Sony Posts Q2 Loss, As PS3 Sales Rise On Price Cut

The strong yen vs other currencies is hurting sony now...

http://www.gamasutra.com/php-bin/news_index.php?story=25879
Sony posted lower revenues and a net loss for its fiscal Q2 on a strengthening yen, as unit sales of PlayStation 3 rose 33 percent year-on-year thanks to a September price cut.

Tokyo, Japan-based Sony said the introduction of the slimmed-down, less expensive PS3 drove hardware unit sales to 3.2 million units during the quarter ended September 30. The company sold 2.4 million units for the same period a year ago.

Analyst Arvind Bhatia with Stern Agee called the quarterly PS3 sales a "positive for the industry, especially in light of Nintendo’s reduced target for Wii hardware sales announced yesterday."

Sony previously said that the new, slim PlayStation 3 sold 1 million units in its first three weeks on the market worldwide.

Despite the spike in PS3 sales, Sony's Networked Products and Services Division, which is home to its games business, saw revenues drop 24 percent year-on-year to ¥352.6 billion ($3.9 billion). Operating loss in the division was ¥58.8 billion ($645.40 million), up from a loss of ¥40.6 billion ($445.63 million) a year ago. Sony attributed the drop to lower Vaio PC and game revenues.

Sony said decreasing sales of the venerable nine-year-old PlayStation 2 were the main driver behind lower game revenues. The company sold 1.9 million PS2s during the quarter, down from 2.5 million a year ago. PlayStation Portable sales were also down, dropping to 3 million sold during the quarter compared to 3.2 million units for the same quarter a year prior.

Sony reiterated full-year PS3 sales of 13 million units, up from 10.1 million units for the previous year. The company also still expects to sell 15 million PSP units this year and 5 million PS2s this year. The company also said it expects to sell 23.9 million PS3 software units this year, up from 21.2 million a year ago; 12.9 million PSP titles, up from 11.8 million; and 11.1 million PS2 titles, down from 23.2 million units.

As a whole, Sony posted revenues of ¥1.66 trillion ($18.46 billion), a 19.8 percent year-on-year decrease. Net loss was ¥26.3 billion ($292 million) compared to net income of ¥20.8 billion ($228.37 million) for the same quarter last year. Sony attributed the lower figures to a "slowdown of the global economy and the appreciation of the yen."

Sony said that it beat its Q2 expectations, and revised its annual profit outlook upward. The company now expects a net loss of ¥95 billion ($1.04 billion), down from a previous net loss outlook of ¥120 million ($1.32 million) for the fiscal year ending March 31, 2010.

Not a huge surprise. Both Nintendo and Sony are hurting bad since the Yen is doing so strong against the dollar. Or maybe it's that the US dollar is doing so weak against the yen??

So sad. :(

No surprise really, strong yen, economic recession, and on top of that the added cost of retooling their manufacturing lines for the slim.

On a brighter note they also said that their loss on the slim model is still within 10-20%'ish, not exactly making profit off the sales of the hardware but definitely losing less per sale at an even lower price point. I think by this time next year they will be profiting on each unit sold.

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Haha.

You laugh now...

We're a second world country!

NOOOOOOOOOOOO!!!!

Haha.

You laugh now...

You're right, I do! :D

Its more of the latter. Japan may have to do what china does to keep their US imports flowing: devalue their currency with the dollar

Not a huge surprise. Both Nintendo and Sony are hurting bad since the Yen is doing so strong against the dollar. Or maybe it's that the US dollar is doing so weak against the yen??

So sad. :(

Its more of the latter. Japan may have to do what china does to keep their US imports flowing: devalue their currency with the dollar

That doesn't work when it's the dollar losing value rather than the yen particularly gaining value. It's a very tricky scenario to be in.

Personally, I'd just set up a US arm and keep all the monies there :p

There are calls to drop the dollar as the world currency though as the state of the US economy is causing a lot of problems in other parts of the world. Luckily for the UK, it's economy is even more f**ked, and so our currency's value is dropping in line, if not faster than yours. :lol:

That doesn't work when it's the dollar losing value rather than the yen particularly gaining value. It's a very tricky scenario to be in.

