations 38% to to 150 billion yen ($1.5 billion). A strong yen makes Sony, a export-centric company, do worse. The global downturn in the economy is likely to strongly the affect the sales of their top-ticket items, such as high definition TVs, cameras.

In spite of promises to make the PS3 profitable this year, it appears that may be cast in doubt. With the system significantly more expensive than its competitors, and a price drop not likely in the immediate future, this holiday season may not continue PS3's momentum from the beginning of the year. That's a shame too, considering the slew of high quality titles that's just about to come about.

"This is just the beginning of a big earnings collapse," said a Tokyo-based analyst to Forbes.com. "Given the track record of this company, it will under-deliver all the way." He added that there is a "good chance" Sony will post a loss this year.

[Via Joystiq; Image from The Brokers With Hands On Their Faces blog]

Tags: business, profit, ps3, sony

Reader Comments (Page 1 of 2)

PSN: HinchyFC @ Oct 23rd 2008 9:48AM

Ouch.

vahdyx @ Oct 23rd 2008 2:23PM

yeah, but the current loss will stay the same and you'll have more customers buying non system profitable items like controllers and PSN stuff and games.

Even newer math!

gamer @ Oct 28th 2008 10:56PM

Interesting article here

http://gamerprospersonalblog.blogspot.com/2008/10/numbers-game-sony-microsoft-and-wii.html

vahdyx @ Oct 23rd 2008 9:52AM

I agree, Sony needs to drop the price!

They need to bit the bullet and release the ps3 at $300 or less

That'll boost sales out the roof, they can also include a PS3 with a Sony HDTV purchase or do a 2 free game mail in system with the puchase of a ps3 at $300, like they did with blu-ray back in the day.

They really need to promote the system better.

At this rate, PS3 will continue to be last and that's not how I want it to be

Popfrogs @ Oct 23rd 2008 12:15PM

So your plan is to sell at a loss (causing losses) and advertise heavily (causing losses) to make more money?

I think Microsoft's gaming division has a job for you. Or maybe you can be a top executive at AIG.

Kspraydad @ Oct 23rd 2008 12:18PM

Slashing prices will not necessarily bring new gamers into the mix...you are simply moving existing delayed sales into this quarter or year.

As evidenced by the Xbox360 world wide slashing of prices it didn't affect the PS3 sales at all...in fact they rose slightly overall.

Sony is going to get as much sales as they think they can at the current higher price point before lowering the price to get all the fence sitters.

JG @ Oct 23rd 2008 1:18PM

vahdyx is right. They need to cut the cost by at least $100 (yes causing losses - hopefully short term).

Then they need to advertise heavily (yes causing losses - hopefully short term), to get more people to buy their system in order to make more money.

Right now the cost is prohibitive, and that's seriously hurting their sales. Avoiding losses by not selling systems is not exactly a brilliant business maneuver, either.

Sony is screwing up left and right, and it's getting old. They need to lower the price and eat the immediate losses, they need to work more closely with developers and help them out so that the PS3 does not get inferior versions of multi-platform games, they need to advertise with a relevant, informative, fun and interesting campaign to sell this machine.

I haven't seen a PS3 commercial in a very long time, but I do see Xbox commercials. Sony needs to really step up and grab some mindshare. They're obviously hurting and trying to stop the cash bleed, but that's just hurting them in the long run.

Sony get it together.

vahdyx @ Oct 23rd 2008 1:26PM

I'd say if they cut it by $100 they'd lose less if they sell more. So they need to get people to spend on it!

So

$400, 3 systems a week that's $1,200
$300, 4 systems a week that's $1,200

No loss and a bigger customer base to purchase sony products like, extra controllers, PSN items, First Party games etc.

Sony would come out ahead with more profits than less by cutting prices and moving more systems!

Kspraydad @ Oct 23rd 2008 1:47PM

If you are currently selling the PS3 at a $100 loss per console and sell more of them by cutting the price by $100 you are now selling more and losing $200 per console.

It is the new math.

B-rad @ Oct 23rd 2008 2:48PM

@vahdyx
There is no way Sony could stand to profit from the PS3 if they drop the price now. The only time you drop the price is if you can still make a profit off the reduced-priced systems, which they aren't even doing now with the current system.

