The Sony Hardware Reciprocal: PS3 losses surpass PS2 profits
by Kevin Kelly 
{ Aug 19th 2008 at 5:27PM }
According to DFC intelligence figures cited by Dave Perry, Sony has lost more money on the PlayStation 3 hardware than it made on the PlayStation 2 during its five most popular years. In pure numbers speak it's lost $3 billion on the PS3, which is about equivalent to everything it made selling PS2s during its peak years. This story would actually have a lot more impact if Carl Sagan was around to say "beelyuns."Perry, best known for his stint at Shiny Entertainment, was speaking at the really long-named Games Convention Developers Conference, which appears to be both a Convention and a Conference, and was just using the figures to underscore how much Sony was spending on hardware development. However, the 1UP article doesn't mention until near the end that the original PS2 lost money in its first year, and that Sony (and the other console makers) does this so it can make bank on the software/games that people need to fuel their systems.
In all fairness, the article goes on to explain that Microsoft lost $4 billion on the original Xbox, and has had to spend over $1 billion replacing faulty hardware in the 360 and extending the warranty for original purchasers. So, we tend to think $5 billion trumps $3 billion. The real winner in this struggle? Nintendo. It has been churning a profit on that little Wii since it hopped out of the gate. Rassin' frassin' wand-wagglin' profiteers.
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Reader Comments (Page 1 of 2)
Jakka - The Heavy wants his sandwich back! @ Aug 19th 2008 5:30PM
Shit, now even I feel sorry for them...
Arttemis @ Aug 19th 2008 6:06PM
I don't. It's their fault for stripping away a marketable (and dirt cheap) feature from their new flagship consoles.
Perhaps NOW that the PS2 profits aren't recouping their PS3 losses, reintroducing full-fledged backwards compatibility might stir up some purchases.
They need to either improve the emulation or reintroduce the PS2 GPU and EE.
Nate @ Aug 19th 2008 6:10PM
They're talking *hardware* profits and losses. The *hardware* profits from the PS2 isn't where Sony made their money. It's the software, dummies!
browntown @ Aug 19th 2008 6:25PM
Y? Blu-ray players in so many homes, they won that format war, the CELL is being used in laptops and other electronis, life is good for SONY, their future looks bright, especially with the videostore and the singstore (they should probably offer music like itunes to everyone). But they really need to rethink strategies next gen as well as microsoft. Nintendo is dominating right now, but if SONY didn't take risks, then we wouldn't have the playstation.
LaughingTarget @ Aug 19th 2008 6:26PM
PS3 hardware vs total PS2 profits. Seems to be pretty big. And the backwards compatibility isn't their biggest marketable feature, the system was over-engineered from the start.
Arttemis @ Aug 19th 2008 6:26PM
Hardly! The cost to produce a PS2 and its near-decade old technology has to equate to pure profit for Sony.
Yes, selling PS2s at $100 has to be a major source of revenue for them.
Arttemis @ Aug 19th 2008 6:32PM
@LaughingTarget - I won't argue with that. I was merely responding the comment about feeling sorry for them when they're clearly still milking the pure profit in selling PS2s.
Hyams @ Aug 19th 2008 6:35PM
LaughingTarget: No, read the article. It's PS3 hardware losses versus PS2 hardware gains during the years it's been profitable.
(ie. the years the PS2 hardware lost money aren't taken into consideration, nor are any software profits for either console.)
Here it is in the article:
"But Sony's PS2, the best selling videogame console of all time, was making a healthy profit on each unit sold as of a few years ago. Seemingly all of that went to fund the PS3 hardware that Sony has been selling -- and for the foreseeable future will continue to sell -- at a loss."
Hyams @ Aug 19th 2008 6:36PM
LaughingTarget: No, read the article. It's PS3 hardware losses versus PS2 hardware gains during the years it's been profitable.
(ie. the years the PS2 hardware lost money aren't taken into consideration, nor are any software profits for either console.)
Here it is in the article:
"But Sony's PS2, the best selling videogame console of all time, was making a healthy profit on each unit sold as of a few years ago. Seemingly all of that went to fund the PS3 hardware that Sony has been selling -- and for the foreseeable future will continue to sell -- at a loss."
Hyams @ Aug 19th 2008 6:37PM
(Hey, the new comment system is problematic too. Yay!)
Zeus.:God @ Aug 19th 2008 7:40PM
Browntown, the Cell isn't being used in anything except the PS3 and Sony's new video editing computer... Also known as a PS3 in a different case...
Anyway, the fact of the matter is, the Cell sucks in it's current form, Blu-Ray won due to Sony and company buying out various studios, and the price of Blu-Ray players is going up with the loss of HD-DVD... Sony's having issues, and it's all their own fault.
John @ Aug 20th 2008 5:17AM
SONY doesn't own the cell anyway, that's like saying Burger King is doing well because Mcdonald's is using beef too.
The Fatass of Kickassness @ Aug 19th 2008 5:30PM
Dayumn.
