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An interesting look at Sony’s Financial Situation with the PS3

While Nintendo gets more doom articles than anybody these days. What’s swept under the rug are the other console manufacturers struggles in the console space. The PS3 is widely looked at as a success for Sony because of the brainwashing of tools like Michael Pachter. However, the PS3 lost Sony billions of dollars over the course of it’s lifetime. didn’t net them much profit over the course of its life.

I got this article from VGChartz and was tipped to me by timg57867:

I have seen a couple of threads / posts and even articles claiming that the PS3 made one of the greatest comebacks and is a profitable business for Sony. I just had to clear this up.

It seems that a lot of people forgot or ignore the gigantic losses Sony reported earlier this gen, thanks to the PS3.

The financial year that ended March 2006, Sony’s game division reported a 75 million USD operating income. Back then the PSP and PS2 were going really strong and were highly profitable. The operating income was down 80% just thanks to the R&D for the PS3. So even before the PS3 was released it already had its impact on the gaming business.

The financial year ended March 2007, the gaming division reported a 1.97 billion USD loss. Again the PS2 and PSP were profitable back then, so the losses made by the PS3 easily surpass the 2.2 billion USD mark.

Link: http://www.sony.net/SonyInfo/IR/financial/ar/2007/8ido180000018aei-att/SonyAR07-E.pdf

The next year, Sony reported a 1.24 billion USD loss. Again considering the PSP and the PS2, 1.5 billion USD loss just for the PS3 in this one year is an educated guess.

Link: http://www.sony.net/SonyInfo/IR/financial/ar/2008/qfhh7c00000htn6x-att/SonyAR08-E.pdf

In the year that ended March 2009 the gaming division saw some improvements, but still reported a 591 million USD loss.

Link: http://www.sony.net/SonyInfo/IR/financial/ar/8ido180000023g2o-att/SonyAR09-E.pdf

So before the next financial year started, the PS3 already had a 4.3 billion USD loss to fight, not including R&D! Sony merged the gaming business with the Vaio business and called it “Networked Products & Services”. From this point on it gets complicated to guess the exact PS3 numbers. However the newly formed division reported a 888 million USD loss for its first year.

This was the year when the new model launched and the PS3 saw a big price cut. This was the time when Sony decided to go after market share instead of profits. Tha vaio-business is way smaller than the Playstation business, so at the very least 500 million USD of those 888 million loss belong to the Playstation, mainly for the PS3. Let’s be very conservative here and say the PS3 only lost 400 million USD.

Link: http://www.sony.net/SonyInfo/IR/financial/ar/8ido18000003dkyy-att/8ido18000003dl0u.pdf

The year financial ending March 2011 was the very first year the PS3 actually made a profit! The new division posted a 428 million USD profit for the whole year. The Vita was not yet launched and the Vaio business was going strong according to the report. 300 million USD profit for the PS3 is an optimistic guess.

Link: http://www.sony.net/SonyInfo/IR/financial/ar/report2011/SonyAR11-E.pdf

The next year Sony decided to mix the division formed 2 years ago with all the other businesses for consumers (LCD, audio and video, gaming, tablets). Sony reported that this new division started with a breathtaking 2.8 billion USD loss. The report states that there were a lot of impacts that went bad for them (floods in Thailand and decreased sales of Playstation 3 hardware, digital cameras and PCs). Let’s be VERY optimistic and assume that the gaming division did not post a loss, even though the PSN outage cost them 171 million USD and is included in this report.

Link: http://venturebeat.com/2011/05/23/sonys-playstation-network-outage-costs-171m/
Link: http://www.sony.net/SonyInfo/IR/financial/ar/2012/common/docs/EAR.pdf

For the FY 2013 the gaming division is back and called “Game”. Here are the results we have so far:
Q1: 45 million USD loss
Q2: 29 million USD profit
Q3: 53 million USD profit.

= 37 million USD profit in the past 9 months.