Personally, I'd just set up a US arm and keep all the monies there :p

There are calls to drop the dollar as the world currency though as the state of the US economy is causing a lot of problems in other parts of the world. Luckily for the UK, it's economy is even more f**ked, and so our currency's value is dropping in line, if not faster than yours. :lol:

Recent issues of the losing dollar could also explain why the US is getting no love from Sony. It's all going to EU where they get more in return :(

Aye, it's getting quite expensive in the UK because of the Euro holding it's value well. The RRP of PSP games is generally £24.99 on UMD, yet the PSN downloads are £31.99 for titles such as Need for Speed Shift purely to stop Europeans purchasing off the UK PSN :lol: >_<

No surprise really, strong yen, economic recession, and on top of that the added cost of retooling their manufacturing lines for the slim.

On a brighter note they also said that their loss on the slim model is still within 10-20%'ish, not exactly making profit off the sales of the hardware but definitely losing less per sale at an even lower price point. I think by this time next year they will be profiting on each unit sold.

I don't believe the PS3 will be selling at a profit next year. This is a mature product and further manufacturing cost savings are just not going to be material. It would have been nice if Sony could have only lost $60 per console during the life of the PS3 rather than the $100 - $150 that was lost but that is just billions under the bridge and nothing can be done about it now.

Chris

I don't believe the PS3 will be selling at a profit next year. This is a mature product and further manufacturing cost savings are just not going to be material. It would have been nice if Sony could have only lost $60 per console during the life of the PS3 rather than the $100 - $150 that was lost but that is just billions under the bridge and nothing can be done about it now.

Chris

I have to say I think you're wrong. Further die shrinks of the Cell and RSX chips will provide a higher yielding manufacturing process, which in turn would lower costs on the PSU and cooling solution. The RAM chips inside are still multiple chip designs and getting these down to single chip version will cost less as well.

That's just from what I've seen. I'm sure Sony can eek out a few more pennies here and there. We shall see...

I don't believe the PS3 will be selling at a profit next year. This is a mature product and further manufacturing cost savings are just not going to be material. It would have been nice if Sony could have only lost $60 per console during the life of the PS3 rather than the $100 - $150 that was lost but that is just billions under the bridge and nothing can be done about it now.

Chris

The original PS3 losses were actually quite a lot higher than $150 according to a lot of reports they were costing in excess of $800 to manufacture initially.

The yen is gaining value vs the $ due to the $ losing value thanks to all the money being printed. The $ has been losing value vs many other currencies. china artificially lowers the value of their currency to keep their items cheap in US. US biz is not happy about that either. Obama and other politicians have complained about it.

If $ is no longer world currency, its value will really plummet. Those talks have been going on for a while now. Yeah UK economy is supposed to be just as bad as US, if not worse. UK may get bailed out if it switches to euro...

That doesn't work when it's the dollar losing value rather than the yen particularly gaining value. It's a very tricky scenario to be in.

Personally, I'd just set up a US arm and keep all the monies there :p

There are calls to drop the dollar as the world currency though as the state of the US economy is causing a lot of problems in other parts of the world. Luckily for the UK, it's economy is even more f**ked, and so our currency's value is dropping in line, if not faster than yours. :lol:

I guess it depends on if there is a PS3 price drop next year, and to what extent the price drop will be. If its price is dropped by $100, it is doubtful the die shrink, cooling, etc cost reductions will justify that much of a price drop without incurring some additional loss on each PS3 sold.

I have to say I think you're wrong. Further die shrinks of the Cell and RSX chips will provide a higher yielding manufacturing process, which in turn would lower costs on the PSU and cooling solution. The RAM chips inside are still multiple chip designs and getting these down to single chip version will cost less as well.

That's just from what I've seen. I'm sure Sony can eek out a few more pennies here and there. We shall see...

I guess it depends on if there is a PS3 price drop next year, and to what extent the price drop will be. If its price is dropped by $100, it is doubtful the die shrink, cooling, etc cost reductions will justify that much of a price drop without incurring some additional loss on each PS3 sold.

Excellent point, I suppose saying that they will further reduce their manufacturing costs would have been more appropriate!

If $ is no longer world currency, its value will really plummet. Those talks have been going on for a while now. Yeah UK economy is supposed to be just as bad as US, if not worse. UK may get bailed out if it switches to euro...

