Sony to lose $1 billion on Playstation 3
Dec 15, 2005 @ 1:58 am ·
Filed under Playstation 3 News · 
Deutsche Version (German)
According to a report from Merrill Lynch Japan Securities, published in Japanese magazine Toyo Keizai, Sony is set to lose over US $1 billion on the Playstation 3 in the year following its launch.
The report indicates that Sony may be willing to sell the console at less than the production cost - said to be around 54,000 yen (almost US $500) - in an effort to gain a significant share of the market.
Merrill Lynch predicts that Sony will launch the PS3 with a US $399 price tag - around US $100 less than it costs to manufacture.
The expected move by Sony is similar to the plan they implemented with the Playstation 2, which initially sold at a loss before making up its profits with the sale of software in following years.
Microsoft’s next-generation console, the Xbox 360, was also reported to have been released at a loss, rumoured to be at least US $126 per console.
Sony Computer Entertainment president, Ken Kutaragi, told Toyo Keizai that he believes price will not be such a big issue because people will want the PS3 no matter what the cost.
“Whether consumers think a product is expensive or cheap all depends on the balance between its appeal and price. Our ideal [for the PS3] is for consumers to think to themselves, ‘OK, I’ll work more hours and buy it.’ We want people to feel that they want it, no matter what…
I’m confident that the PS3 is a product that people will definitely want,”
he said.
The expensive production cost of the Playstation 3 is mainly due to the advanced equipment of the machine, with the three main components - its Cell chip, RSX, and BD-ROM drive - totalling to the value of around 11,000 yen (approx. US $100).
Source: Gamespot
Writer’s comment
While the idea to lower the price in order to gain a large percentage of the market sounds promising, particularly after the resounding success of the Playstation 2, (profits of US $759 million and $1.03 billion in the two years after release) an operating loss of US $1 billion must be a concern. It would be over twice what the Playstation 2 experienced in its first year due to the more powerful - and far more expensive - components of the next-gen console.
However, with the limited success of the Xbox 360 in Japan so far, Sony has reason to be confident that they can successfully overcome the initial loss period. The challenge remains to continue to churn out top quality games that will appeal to their consumers, something that Microsoft appears to struggle with for the Japanese market.
By Blake Hurley, Ps3Focus.com writer
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December 15, 2005 @ 5:06 am
hmmmm Said,
this is the reason they do business cases people–they’ll make it back and more.
December 15, 2005 @ 12:01 pm
David Said,
Isn’t a foreign company selling an item at a loss in the US market in order to gain market share called “dumping?” Isn’t that illegal and subject to […] more
December 15, 2005 @ 1:59 pm
Ben Young Said,
its a good strategy really, as remember that first year establishes them in the market place, so people want the games more and people want what their […] more
December 15, 2005 @ 2:38 pm
meagain Said,
sony can’t sustain that kind of loss… they’re done…
December 15, 2005 @ 5:22 pm
karkar Said,
Hey people, don’t forget, this is not official yet. We will wait and see how much the PS3 is going to cost, if the console is going to be cheap, then […] more
December 15, 2005 @ 6:16 pm
moovees Said,
Sony needs the world to adopt the Blu-Ray DVD format so they can license the technology to other hardware manufacturers. If Sony can get a million BD- […] more
December 15, 2005 @ 7:23 pm
automatic_jack Said,
are you kidding me sony can take that kind of hit with out much sweat, for these reasons… 1. they have a market capatalisation of near $40 billi […] more
December 15, 2005 @ 9:43 pm
Yesman Said,
Automatic jack is absolutely right. Sony has the financial gut to take that kind of punch. For the Xbox360 well, DREAMCAST2006!!! Xbox has what that s […] more
December 15, 2005 @ 10:32 pm
HighDecibel Said,
After (Its not over yet) Rootkit fiasco, I’m inclined to not bother with the ps3. I refuse to buy their products at all. “Our ideal [for the PS3] […] more
December 16, 2005 @ 2:24 am
40s Said,
The figures from Lynch seem questionable. They predict only a $100 loss for the PS3 and a $126 loss for the 360? Those figures don’t add up. The PS […] more
December 16, 2005 @ 6:22 pm
yRuReAdNtHiS Said,
KINDA OFF TOPIC JUST SO YOU KNOW…. Iv’e always been into GAME consoles and games and Sony but I dont understand why they keep on going with more con […] more
December 16, 2005 @ 8:19 pm
yRuReAdNtHiS Said,
sony may lose that much but not on all systems cause the will be selling stuff for your ps3 making the money back.