 So overall we are looking at a total loss of 4 billion USD for the PS3, not including R&D and that is a very optimistic guess. With all the factors I chose to ignore to show you that this is not biased in any way (R&D, PSN Outage, Most of the PS2 / PSP profits) the actual number would be way higher.  There are reports that the cell processor alone cost 400 million in R&D, add Blu-Ray, PSN etc. and you get the idea. So a 5-6 billion USD loss for the PS3 is very likely.

So the comeback of the PS3 never really happened. And it did not make any money yet and won’t recoup the money at all. This is not spinning, no trolling just hard facts from the financial reports. This is why I don’t get all these celebrations of Sony and the PS3. Imagine where the Xbox 360 or the Wii would be if Nintendo or MS were willing to take a 5 billion USD loss…

I knew Sony had staggering losses, but I didn’t know it was this bad. Exactly how does Pachter get away with not reporting on any of this?

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Author: Francis@PE (15010 Posts)


43 Responses to An interesting look at Sony’s Financial Situation with the PS3

  1. […] PlayStation content to other devices | Joystiq Sony lost a total of 6 billion dollars last gen: An interesting look at Sony’s Financial Situation with the PS3 | PLAYERESSENCE Sony sold off their NY HQ building: UPDATE 2-Sony sells New York HQ for highest-priced US bldg in […]

  2. *NormalGamer* says:

    Great article. Didn’t know that Sony’s financial troubles were way worser than I thought. Wonder how Sony is gonna get out of this one?

  3. rubix8702 says:

    Excellent article, and a lot of these problems stem from the engineers versus the CEO's culture currently at Sony. When Sony was founded it was founded by engineers. The motif behind the company was 'we want to make the best product with a seal of quality,' and for the most part they have done that. Fast forward to the golden era of Sony in the late 80's and 90's, their brand power couldn't be touched. From sound equipment (anyone remember the Walkman lol?), to televisions, the Sony brand couldn't be touched. Everything they touched turned to gold, and essentially the engineers grew to have the louder voice. However, times have changed and unfortunately the culture has become toxic for them.

  4. Not sure says:

    Lots of speculation used to arrive at these numbers.

    • timg57867 says:

      Yeah, speculation in Sony's FAVOR. =P

      • timg57867 says:

        That dude isn't "speculating" anything when he's getting these numbers. Speculation is "a message expressing an opinion based on incomplete evidence." He uses no bias against Sony, and lists hard, veritable sources at every turn. It's in Sony's favor because he chose to overlook factors which would probably make the loss bigger. Either way you look at it, the PS3 certainly made no net profit.

  5. donzaloog says:

    Sony is in a very bad position right now. This gen is make or break for them. They lost all of the money they made with the PSX & PS2. The PS3 was a failure compared to those two. Nintendo is in a much better position that they are with the success of the DS and Wii.

    The mass gaming public is so ignorant of what is actually going on in the industry. They choose to listen to idiots like Pachter, rather than the truth.

  6. Ray01 says:

    I guess I'm late to the party here.
    Well whatever, I pretty much agree with everything you guys are saying.
    I knew Sony was doing bad, I didn't know it was That bad. Mind blown.

    Sony needs to climb their way out of a very deep hole or else their future looks bleak. . . .We going to see ImageSoft again anyone? lol

  7. Blue_Orbot says:

    Somebody brought up how Sony sold the PS3 at a loss (which was still a whopping 600 bucks). It makes me think… why is 600 a loss? Well, they cram in as much stuff as they can. It seems, to me at least, that they’re putting too much stuff in a console, therefore they can never make enough money off of it to cover all the stuff they put in.

    Which, ironically, is pretty much what poor Sega was doing. Ahead of their time.

    Nintendo, on the other hand, has been doing the exact opposite, with the Wii and Wii U. The Wii was “underpowered”. The U is “underpowered”. In additional to other details, such as not putting in more than 32 gb in the U. Not putting in a DVD player. Currently only supporting one GamePad (which took up a sizeable chunk of that 300-350 pricetag).