If it hits parity with the Pound (its 1.1 atm when a year ago it was a stable 1.4-1.5) I can see us joining the Euro becoming extremely likely. We poured billions into it when the currency first launched as it was initially plummeting in value and very nearly sent the whole Eurozone into chaos.

I believe there are a fair few countries trying to get out of the Euro now though, as it's benefiting some countries, while leaving others economically crippled due to them having no control over interest rates etc.

Don't own any stock in Sony but I will own this

http://i237.photobucket.com/albums/ff169/captscience/image_god_of_war_3-2.jpg

If it hits parity with the Pound (its 1.1 atm when a year ago it was a stable 1.4-1.5) I can see us joining the Euro becoming extremely likely.

Yeah, if it happens, that will be interesting how that plays out: cath. area (euro) and protstnt nation like UK coexisting... I never understood why uk was worth so much (with all due respect of course :angel). Amazing it has fallen that much so fast...

We poured billions into it when the currency first launched as it was initially plummeting in value and very nearly sent the whole Eurozone into chaos.

I didn't know that. Why did UK invest in euro...because it was cheap?

I believe there are a fair few countries trying to get out of the Euro now though, as it's benefiting some countries, while leaving others economically crippled due to them having no control over interest rates etc.

Which countries trying to get out of euro? First time I heard of that. Which are the top 10 strong nations using euro: france, germany, luxemberg, spain?

:angel)

http://i237.photobucket.com/albums/ff169/captscience/image_god_of_war_3-2.jpg

Yeah, if it happens, that will be interesting how that plays out: cath. area (euro) and protstnt nation like UK coexisting... I never understood why uk was worth so much (with all due respect of course :angel). Amazing it has fallen that much so fast...



I didn't know that. Why did UK invest in euro...because it was cheap?



Which countries trying to get out of euro? First time I heard of that. Which are the top 10 strong nations using euro: france, germany, luxemberg, spain?

Germany in particular wanted a return to the doitch mark not so long ago. (some parts are prosporing, others are falling on their arse)

The reason the UK economy was so strong was simply because we owned half the world at the turn of last century, "British" meant quality, and we had a very heavy manufacturing industry. Britain was also at the forefront of almost everything technologywise. Heck, this forum is purely down to a British invention. The humble Television ;)

World War 2 was the begining of the end for the UK as a major player in the world IMO and with a now global economy and manufacturing being no where near as specialised (you don't need the trained workforces the same) Britain's best selling point to companies around the world became moot and our economy turned to the financial sector.

This last recession was the financial sector going into meltdown, the UK no longer has much else to tap into as manufacturing is on it's arse and has been for the last decade, I'm really struggling to see anything that can be used for any substantial recovery (which is probably why Britain is one of the few left in Europe that is still officially in recession). It's actually pretty bleak over here right now, but I always knew 3 terms with Labour in power would fuck this country up the arse, I just didn't realise it would be so bad.

Britain although not in the Euro, is still a major part of the EU (80% of our trade is with EU countries and so it was in our interest for the Euro to succeed as a currency), which is the reason for buying into the Euro to prop it up as a currency. It certainly wasn't bought to profit on, they sold most of our gold reserves to buy the Euros and announced to the whole sodding world they were gonna sell the gold (yes, labour are that retarded) meaning gold prices plummeted and they sold while Gold was undervalued.

Anyway political/economical rant over ;p

The original PS3 losses were actually quite a lot higher than $150 according to a lot of reports they were costing in excess of $800 to manufacture initially.

It was much larger in the beginning but historically, the total is about 30 million sold at about a $4 billion total loss is what I am guessing. That is where my estimate per console comes from and I believe there is no way in hell a PS3 can be sold at $300 retail profitably, not now, not ever.

Chris

Oh OK, thanx for the history lesson. Yes UK was indeed a super power back in the day; main reason why English is the dominant language around the world. Speaking of financial sector, isn’t UK’s RBS in trouble or something? IMHO switching from the gold standard to the current credit (bonds) based system is a reason of US downfall as well. Interesting that both UK and US are having similar economic issues now with no easy solution…

It was much larger in the beginning but historically, the total is about 30 million sold at about a $4 billion total loss is what I am guessing. That is where my estimate per console comes from and I believe there is no way in hell a PS3 can be sold at $300 retail profitably, not now, not ever.