December 17, 2005 @ 4:32 am
Ikkei Said,
Actually, losing money in the following months (even a year) after the release of a console has been the case since the 90’s for all manufacturers. Se […] more
December 17, 2005 @ 4:21 pm
Topherhead Said,
y the helll is every one talkin about how sony is tryin to sink its teeth into our wallets?? BILL GATES is the greedy SOB worth 52 billion$ he saw th […] more
December 18, 2005 @ 4:27 am
Markyp23 Said,
In response to David: “Isn’t a foreign company selling an item at a loss in the US market in order to gain market share called “dumping?” Isn […] more
December 19, 2005 @ 10:12 am
Jose Godinez Said,
This isn’t a first for Sony. With the PS2 and the PSP, they’ve taken losses. They could care less. They’ll make a return. If they didn’t the first cou […] more
December 20, 2005 @ 7:44 am
Dr Goomba Said,
then it will all be dwon to the games, then. a console can only be a great console if the games are top notch
December 22, 2005 @ 10:52 am
toothpick Said,
im not sure about the xbox369 but i know for sure the ps3 can take the hit hit losing money in the beginning to make money in the end , games, accesor […] more
December 27, 2005 @ 3:38 am
damian Said,
how come i cant find any information about the ps3 coming to australia like release dates and price. it sounds like it is going to be pretty expensive […] more
December 30, 2005 @ 8:51 am
the gamer Said,
friends…sony’s way of releasing their produsts even losing a million to a billion of dollars is an old chinese trading trick…it’s a way to build t […] more
December 31, 2005 @ 11:16 am
Shanus Said,
They care about their reputation more than their earnings, that’s noble.
January 2, 2006 @ 10:52 pm
XBOX SUCKS Said,
in the long run xbox will only be a mosquito for the ps3. people are goin to buy the ps3 like crazy as soon as it comes out. the only reason xbox will […] more
January 10, 2006 @ 9:51 pm
Michael Gariti Said,
Why do I think that Blu-Ray (and the PS3) will be more appealing than HD-DVD (and the XBox360)? A few reasons… 1.) Blu-Ray players (like the PS3) […] more
January 21, 2006 @ 1:16 pm
j izzle Said,
man,xbox is retarded going up against sony and all microsoft fans that are buying a system they think is better is just foolish you people better star […] more
January 24, 2006 @ 3:34 pm
Snoozerr Said,
I’ve been playing video games since the beginning, from pong on our console tv to atari tank command to nintendo to sega to ps to game cube to x-box t […] more
February 5, 2006 @ 4:32 am
Newelijah Said,
I agree Damien, we are like all other territories and get nothing until they give an announcement, which will more than likely be at E3 next year.
March 17, 2006 @ 9:43 pm
Jim Said,
Its a very smart idea because when you think about how Sony has roughly 70 Percent of marketing share they have more confidence in their fan base and […] more
June 2, 2006 @ 12:32 pm
Mr. Car Salesman Said,
Playstations are just like toyotas/hondas, no matter how much big business says that they are losing on a product or what great a deal (value) you are […] more
June 9, 2006 @ 11:38 pm
Scarface Said,
The price’s that y’all putting for the playstation 3 is wrong. Why? Because you have to think about all the people that play it. Think about the kids […] more
July 25, 2006 @ 2:29 pm
Wes Said,
I read that the PS3 is going to cost 600 w/o the processory, almost 800 with the processor
August 2, 2006 @ 6:21 am
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June 11, 2007 @ 1:58 am
y Said,
Guess what, PS3 sucks! It came out with one good game and the rest are crap. They’re thinking of having to lower the price by $200 because they’re not […] more
July 4, 2007 @ 3:22 pm
SuperFist Said,
Wow, everything you said was a figment of your imagination. There is no truth to anything you just posted. Wait until after a year has passed since th […] more
October 16, 2007 @ 12:49 pm
Averre Said,
The PS3 now has Heavenly Sword, what is known as a AAA title, it did not boost the sales of the PS3 in the States, not by a long shot…the game was s […] more