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[FrankT]

In the last 4 financial years Nintendo made US$ 15.8 Billion in operating income.
That figure , in the videogame industry context, is simply mind blowing.
In comparison if we sum up only the profitable years for Sony gaming division ( most pre-PS3 years ) we would get a total operating income of around US$ 5.7 - 6.1 Billion.

As I thought, but what % of that would we place on the NDS? 40-50 perhaps?

 

[Vinci]

In the last 4 financial years Nintendo made US$ 15.8 Billion in operating income.
That figure , in the videogame industry context, is simply mind blowing.
In comparison if we sum up only the profitable years for Sony gaming division ( most pre-PS3 years ) we would get a total operating income of around US$ 5.7 - 6.1 Billion.

Considering how difficult it is to make money in the gaming industry, it's beyond even that. It's illogical. Iwata has to be dealing crack on the down low or something, 'cause that's just insane shit.

 

[donny2112]

Considering how difficult it is to make money in the gaming industry, it's beyond even that. It's illogical. Iwata has to be dealing crack on the down low or something,

The question would immediately come up, then, as to why Nintendo doesn't start using that money to grease the wheels with third-parties more than they are (e.g. cut license fees in half to bring big multi-platform games to Wii, too; outright buy studios; fund development). The likely answer is that Nintendo doesn't want to start a habit when the money's flowing that will cost them if the money stops. Iwata's talk about behind the scenes machinations that will take 2-3 years to come to light is at least something, though.

 

[Vinci]

The question would immediately come up, then, as to why Nintendo doesn't start using that money to grease the wheels with third-parties more than they are (e.g. cut license fees in half to bring big multi-platform games to Wii, too; outright buy studios; fund development). The likely answer is that Nintendo doesn't want to start a habit when the money's flowing that will cost them if the money stops. Iwata's talk about behind the scenes machinations that will take 2-3 years to come to light is at least something, though.

Yeah, that's both the curse and benefit of being very conservative. When times are tough, you'll survive; when times are good, you're too tight to take full advantage. I think outright buying studios is largely a mistake, particularly with a company like Nintendo that doesn't give a damn about stroking someone's ego.

But yeah, the behind the scenes stuff is likely more projects akin to Other M and Last Story.

 

[yurinka]

I don't know if you noticed but that 5.6 billion is dollars, when the number above is yen.

As I said, I mistaked thinking it was 5.6 billion yens.

Either way, that bolded part makes you sound like a fucking lunatic. In PS2 era when Sony was completely ruling the market their best FY result was 960 million dollars profit. Now PS3 is in 3rd place and nowhere near the success that PS2 was and you think it suddenly starts raining money in Sony HQ? :lol :lol

If I don't mistake looking at the OP, this fiscal year PS3 has been 2nd worldwide in both hardware and software, selling more than 360.

And LTD, is 4.5M behind in HW and 64M in SW, not so big difference. And PS3 HW forecast for this year are 15M, and Wii are 18M. PS3 is not as behind in a 3rd place as before, and looks like Wii is going to decline (at least this year considering Nintendo's forecast).

PS3 HW cost was the reason of their looses in this gen. Now they have healty profitable PS3 SW and HW numbers, in addition to PS2, PSP, PSN and perifeals profits.

In terms of profit, the market growed a lot since the PS2 era. MS is going to have a PS2 like year in terms of profit, not to say Nintendo. And PS3 is almost matching 360 market share, having the extra profit of PS2 and PSP.

So unless they have this year another big PS3 price cut or a really expensive, non profitable PSP2 to be released really soon, I think they can match MS profit numbers for this FY.

Let's say the sell the same PS3 HW and SW than 360 this year. Even if the 360 HW now is more profitable than PS3 HW, this extra profit is more than the one coming from PS2, PSP and PSN?

I think no. And if not, why Sony gaming division can't have more profit this year than MS gaming division?