Chris

Well the PS3 (360 as well) may never profit as a whole but it could get to the point where its no longer technically sold for a loss (per console).. Although I bet both consoles will see another price drop around the same time next year if our economy does not change, so that wipes away the profit per console argument...

Oh OK, thanx for the history lesson. Yes UK was indeed a super power back in the day; main reason why English is the dominant language around the world. Speaking of financial sector, isn’t UK’s RBS in trouble or something? IMHO switching from the gold standard to the current credit (bonds) based system is a reason of US downfall as well. Interesting that both UK and US are having similar economic issues now with no easy solution…

It was, I own a stake in it now, I think it's 70% tax payer owned atm. Lloyds (my bank incidentally) are also about 40% tax payer owned, but they were pressured into merging with HBOS last year, and now the EC is splitting it all up again :lol:. The HBOS merger was a really bad plan for Lloyds shareholders who apparently didn't really get a say on the thing, it was just agreed with the government.

Well the PS3 (360 as well) may never profit as a whole but it could get to the point where its no longer technically sold for a loss (per console).. Although I bet both consoles will see another price drop around the same time next year if our economy does not change, so that wipes away the profit per console argument...

I don't know whether there will be another price drop or not but I don't believe the PS3 can be sold profitably for $300, much less $250 or $200. Keep in mind retailer profit, packaging, warranty coverage, shipping, and any other cost in addition to manufacturing cost. This media player just can't be made inexpensively enough to compete based on price with less expensive designs. There is of course absolutely no way to breakeven on the PS3 in total, even if there was some way to make a nominal profit on each console going forward.

Historically the business model for game consoles is to sell the hardware for a loss and make it up on games and associated services but the PS3 broke the bank in that regard. I suspect the XBox 360 is a money loser for Microsoft but only a fraction of losses have been realized compared to the Sony results.

Chris

I don't know whether there will be another price drop or not but I don't believe the PS3 can be sold profitably for $300, much less $250 or $200. Keep in mind retailer profit, packaging, warranty coverage, shipping, and any other cost in addition to manufacturing cost. This media player just can't be made inexpensively enough to compete based on price with less expensive designs. There is of course absolutely no way to breakeven on the PS3 in total, even if there was some way to make a nominal profit on each console going forward.



If it stays at $299 they'll be at the break even point soon.

We're only bringing this up because it looks like the losses are gong to disappear shortly. Sony Chief Financial Officer Nobuyuki Oneda told a press conference in Tokyo today that Sony has managed to get its PS3 losses down to somewhere between 10% and 20% of the system's retail price. It expects that figure to fall into the single digits before the end of the year, then turn into a profit some time during the next fiscal year.

10-20% of the retail price would mean they are losing between $29-$58 on each console sold at $299.

If it stays at $299 they'll be at the break even point soon.



10-20% of the retail price would mean they are losing between $29-$58 on each console sold at $299.

I am not buying it, Sony has been overly optimistic on the PS3 for a long time. I also don't know what he is using to indicate a loss of 10% to 20% but if it is excluding warrany coverage cost or any other direct costs associated with selling the console, the figure is bogus. I say hogwash, that console can't be made and sold profitably at $300, not now, not ever. Sony has done a great job getting the costs down but the big cost reductions are already realized and anything further is going to be much smaller. Assuming retail margins of 10%, Sony would have to be able to build it, provide accessories, packing, shipment to retailers, warranty coverage and other costs and receive $270 for each less any returns that Sony must eat.

You can say Sony will start to make a profit on each console at some future point, I will look at the cost of the processor, other parts, accessories, manufacturing, licensing, packaging, shipping, warranty and other direct costs and say it will never happen. Of course neither of us will ever get to look at Sony's books but if I was permitted, I do know what to look for and what questions to ask. The financial statements indicating $ billions of losses the last few years tell the story and Sony executives promising great PS3 results for the last few years are dreamers, out of touch with reality.

The PS3 is a technological marvel and financial disaster. There is no market willing to pay what it should cost.

Chris