Jun 27

Sony Reports Losses of Over $3 Billion on the PS3

And you thought it was raining money in the Sony camp? Apparently, despite the PS3’s hefty price, Sony is unable to recoup the cost they incurred from research and development of the PS3. Research and development constitutes bulk of the cost to manufacture and distribute the PS3 console.
The company’s fiscal 2008 annual report reveals that Sony has now lost about $3.3 billion on the Playstation 3 since its launch. That is broken down into losses of $2.16 billion in 2007 and $1.16 billion in 2008. The only reason is because they priced the console lower than production cost. Pricing it higher would give competition free reins in the market which could translate to even bigger losses, not to mention possible loss in goodwill and reputation among gamers worldwide.

However, losing money on the console is a common occurrence in the industry. Companies such as Sony usually lower prices on the console to sell more units, but they recover from higher software sales. In the last quarter alone, Sony’s game division improved sales by 26%. They expect the trend to continue with the upcoming exclusive games such as Metal Gear Solid 4 and Resistance 2. There is only one question. Will the increase in software sales compensate for the losses from the console? At a whopping $3 billion, it will take a whole lot of software sales to recover from that.

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