 

[Serenity]

I know exactly which quarter he was talking about. It be might selling well it just ain't selling through that well every else which is the differnce between sell through and shipped. It is possible MS was on the high side for Q3.

How do you know it isn't selling well? They have sold well in the first three months in America which probably makes up half that shipment number. Plus the PsP which the Ps2 has sold more than the last few months in NPD matched the 360 in sales and that is consider a poor selling dead system. I personally don't find it hard to believe.

And weren't you sure that sony wasn't going to hit their shipping target for the quarter?

 

[Stumpokapow]

The question would immediately come up, then, as to why Nintendo doesn't start using that money to grease the wheels with third-parties more than they are (e.g. cut license fees in half to bring big multi-platform games to Wii, too; outright buy studios; fund development). The likely answer is that Nintendo doesn't want to start a habit when the money's flowing that will cost them if the money stops. Iwata's talk about behind the scenes machinations that will take 2-3 years to come to light is at least something, though.

I don't really think expectations are fostered that way.

Companies use their war chests for all sorts of one-time-only things. Companies issue one-time special dividends from their war chests (ugh, terrible use of money), use it for acquisitions, do share buybacks.

Nintendo's got a $20 billion war chest. That's insane. That's comparable to the size of Apple, and Apple's made maybe 20 acquisitions in the time that Nintendo's made one or two. They could literally drop $1 billion (5% of their cash, a drop in the bucket) on paying 50% of 20 AAA projects for the Wii cash advance.

I agree that Nintendo shouldn't bloat and expand and become this huge company with tons of ongoing expenses, because when the gravy years are over, they'd have to make painful cuts. Better to stay lean and run a profit every year, absolutely. But when you have a bunch of cash sitting in what amounts to a giant savings account, that's wasteful.

 

[schuelma]

Nintendo's got a $20 billion war chest. That's insane. That's comparable to the size of Apple, and Apple's made maybe 20 acquisitions in the time that Nintendo's made one or two. They could literally drop $1 billion (5% of their cash, a drop in the bucket) on paying 50% of 20 AAA projects for the Wii cash advance.

I agree that Nintendo shouldn't bloat and expand and become this huge company with tons of ongoing expenses, because when the gravy years are over, they'd have to make painful cuts. Better to stay lean and run a profit every year, absolutely. But when you have a bunch of cash sitting in what amounts to a giant savings account, that's wasteful.

They're presumably doing something with that money right? R&D? Expansion? Something?

Wow, I'm not a businessman, but that seems like a waste to just sit on that pile when you have that kind of potential.

 

[AirBrian]

For the chart lovers:

http://www.sony.net/SonyInfo/IR/financial/fr/09q4_sonypre.pdf

 

[Vinci]

They're presumably doing something with that money right? R&D? Expansion? Something?

Wow, I'm not a businessman, but that seems like a waste to just sit on that pile when you have that kind of potential.

It seems like Nintendo's only interest is in survival. Forever. Like, they want to survive as a company for all time - regardless of what they could have accomplished if they'd been more aggressive. That's why when people talked about Nintendo in the past, and discuss them in the future, they should always assume they'll (at the very least) be around. That's all the company seems to care about.

 

[donny2112]

They're presumably doing something with that money right? R&D? Expansion? Something?

Of course they're doing something with it.

IwataMcDuckSwimmingInMoneyBin.gif

 

[Biff]

Business is all about the long term.

35.7m PS3s resulting in an average loss based on hardware costs alone of, what, $50 a console? Add in R&D costs, marketing, patents, legal fees, lawsuits, etc.. Let's just give a nice even number of $100 average loss per PS3 since launch. $3.57b USD probably isn't too far off.

Now, let's look into the future:

15m PS3s forecasted in fiscal year 5 - in other words, halfway into its 10 year life cycle.

That will bring them to 50.7m PS3s by the end of fiscal year 5. Assuming the PS3 will carry momentum into years 6, 7, and 8 but then drop off in years 9 and 10: 15m average sales for the remaining 5 years is reasonable.