Dartmerc @ Oct 23rd 2008 6:28PM

The mistake you make is to look at the price as prohibitive. Sony are still going after gamers (hence their quality games lineup), and price isn't high on the list of someone who knows what they're looking for in a console.
When the quality titles run dry, or Sony feels it needs to make itself more appealing to casual gamers, the price will drop. Sure, not dropping the price now stops those casual buyers *now*; but it's not like they wont have the opportunity to pick one up the future. I for one am happy that Sony is focusing on quality titles and adding value to their console rather than just dropping the price.

DeathroW @ Oct 23rd 2008 9:59AM

Apparently, electronics and video games market is actually growing much, much more with people trying to stay in instead of going out and spending more money.

I don't think the ps3 will be damaged that much buy it, but the other consoles will benefit more due to their lower price.

ryan @ Oct 23rd 2008 11:51AM

yeah, cheaper ways to play similar games will always hurt the more expensive platform, despite the value that comes with it.

Popfrogs @ Oct 23rd 2008 12:26PM

@ryan: That's true, and that's why Sony needs to play up the media center capabilities of the PS3. If people are staying home watching movies and playing games, Sony needs to make it known that the PS3 is the best choice for these things.

Honestly, between TVersity and PlayOn coming from my PC connected to the wired network, there are very few things the PS3 can't play now.

Dan Rabot @ Oct 23rd 2008 9:59AM

It's such a shame because it's a far far far better system than it's competitors - just that people go for the cheepest option even though it's substandard.

Such a shame, that our economy is forcing people to avoid high value quality goods.

Bishop99999999 @ Oct 23rd 2008 10:25AM

"It's such a shame because it's a far far far better system than it's competitors"

-Unless you want to play Fallout 3. ZING!

ryan @ Oct 23rd 2008 11:54AM

it's a substandard sure, but if you are in the market to play the hottest games of today the PS3 is definitely not the cheapest. and that's all some people really care about.

Devin @ Oct 23rd 2008 11:59AM

@Bishop

First off, it's a 3rd party title that Sony has no control over in terms of development.

In regards to Fallout 3's "inferiority" on the PS3, PSM3 said, "the PS3 version looks the same as on Xbox"

Also, with plenty of games that show off PS3's graphical superiority (don't make me name them), it's easy for me to say that what you're implying isn't justified.....

Tristan @ Oct 23rd 2008 10:05AM

I thought Sony, as a company, has been posting losses for a quite a while now.

Eggy @ Oct 23rd 2008 10:06AM

They haven't. And that "analyst" sounds like he's working for a competitor.

deaftly @ Oct 23rd 2008 10:33AM

And let me me guess, he HAS to be working for Microsoft!

/ugh

DeathroW @ Oct 23rd 2008 10:34AM

Uh no, they've actually been posting profits since around GTA 4 release.

Eggy @ Oct 23rd 2008 1:22PM

deaftly I know you aren't the brightest kid on joystiq but MS is hardly a competitor to Sony. On the console front yes but that is such a small part of both companies. I was of course talking about consumer electronics companies.

HAAS599 @ Oct 23rd 2008 10:14AM

The PS3 still has a lot of years left. It will turn a profit, just not as soon as Sony may have liked. All this does is give Sony more incentive to keep developing the PS3 and keep the great games coming so the system keeps selling.

Lard @ Oct 23rd 2008 10:23AM

D'oh!

Ghostbuddy @ Oct 23rd 2008 10:57AM

"It's such a shame because it's a far far far better system than it's competitors"

I could at length explain to you why this is foolish. Instead, im just going to laugh at this sad excuse of a ignorant, fanboy elitist comment. I don't know where you get off spinning a thread about Sonys failure, to blame consumers.

In any event, I think this needs to be said...

Year of the PS3, I think not...

Devin @ Oct 23rd 2008 11:39AM

Ghost, expect these comments or get off of this forum.

PS3fanboy you are not!

Kspraydad @ Oct 23rd 2008 11:46AM

What is the year over year growth of the PS3 right now?

Approx numbers Mid Oct 2007 to Mid Oct 2008

12.5 to 21.5 for Xbox or 72% growth
5.3 to 15.9 for PS3 or 200% growth
12.9 to 33.6 for Wii or 162% growth

Numbers are fun.

ryan @ Oct 23rd 2008 11:56AM

I heard the year of PS3 was delayed to 2009?