5th hot meal @ Aug 19th 2008 5:33PM
8 billion cumulative losses, that could have bought quite a few fanbois.
Cody @ Aug 19th 2008 7:14PM
The real winner in this struggle? Nintendo. It has been churning a profit on that little Wii since it hopped out of the gate. Rassin' frassin' wand-wagglin' profiteers.
And that's all that matters children. PROFIT PROFIT PROFIT.
If Sony's game division and Microsoft's game division weren't under a corp. umbrella protective blanket, Nintendo would be running their own gaming monopoly. *sigh* One can only dream....
DeadPlasmaCell @ Aug 19th 2008 7:47PM
@ Cody
"Nintendo would be running their own gaming monopoly. *sigh* One can only dream...."
Dream? Try nightmare. Nintendo already doesn't have to answer to anyone and look at all the garbage (hardware & software) that's out on the system.
Greyseal @ Aug 19th 2008 7:54PM
Yeah... I'm as big a fan of Nintendo as anybody else, but there was a time when they DID have a monopoly. Their arrogance directly led to the production of the Playstation and Sony's eventual dominance for two hardware generations.
Foetoid @ Aug 20th 2008 1:23AM
@Deadplasmacell
I dont see any problem with thier hardware or software bar the lack of internal storage. I've got 11 Wii games, 12 VC games, 2 WiiWare games and 13 GC games, all of which are A+ titles. Im a picky hardcore gamer who refuses to buy shovelware or minigame compilations and i've still managed to find tons of A+ games to play without even owning Brawl, Mario Kart, Battalion Wars, The Godfather, Geometry Wars, Galaxy or NMH. So many many good games to play overshadowded 10:1 by crap. You just gotta find the right rake to plow through the crap to find the many gems hidden among the garbage. Most hardcore gamers are so blinded by thier HD that they wont take the time to sift through the garbage on Wii to find the good games.
Kersh @ Aug 19th 2008 5:35PM
Can you put a price on winning a format war? How many blu-ray discs does an average PS3 owner have? How much does a company have to pay in order to manufacture BD players? How would the scenario be different if the PS3 was expensive enough to break even, or if the 360 had out of the box HD-DVD capability?
Sure, they may not be too happy with losing $3 bil, but imagine how much they're making because they took that loss.
Mr Khan @ Aug 19th 2008 5:43PM
While Sony has a prominent place on the Blu-Ray Council, or whatever the hell its called, it is not exclusively their format, and they don't exclusively make players for said format
That being said, the PS3 had minimal impact on Blu-Ray's victory. The overwhelming support from major movie studios, which Blu-Ray was getting even as the PS3 was taking its first faltering steps, was already there
Abuzar Baloach @ Aug 19th 2008 5:59PM
Are you joking? The PS3 had a HUGE impact on Blu Ray winning. With the PS3 in so many homes, that was the reason the Studios switched to Bluray. The Ps3 had an indirect and direct role in insuring victory for Blu Ray.
Jacksons @ Aug 19th 2008 6:01PM
At the same time, I wouldn't sell the PS3's impact on Blu-Ray's success short.
shoan @ Aug 19th 2008 6:31PM
i own absolutely no blue ray movies. Netflix FTW :D
Kersh @ Aug 19th 2008 6:31PM
How many people held off buying a BD player or HD-DVD player until the format war was over? How many of them owned PS3s, and bought blu-rays anyways? How many questions will I end up asking?
LaughingTarget @ Aug 19th 2008 6:34PM
BluRay may have beaten HD-DVD, but it still isn't a viable format when dealing with profitability. It'll take a few more years to do this.
Sony has a particularly poor business model. Taking massive losses for a short term profit in the future is a major mistake. DVD was only around for 8 years before it was deemed necessary to replace. Wiping out 5 years of profitability just to get a new format on the market isn't exactly intelligent. Sony is turning around, not because they won the HD format war but because many of the old guard that made all those dumb decisions have been effectively removed from the company (see Kutaragi).
Sure, they may have profits sometime in the future, but elite businesses don't think that way. It's better to make $1 billion a year for the next four years than it is to reach that same $4 billion after eating through huge losses. Nintendo has it right. More total profitability and more money when factoring in present values.
Sony will always be in the hole when compared to a more prudent business model. Even a best case scenario would have been whipped by making a product that didn't manifest huge losses.
Iwa @ Aug 19th 2008 7:23PM
Sony had a invested interest to replace DVD with Bluray due to licensing royalties that they missed out on DVD. Sony didn't have a seat on the DVD consortium, they passed on it to avoid a format war with DVD.
Shaq-Fu @ Aug 19th 2008 8:56PM
Sorry. The Blu-ray council flexed their muscles to get exclusive deals with studios, and Toshiba was screwed. If the PS3 won Blu-ray the format war, then why didn't the 360 win the war for HD?
Hell, as long as I can still buy a regular DVD and put it in my 1080i upscaling player, I don't need a BR player
nick @ Aug 20th 2008 1:19AM
"Sony had a invested interest to replace DVD with Bluray due to licensing royalties that they missed out on DVD. Sony didn't have a seat on the DVD consortium, they passed on it to avoid a format war with DVD."