Therefore, we have FY2010 @ 15.0m + FY2011-2015@ 75.0m = 90.0m PS3s left in the 10 year lifecycle. Would put them at 125.7m lifetime sales - assuming that we haven't begun to see the impact of PS2 owner conversion in smaller markets, that would put them in line with PS2 sales. Overly ambitious? Alright, but stay with me...

Here's my point:

Sony has another 90.0m PS3s to make back every dollar they've lost on hardware profit alone. If they average a $40 profit on each PS3, they'll break even. $40 is probably unreasonable, but $20 is entirely achievable. Half the losses are recouped, plus all the profit they would have made on software (incl. PS Store) and peripheral (incl. PS Move) sales over those 6 years will undoubtedly put them strong in the black.

Investors are happy; Sony is happy. Bluray overtakes DVD as #1 disc format in the world; Sony execs hailed as geniuses instead of idiots.

Spoiler

No, I don't work for Sony. I just like talking business.

 

[gofreak]

A couple of other tidbits:

They expect the game business to be profitable for the full year FY2010, but not exceptionally so ("break-even or profit").

When asked why they weren't expecting more from game, they say that though there is a lot of good news on the PS3 side, PS2 is declining, and PSP has been disappointing in the last FY. Also, perhaps interestingly, he noted that "although it is premature to talk about future platforms, R&D expenditure continues".

Gave a couple of mentions to PSN/network software...says they fell a little short of their target of 50bn yen in sales, and they need to do a little more there in terms of profitability.

Also, they do provide a separate figure for Game revenue for FY09: 814bn Yen ($9bn), down 14.6% YoY. No such luck for operating income. But to give you an idea of the size of the game business within NPS, that's about half the total sales of NPS. I always had the impression the game business was very dominant in NPS, that NPS was really just the game business with a thin coating of other businesses, but it's not really the case.

 

[SlipperySlope]

I thought a price cut was widely expected even before we saw these sales projections. They recently broke even on hardware for one thing.

Broke even on hardware? Where did you hear that?

 

[Celine]

If anyone is interested there is a bunch of Sony historical data here ( even the 2 operating income missing in Psycotext chart ):
http://www.sony.net/SonyInfo/IR/financial/fr/historical.html

 

[Celine]

They expect the game business to be profitable for the full year FY2010, but not exceptionally so ("break-even or profit").

What does this mean ?

 

[gcubed]

Broke even on hardware? Where did you hear that?

they profit on hardware now... Bloomberg

 

[schuelma]

Assuming the PS3 will carry momentum into years 6, 7, and 8 but then drop off in years 9 and 10: 15m average sales for the remaining 5 years is reasonable.

That's a massive assumption you are making there.

 

[gofreak]

What does this mean ?

It means for Apr 2010 to March 2011 inclusive they expect the game business to break even or make a small profit.

(As opposed to NPS where they are forecasting a loss overall)

 

[Stumpokapow]

They're presumably doing something with that money right? R&D? Expansion? Something?

Wow, I'm not a businessman, but that seems like a waste to just sit on that pile when you have that kind of potential.

R&D would generally be considered an operating cost, something that has an annual budget as opposed to an extraordinary expenditure like a special dividend, a stock buyback, an acquisition, etc.

Their war chest has grown a lot over the last few years, so they basically have not been spending it. Yeah, they've been spending money, expanding, getting new employees, a few tiny little acquisitions, etc. but it doesn't seem like those originated from their war chest.

Companies that aren't doing anything with their savings are largely investing them in short-term money markets (IE low risk bonds) because you can't very well put that level of money in a savings account

 

[Biff]

That's a massive assumption you are making there.

Agreed

I concede it may be overly optimistic, but even if you knock 20m PS3s off my 90m estimate, that means Sony has 70m PS3s left in the 10 year cycle.