    Ironically, it seems like if anybody were to “become the next Sega”, it would be Sony.

    Of course, it very well could just b3 their gaming division. And it still doesn’t seem likely that they’re going anywhere soon, at least not like Sega, who had 6 or so failed systems, as to where Sony only has (apparently) the PS3, and (so far) the Vita. Plus, they dominated last gen with the PS2 (not the handheld market, though), so Sony seems OK for the time being. I have no desire for Sony to go Sega, but people do need to get their facts straight.

    • Sid says:

      The Wii compared to the XBOX 360 and the PS3 it's underpowered, but I think that this time, the PS4 and the upcoming XBOX are overpowered, the Wii U hardware it's fine, it proved that it could run excelente last and new engines, I don't understand why the PS4 has to use 8 cores and 8 GB of RAM, when with less that the half of that hardware could run everything.

    • DBPanterA says:

      The big thing people forget was the battle Sony was in with Toshiba in the drive to make Blu-Ray or HD DVD the high end source of video. Sony won largely because people were buying the PS3 because they were cheaper than actual Blu-Ray players at the time. However, what wasn't seen in 2006 at launch was the rise of a little streaming service like Netflix, which millions of people enjoy and just shows that a lower quality image and a reasonable price is what most people want.

  8. Sid says:

    It's possible that the PS4 cost less than 450 dollars?, I didn't think so…

  9. Aiddon says:

    It always does amaze me at how badly Sony screwed up this gen. People keep trying to push them as some champion of gaming when in fact they're kind of incompetent. Furthermore, the Vita has shown that Sony learned NOTHING from the PSP and I doubt when the PS4's price tag shows up that they're going to show any sign of getting wiser.

    And then there's the lack of foresight a lot of game companies have. Currently it almost seems like publishers and developers are trying to bankrupt themselves by pushing visuals and budgets they can't afford. They have no interest in thinking long term and it's really starting to wear down on companies. This reckless behavior HAS to stop.

  10. jesgrad07 says:

    And I think it is only going to get worse for Sony with the PS4…

    • NS3210 says:

      When you look at history, whenever a console maker insults another such as Sony insulting Nintendo, it always turns for the worse. The victim of bullying always succeeds. I remember when Atari insulted Sega and Nintendo with their Jaguar, and you see what happened to that console, it led to Atari dropping out the console race. The same happened to the 3DO, it called Genesis and SNES "baby toys" and the 3DO was a colossal failure, the only thing good on that console was the home port of Super Street Fighter II Turbo. In modern times, Jack Tretton (gosh I can't wait till he leaves Sony) insulted Nintendo saying their handhelds are for babysitters, and look what's happening to the Vita…… my point exactly. Pretty much the industry is like high school, you have the sports jock that gets girls and does bad in grades (Sony), you have the rich kid (Microsoft), and you have the nerd that makes straight As and makes his family and whatever friends he has happy (Nintendo).

      • Titan64 says:

        Wow….that actually sense. So here are the repeating truths of the industry
        1. Underpowered always wins
        2. Insulting another competitor's console=failure
        3. Leaving Nintendo or bringing a franchise that was once on Nintendo consoles=failure and the opposite leads to success

        There is more but it seems to be the truth.

      • jesgrad07 says:

        That is arrogance and over confidence. It happens all the time in business. They try to get sells by saying their product is better instead of showing that it is better with actual content. Sony is very arrogant and have done that, but that isn't exactly the problems I was thinking of that would make it worse for them with the PS4. I was thinking of the…
        – over hype before a price reveal.
        – rising development costs that will not use its features leading to more stale games
        – few revolutionary features it has that will not appeal to the mainstream…a share button, touch pad?, more RAM…more HD?
        – large amount of late adopters to this gen that will probably wait to pick up a PS4.

        And really the 720…
        – possibly having similar specs, which would lead to a similar library splitting their audience
        – coming out around the same time while aiming for the same "mature/hardcore/adult" market also splitting their audience.
        – having a better launch line up that overshadows the PS4.
        – being cheaper than the PS4 but more expensive than the Wii U.
        – having more mass appeal than the PS4.