Yes, and no. Sony's created a competing format to DVD, back when DVD was first created. Basically there were two camps-- much like HD DVD and Blu-Ray. At the time, IBM's president negotiated a deal between the two formats to unify. Nobody wanted another VHS and Betamax war. The DVD as we know it today was Toshiba's (et al) design with some of Sony & Philips's technology added. So Sony did have a part in DVD. And Sony was an original member of the DVD Forum, which later became the DVD Consortium. I do believe Sony is paying licensing fees to Toshiba though, as is everyone else.
If you look at Sony, historically, they've never been one to easily embrace other formats when they can introduce their own.
When it came time to design a successor, Toshiba and Sony/Philips squared off again, but this time, Sony had the support of Panasonic (which backed Toshiba the first time around), most major movie player companies, and most major studios of which (cough) Sony owns a few... Columbia (Sony Pictures) and MGM/UA. Toshiba had to rely completely on other studios, but couldn't gather enough support.
Iwa @ Aug 20th 2008 2:38AM
"(cough) Sony owns a few... Columbia (Sony Pictures) and MGM/UA."
That's a definite no. The only studios that Sony owns is Columbia/Tristar. Sony owns 20%, not even the majority, of MGM/UA. MGM/UA is independent of Sony. Sony doesn't even distribute their films any longer, with the exception of coproductions since 2006.
x Shadow @ Aug 19th 2008 5:35PM
i never got the reason why people buy and/or sell shredded money... =/
Mr Khan @ Aug 19th 2008 5:50PM
I wouldn't know about legitimate applications, but having the unique kind of material that they use to make bills would go a LONG way towards making authentic counterfeits
domgbrown @ Aug 19th 2008 6:05PM
@Mr Khan
Or you could pull a dollar bill out of your pocket
mr mobius @ Aug 19th 2008 5:35PM
Nintendo even made a profit on the Gamecube. They have the best accountants in the world.
Sora @ Aug 19th 2008 6:22PM
Well I'd imagine that they made more profit on the Gamecube than the Wii, because they make profit on the Wii and the Wii is two Gamecubes duct taped together. Thus, they spend twice the amount they do to make Gamecubes, meaning they get less profit from Wiis.
Mr Khan @ Aug 19th 2008 7:48PM
More, though. Since almost no semiconductor R&D had to go into it, pretty much all the R&D was focused around the Wiimote, then they just double the RAM
Zertoss @ Aug 19th 2008 5:36PM
Beelyuns!
http://www.youtube.com/watch?v=5Ex__M-OwSA
invader alex @ Aug 19th 2008 5:38PM
This is why i like nintendo... i don't know why but i do.
but then again i am a WiiCast kind of guy
CenturionRyan @ Aug 19th 2008 5:38PM
In before people who didn't read the whole article and automatically jump the the conclusion that this is a sure sine of Sony's demise.
Kersh @ Aug 19th 2008 5:40PM
Not to go off on a tangent, but I really hope people don't think this will cos the downfall of sony.
Zertoss @ Aug 19th 2008 5:41PM
I'm sure it'll be tangent to many anti-Sony rants.
Zertoss @ Aug 19th 2008 5:41PM
God dammit, I got beat.
Kersh @ Aug 19th 2008 5:48PM
Speed is integral lest your comment seem derivative.
OH SHI-... k, enough.
Jacksons @ Aug 19th 2008 5:38PM
Oh, this is just talking about hardware. That title's hella misleading.
Jonah Falcon @ Aug 19th 2008 5:39PM
http://www.youtube.com/watch?v=IH2w2l1JTs4
ChuckJ @ Aug 19th 2008 6:31PM
I love the part at 2:57 " Real time weapon change.. to uhhhh, flip the crab over...."
What?!?! LMAO What the hell is Real Time Weapon Change anyways? Are you serious Sony?
Nice vid. Funny stuff
DEEZNUTZ @ Aug 19th 2008 5:39PM
DAMN! Well they wanted to win the HD disc format war and they did... now here's to SONY hoping it was worth it.
Nigeria @ Aug 19th 2008 5:39PM
I don't smoke no more.
AoE @ Aug 19th 2008 5:43PM
but I ain't smokin' no less
Atr-Slzr-Ctr @ Aug 19th 2008 5:40PM
That picture its cruel :(
Hyams @ Aug 19th 2008 5:41PM
He's saying that the money Sony made on PS2 *HARDWARE* since it became profitable is less than what Sony is losing on PS3 *HARDWARE*.
For the past few years, the PS2 has cost less to manufacture than it's sold for, so Sony was making a bit of money with each console sold. The PS3 costs more to manufacture than it's being sold for, so Sony are losing money on each console sold. The money made from PS2 hardware since it became profitable is less than what's been lost from PS3 hardware.
This is not surprising.
Money being brought in from game sales, peripheral sales, and PSN download sales are not included in this estimation, for either console.