They are at 35.7m now, and therefore would still have two-thirds of the way left to go! Lots of future sales remaining to recoup the losses via hardware profit, no?

 

[orion434]

Agreed

I concede it may be overly optimistic, but even if you knock 20m PS3s off my 90m estimate, that means Sony has 70m PS3s left in the 10 year cycle.

They are at 35.7m now, and therefore would still have two-thirds of the way left to go! Lots of future sales remaining to recoup the losses via hardware profit, no?

There is no 10 year cycle... new consoles will be here in 2012 - 2013 the latest, and SONY will support the PS3, but it won't be the main focus at that point. They can maybe squeeze 45m more for a total of 80m and that's being optimistic, unless someone wants to bring in the clown gif... or the one that had negative install-base for the Wii + X360 gif, one of my fav's.

 

[Dedication Through Light]

There is no 10 year cycle... new consoles will be here in 2012 - 2013 the latest, and SONY will support the PS3, but it won't be the main focus at that point. They can maybe squeeze 45m more for a total of 80m and that's being optimistic, unless someone wants to bring in the clown gif... or the one that had negative install-base for the Wii + X360 gif, one of my fav's.

It would be too much money to release a ps4, unless they do a ps3.5 or something, Sony Corp needs to make more money and profits I would think, not release a new computer entertinment system.

 

[Karma]

Their FY2010 is interesting, the PS3 growth seems to point to a 50$ price cut later this year (probably we'll see a 250$ PS3 and 299$ Move bundles in September).

To reach 15m for the year Sony will need a PS3 Slimmer, a new Final Fantasy launch in Japan and another $100 price drop.

 

[orion434]

It would be too much money to release a ps4, unless they do a ps3.5 or something, Sony Corp needs to make more money and profits I would think, not release a new computer entertinment system.

Maybe they are already working on a PS4? Sony would be crushed if they don't issue a new console in response to the competition.

 

[noobie]

:lol Seriously?

Edit: The best part about your post is that you talk about how sony is still making 'proper' games and the only game you mention is a 2D platfomer.

i mentioned LBP cuz i think that it has some fun factor like Nintendo games, i mean its a replica of Mario while not being a replica of Mario.

and the proper games which Sony is churning out pretty regularly lately is known to everyone starting from God of War 3, to KZ2, Infamous, Heavy Rain, WKC, UC2, R&C n so on.. u know the list..

i should have mentioned them in two different sentences

 

[unconcerned]

To reach 15m for the year Sony will need a PS3 Slimmer, a new Final Fantasy launch in Japan and another $100 price drop.

Actually no. They did 13m last fiscal year, and half of that time the fat ps3's were selling like shit @ $399. The Slim ps3s came through and crushed the buildings. 9 million ps3s were sold in 6 months because of the slim. I remember people on GAF laughed at sony for setting a goal of 13m for last fiscal year. See what happened? So with a full year of the slim ps3 (bar supply issues) i see no reason why sony wouldn't reach their goal of 15m. GT5 bundle for the holidays is a lock, and that will be enough to pick up the slack of not having a "FF13" in Japan this year.

 

[Taurus]

Business is all about the long term.

35.7m PS3s resulting in an average loss based on hardware costs alone of, what, $50 a console? Add in R&D costs, marketing, patents, legal fees, lawsuits, etc.. Let's just give a nice even number of $100 average loss per PS3 since launch. $3.57b USD probably isn't too far off.

Now, let's look into the future:

15m PS3s forecasted in fiscal year 5 - in other words, halfway into its 10 year life cycle.

That will bring them to 50.7m PS3s by the end of fiscal year 5. Assuming the PS3 will carry momentum into years 6, 7, and 8 but then drop off in years 9 and 10: 15m average sales for the remaining 5 years is reasonable.