        Lots of negatives but not many positives.

      • RicardJulianti says:

        Don't forget about when Sega ran attack ads against Nintendo saying "Genesis does what Nintendon't"

        Every system after the Genesis failed and Sega went under.

      • Shannon Kyanzaki says:

        what you compared the type of guys to, is what I've been comparing those three two since the Wii…you hit it right on the nail dude!

    • Rpx says:

      It depending on the console pricing, the launch games and the online system as a free service or a paid membership service.

      Remember Sony likely noticed the revenue stream that MSFT gain from XBL paid service.

  11. NS3210 says:

    And they think having 8GBs of RAM and all this share stuff, play a downloading game, etc. will solve all their problems? WTF. Sony fanboys are in denial if they think the graphics shown on the Killzone 4 trailer is actual gameplay, it's not. I don't want Sony to drop out the console race, but their only killing themselves. The Golden Age of Sony (PS1/PS2/PSP) will always be better and never gets old compared to the Dark Age of Sony (PS3/PS4/PSVita)

  12. Aika says:

    I didn't knew they lost alot, i wonder how they will solve it and what price going to be for the ps4 maybe they take the risk the future hold unknown for them.

  13. timg57867 says:

    Thanks for posting this Francis. When Nintendo hits rough spots, people like to spout all kinds of crap and glorify the competition. People need to realize that Nintendo isn't the only one facing challenges.

    • Furious Francis says:

      No problem, I would just love to see Pachter justify his stance with Sony after reading this. But there is no way he would do this….

      • koopzilla says:

        He will just continue acting as if Sony is having no problems whatsoever, and claiming Nintendo is doomed. If you want to count that as a justification.

  14. Guest says:

    Does this mean they would have to keep supporting the ps3 to make back their losses? If so, how will they allocate their resources to support the PS3, PS4 and the Vita?

    • Furious Francis says:

      That's why you're not seeing a lot of software on the PS Vita right now. They don't have the money to support it. All hands are on deck for the PS4 and wrapping up the PS3.

  15. GeneralBrown178 says:

    Anyone else miss the PS1 and PS2 days?

    • Titan64 says:

      Whats really said is that Sony proved to Nintendo that power isn't everything….twice. I think Sony should have made the PS4 in similar specs to the Wii U but they opted for unnecessary power. This could be bad for them. With little to no Japanese support, an emphasis on power and not immersion, it will be the rough for Sony. I won't say they will crumble but they will be hurting.

      • Furious Francis says:

        I think Sony made a good call on the graphics for the PS4. They don't have the creative IPs Nintendo has. If they went with something as strong as the Wii U, there games would essentially be the same as last generation. The same shooters, the same racing games….ect. THEY HAVE to make the games look better, because the gameplay aint changing.

        Look at Killzone Shadow Fall….anything different in the gameplay there? Nope….just same old hold L Trigger, then press the right trigger.

        • GeneralBrown178 says:

          You got a point, I agree.

        • routerbad says:

          The problem is that it isn't powerful enough to overcome severe diminishing returns in graphical representations. Adding more polygons to a model only works to a point, making certain post processing techniques more efficient only works to a point, where more power doesn't mean better visuals or even necessarily better performance depending on the engine and the techniques being used. Nintendo has 3 generations using a dedicated tessellator, this is the one area where gains can actually be had to reduce the need for just more or higher resolution textures. The AMD chip Sony is using might also have a hardware tessellator, but in an OTS chip, going against Nintendo's custom tess logic, I'd go with Nintendo. Nintendo is king of efficiency, making all of the components interact and communicate in the most efficient way possible. In many ways, this can trump raw power, in others, it can't. The fact remains, though, that despite the additional power in the PS4, there will be no additional capability. Both GPU's will support the same techniques, the same engines, and similar API's. PS4 might be able to eke out a little more performance, but the games will look the same regardless, and since most games will be locked to either 30 or 60 fps, the extra power will be wasted.