Popfrogs @ Oct 23rd 2008 4:46PM

@ryan: It might have been. But as you know, the year of the troll is every year!

ryan @ Oct 24th 2008 1:25AM

hmm, i thought it may have been delayed. DARN.

tmontana213 @ Oct 23rd 2008 11:25AM

I don't see how any company can post a gain when the economy is in the shape it is.

4thcage @ Oct 23rd 2008 11:45AM

I very agree. Looking at my stock portfolio, I see all red these days. guess just have to ride with the wave. What's go down, eventually will come up.

Devin @ Oct 23rd 2008 11:45AM

Well said montana.

People are taking this as PS3 may do "bad" when it could be inevitable even if it meets sales expectations since the global economy is doing "bad" as well.

What are the expectations for 360?

JasonM @ Oct 23rd 2008 11:54AM

I know!

Sony should take it's biggest upcoming game - biggest game ever for the PS3, really - and DELAY IT'S RELEASE!

That way they'll sell less, both games AND consoles.

Brilliant!

Kspraydad @ Oct 23rd 2008 12:01PM

Do you empirical evidence that the LBP delay will lower sales? I'm thinking it got more mainstream press than it would have otherwise and will have a positive effect on sales.

Jon Acheson @ Oct 23rd 2008 1:39PM

Since you can't get empirical evidence of what would have happened in an alternate universe where LBP wasn't delayed, no.

That doesn't really invalidate his argument, though.

While I see the delay hurting them a little (they had a lot of great hype and momentum going, which seems to have deflated now), I still think they are going to do pretty well with this game.

Kspraydad @ Oct 23rd 2008 1:49PM

Empirical evidence would be a loss of preorder sales...I have seen no evidence of such happening.

YakuzElite @ Oct 23rd 2008 12:13PM

Ok, lets get it straight. Its not the system that makes the games, but the games that make the system. I know people who still play with older video game systems just because certain games offer an experience you wont get any where else. And that's the important thing. Its all about the games.

Both 360 and Ps3 are fantastic systems (and I have both). They both have their strength and weaknesses (Trust me, Media streaming through PS3 is far superior, and it plays blu ray right off the bat).

What this article is trying to state is that Sony jumped the gun way too quick on when they thought PS3 would make them proper profit. Its not saying the PS3 is dying, going in shambles, or anything like. Right now the economy being the way it is people are moving towards the 360 and the wii as cheaper alternatives. And by cheaper I mean in price, not the quality of the system or the games.

Bob the Pirate @ Oct 23rd 2008 12:19PM

I think if the PS3 had some sort of X-Ray power allowing us to see girls naked then it would sell better!!!!

What do you guys think?

Devin @ Oct 23rd 2008 12:25PM

Possibly, but 360fanboys would still hate it....

ryan @ Oct 23rd 2008 12:28PM

Well, game developers have yet to unlock the true power of the PS3, so anything is possible I guess. :P

Kspraydad @ Oct 23rd 2008 12:34PM

Can't see why not.

SONY already has that on their cameras.

steve @ Oct 23rd 2008 12:35PM

@Devin

"In regards to Fallout 3's "inferiority" on the PS3, PSM3 said, "the PS3 version looks the same as on Xbox"

You forgot the but! But the textures are muddier, the framerate is choppier and the things in the distance are jaggier/rougher!
Now how the hell is that the same???
In other words it is inferior to the 360 version which is How I think they started that sentence. Just because they tried to take it back by saying the same thing using different words doesn't mean it worked.
Oh and by the way before you "XBOX fanboy" me, I own the the 360 and PS3 both!

deaftly @ Oct 23rd 2008 2:00PM

Don't even bother with that guy, I own both as well. He calls everyone a 360fanboy if you don't praise the company that made his beloved piece of plastic. Its sad.

Devin @ Oct 23rd 2008 2:21PM

@deaftly

When have I ever called you a fanboy?

Mokano40 @ Oct 23rd 2008 12:43PM

Devin said...

@Bishop

First off, it's a 3rd party title that Sony has no control over in terms of development.

In regards to Fallout 3's "inferiority" on the PS3, PSM3 said, "the PS3 version looks the same as on Xbox"

Also, with plenty of games that show off PS3's graphical superiority (don't make me name them), it's easy for me to say that what you're implying isn't justified.....

PLEASE DEVIN, NAME THEM...................