Therefore, we have FY2010 @ 15.0m + FY2011-2015@ 75.0m = 90.0m PS3s left in the 10 year lifecycle. Would put them at 125.7m lifetime sales - assuming that we haven't begun to see the impact of PS2 owner conversion in smaller markets, that would put them in line with PS2 sales. Overly ambitious? Alright, but stay with me...

Here's my point:

Sony has another 90.0m PS3s to make back every dollar they've lost on hardware profit alone. If they average a $40 profit on each PS3, they'll break even. $40 is probably unreasonable, but $20 is entirely achievable. Half the losses are recouped, plus all the profit they would have made on software (incl. PS Store) and peripheral (incl. PS Move) sales over those 6 years will undoubtedly put them strong in the black.

Investors are happy; Sony is happy. Bluray overtakes DVD as #1 disc format in the world; Sony execs hailed as geniuses instead of idiots.

Spoiler

No, I don't work for Sony. I just like talking business.

I just want to ask, do you think MS and Nintendo are just going to sit on their asses doing nothing? It seems that you assume that the market is just waiting there for Sony to grab it while all Nintendo and MS can do is run around waving hands helplessly

Spoiler

HINT: new consoles

.

Expecting Sony to sell 100 million+ PS3s just because "it's the way they tend to do with Playstations" is just utter bullshit.

 

[Celine]

There is no 10 year cycle...

Bu bu bu but the PS2 10 year plan ...
PlayStation 2
9,20 18,07 22,52 20,10 16,17 16,22 14,78 13,66 7,91 7,30

 

[Dedication Through Light]

Maybe they are already working on a PS4? Sony would be crushed if they don't issue a new console in response to the competition.

That's assuming that the M$ and Ninty release their consoles at the same period (2012-2013?) The companies could all aim for 2014-2015 to maximize Natal sales and explore untouched software capabilities and ideas for the Wii. Everyone wins waiting, especially with the tumultuous worldwide economy.

 

[schuelma]

Actually no. They did 13m last fiscal year, and half of that time the fat ps3's were selling like shit @ $399. The Slim ps3s came through and crushed the buildings. 9 million ps3s were sold in 6 months because of the slim. I remember people on GAF laughed at sony for setting a goal of 13m for last fiscal year. See what happened? So with a full year of the slim ps3 (bar supply issues) i see no reason why sony wouldn't reach their goal of 15m. GT5 bundle for the holidays is a lock, and that will be enough to pick up the slack of not having a "FF13" in Japan this year.

While I generally agree that the new fiscal goal isn't completely unrealistic, I do think it should be noted that the 6 months with the slim shipments included what was basically a relaunch of the system as well as the holiday season. The slim shipments got a hell of a headstart via the strong launch it had and then basically went right into the holiday season.

 

[JardeL]

To reach 15m for the year Sony will need GT5.

Fixed.

 

[LegoDad]

People talking about insane price cuts should realize that Sony just had a phenomenal year and lost $900 million USD. A $100 price cut means they lose another $100 million extra next year. Do you guys really think they're in a position to lose more money?

That money wasn't lost because of Sony Games, it was because of Vaio and walkman, which are grouped with the Sony Game department.

 

[Dedication Through Light]

Actually no. They did 13m last fiscal year, and half of that time the fat ps3's were selling like shit @ $399. The Slim ps3s came through and crushed the buildings. 9 million ps3s were sold in 6 months because of the slim. I remember people on GAF laughed at sony for setting a goal of 13m for last fiscal year. See what happened? So with a full year of the slim ps3 (bar supply issues) i see no reason why sony wouldn't reach their goal of 15m. GT5 bundle for the holidays is a lock, and that will be enough to pick up the slack of not having a "FF13" in Japan this year.

Um they could get FF Versus 13 this holiday season. The thread is banking it all on just one title. In Sonys case, I think their combined portfolio of games is more important than just one title (GT 5).

 

[FrankT]

What does this mean ?

Pretty much what they have hoped for years now. A smallish profit at the end of the fiscal year.