          Also, in some instances, the PS4's reliance on parallelism in the CPU will cost performance. Games don't benefit from over engineering, they suffer, and when compared to Power7, individual Jaguar cores are surprisingly weak.

          Then there is the fact that extra power does not always allow for new types of gameplay. Nintendo realized this, so they worked to develop new methods of interaction, because that always opens up new gameplay opportunities. Making things a little more detailed or even a little more interactive doesn't change core mechanics, focusing on two screens or using kinetic energy to interact with a game world absolutely does.

  16. Titan64 says:

    O_O I knew it was bad, but damn…..that bad….How is the PS4 going to save them now? The lowest possible amount they can sell it at is 450$. Thats not bad but still expensive when considering most of the launch lineup is multi gen multiplats….you know…the ones the Wii U had and some of the multiplats the Wii U is getting. So….This could spell trouble for Sony real bad.

    • koopzilla says:

      It's just going to cost them more money. They can only blame themselves. They started this trend of selling consoles for a loss, and it's really biting them in the ass. It's pretty crazy they can't even make a profit selling consoles for 599 US dollars. I know I've stated before how bad I think it is for developers how fast Sony and Microsoft are pushing the graphics capabilities of these systems, but it looks like it's really hurting the console manufacturers as well. …And people think Iwata should be fired for realizing what's going on and deciding not to take a $5 billion loss.

      • Titan64 says:

        I know man. It still blows me away how ingenious the Wii was when they went low power the 7th Gen. Iwata mentioned that the Wii U games were being delayed because of they didn't anticipate the amount of resources they needed to create HD games. They could have hired more people but it wouldn't change much. So that tells me if Nintendo wasn't…"properly prepared" for a true HD, how the hell was Sony or Microsoft prepared for it.

      • RicardJulianti says:

        I like to think of it this way…

        If you're given the option of someone with 10-15 years of experience, 15-20 years of experience or 25-30 years of experience…..who would you pick?

        There's a reason Nintendo has been around this long…..why can't people trust them? I kind of feel like if Nintendo wasn't around, the PS3 and 360 would have been around for another 2 or 3 years before other consoles were announced or possibly even rumored. With the release of one next generation console, the other two companies had to speed up their development just so they wouldn't give Nintendo a 2-3 year head start.

        With Nintendo sticking to the usual console life cycle (they didn't plan on the Wii lasting as long as it did, and it shows), and keeping costs low, they force the hands of the other 2. Speeding up R&D burns through cash, especially when they want to be the most powerful ones out there. Given a couple more years of research, Sony could have gone with a normal cpu rather than a tablet version. They possibly could have used graphene which will blow everything out of the water (100tbps wireless transfer speeds, faster through the medium itself. WTF)

        Nintendo is effectively filling up the tank, slowly but surely drowning Sony and to a lesser extent Microsoft. They try to keep up, but also forge ahead in the best way they know how….by throwing money at it. If they don't turn things around, Nintendo could very well be the only one left. Tortoise and the hare, bitches.

        Edit: You'd think after writing 4 full pages, I wouldn't have anything more to say……

  17. koopzilla says:

    Wow! Nintendo is sooo doomed. Fire Iwata!!!

    (trying to get in the mindset of Pachter reading this article.)

  18. fpssteve1 says:

    In my Public Speaking class, for my Informative Speech project, I decided to speak about the financial situations of the big 3, and I even used your "Microsoft and Sony are Closer to Going Third Party" article as one of my sources.

    I find it funny how whenever somebody preaches doom for Nintendo, they often… conveniently forget to mention Microsoft or Sony at all. A lot of 'gamers' in my class had their minds freakin' BLOWN when I talked about Sony.

    And apparently, judging from this article, I didn't even scratch the surface. Damn… and the PS4 is supposed to make things better?

  19. Bay2OnWiiU4Life says:

    Pachter is too scared to post Sony's statistics. Some ANALyst he turned out to be.

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