That money wasn't lost because of Sony Games, it was because of Vaio and walkman, which are grouped with the Sony Game department.

No pretty sure the first two quarters had fairly big losses from the games division which would make sense considering that was price cut time.

While I generally agree that the new fiscal goal isn't completely unrealistic, I do think it should be noted that the 6 months with the slim shipments included what was basically a relaunch of the system as well as the holiday season. The slim shipments got a hell of a headstart via the strong launch it had and then basically went right into the holiday season.

Indeed there is no relaunch this year. Price cut almost has to be worked in with these kind of numbers. Much stiffer competition this fall to be sure.

 

[Version 3.0]

15m average sales for the remaining 5 years is reasonable.

No, it is not. That's quite excessive. Half that is closer to "reasonable".

Investors are happy; Sony is happy. Bluray overtakes DVD as #1 disc format in the world; Sony execs hailed as geniuses instead of idiots.

Recovering from a massive disaster prompted by your own stupidity doesn't make you a genius. It's a wash. And by the time Blu-Ray overtakes DVD, they'll have long forgotten any part the PS3 played in its success. Hell, they probably already have.

Sony's done a great job of sticking it out and dealing with the situation they created, building an excellent game library and turning around the perception that the PS3 was 'defeated' (or however you want to describe it). But from a business perspective, they have a long way to go. The next step, clearly, is to return to profitability.

 

[LegoDad]

Pretty much what they have hoped for years now. A smallish profit at the end of the fiscal year.



No pretty sure the first two quarters had fairly big losses from the games division which would make sense considering that was price cut time.

Separate from NPS, SCE made a profit of ~ ¥20bn ($200m) for the three months Jan 2010 to March 2010. Vaio and Walkman lost money in that time due to restructuring costs and poor product portfolio.

 

[FrankT]

Separate from NPS, SCE made a profit of ~ ¥20bn ($200m) for the three months Jan 2010 to March 2010. Vaio and Walkman lost money in that time due to restructuring costs and poor product portfolio.

They didn't lose that $900 million this quarter, but a large majority of it in the first two quarters of the fiscal year.

Where was that 200m number reported by the way because if this true;

This was NPS operating loss for the quarter, 7bn Yen:

There is no way that can be if overall they had a loss off 33 or 75 million for the quarter.

No, it is not. That's quite excessive. Half that is closer to "reasonable".




Recovering from a massive disaster prompted by your own stupidity doesn't make you a genius. It's a wash. And by the time Blu-Ray overtakes DVD, they'll have long forgotten any part the PS3 played in its success. Hell, they probably already have.

Sony's done a great job of sticking it out and dealing with the situation they created, building an excellent game library and turning around the perception that the PS3 was 'defeated' (or however you want to describe it). But from a business perspective, they have a long way to go. The next step, clearly, is to return to profitability.

What is the rate of DVD/BD at this point? 85/15? Serious question. I would like to know because this seems like it is going to be the longest transition ever.

 

[LegoDad]

They didn't lose that $900 million this quarter, but a large majority of it in the first two quarters of the fiscal year.



What is the rate of DVD/BD at this point? 85/15? Serious question. I would like to know because this seems like it is going to be the longest transition ever.

Just telling you that Vaio and Walkman are killing that division, its not only the Game Division.

 

[gofreak]

Separate from NPS, SCE made a profit of ~ ¥20bn ($200m) for the three months Jan 2010 to March 2010.

Where'd you get that number from? It seems very high (I mean, relatively, for SCE these day), more like what their Q4 game profit might have been.

 

[SlipperySlope]

Sony Forecasts Miss Estimates, Fuel Concern Over Europe Demand



Bloomberg

Sorry if already posted, but I see now what they're expecting. $10 million USD for the division (I used 100 yen/dollar ratio for simplicity reasons) in profit.

So the hardware is still unprofitable. It'd be software sales that would put the division in the black, along with PSP and PS2 sales.

Edit - It seems like a typo by the writer that put in "stopped losing money from PS3 consoles". The numbers say otherwise (the 50 billion yen loss for the division for the previous year was for the division, not the hardware only. It'd be the same for the 1 billion profit projection.).

 

[FrankT]

Where'd you get that number from? It seems very high (I mean, relatively, for SCE these day), more like what their Q4 game profit might have been.

This is what I was wondering too. Added above and yea perhaps Q4 as I do not have the number.

 

[RustyNails]

GT5 bundle for the holidays is a lock, and that will be enough to pick up the slack of not having a "FF13" in Japan this year.

FF13: Versus for December 2010 release in Japan. Believe.

 

[Celine]

That money wasn't lost because of Sony Games, it was because of Vaio and walkman, which are grouped with the Sony Game department.

Sony expects a game division profit of less than 10 billion yen this fiscal year after a 50 billion yen loss in the fiscal year just ended. The company says it is finally making a profit from its PS3 hardware - 3.5 years after its launch.

http://e.nikkei.com/e/fr/tnks/Nni20100513D13JF360.htm

 

[gofreak]

Sorry if already posted, but I see now what they're expecting. $10 million USD for the division (I used 100 yen/dollar ratio for simplicity reasons) in profit.

So the hardware is still unprofitable. It'd be software sales that would put the division in the black, along with PSP and PS2 sales.

Edit - It seems like a typo by the writer that put in "stopped losing money from PS3 consoles". The numbers say otherwise (the 50 billion yen loss for the division for the previous year was for the division, not the hardware only. It'd be the same for the 1 billion profit projection.).

Re. hardware, they said that it was now profitable 'on a gross margin basis'.

Regarding game profitability for the next year...you have PS2/PSP declining in terms of their contribution to profit. You have PS3 software increasing in terms of contribution to profit. PS3 hardware neutral (?) - OR, if they're budgeting for a price cut - losing money again at some point in the future. You have R&D spending ongoing (a negative contribution...that might significantly weigh on PSP/PS2 and PS3 softwares' contribution to profit). Shuffle those things together, and it's quite possible that they're profitable on hardware NOW on a gross margin basis, yet not expecting great profitability overall for Game in the next FY.

Sony expects a game division profit of less than 10 billion yen this fiscal year after a 50 billion yen loss in the fiscal year just ended. The company says it is finally making a profit from its PS3 hardware - 3.5 years after its launch.

http://e.nikkei.com/e/fr/tnks/Nni20100513D13JF360.htm

If that 50bn is actually for the Game business as opposed to simply for PS3, it'd mean the game business accounted for ~60% of NPS's loss, not the full 900m or whatever.

I've little doubt that if you take the 900m loss as representative of the game business' loss, that that's significantly overstating the loss in the game business. Vaio was unprofitable last year along with unspecified 'others'. Other NPS units were so unprofitable in the last quarter that the overall division posted a loss of 75m, while game posted a profit.

 

[Psychotext]

I'm a bit busy at the moment, but I'll update the big financial results table when I get five minutes. Not sure when I did it last, think it was as of the last quarter.

 

[SlipperySlope]

Now let me give you the information that is relevant here:

Oneda says: "The company stopped losing money from PS3 consoles in March and will likely post an annual profit of at least 1 billion yen this year from PS3, compared with a loss of about 50 billion yen in the year ended March 31."

Firstly let us work out what exactly he is saying.. He says that Sony lost 50 billion yen from PS3, does he mean the PS3 on its own lost that amount or is he saying the division that the PS3 is under lost that amount? Well here is the relevant information:


Networked Products & Services (GAME) (Millions of U.S. dollars)

-FY 2009: Operating Income (loss) $(893)


The division that houses the loss contributed by the PS3 made a net operating income loss of $893 million USD. $893 million USD converts to $82.54 billion Yen which is more than Oneda specified the PS3 contributed. One must then assume that the PS3 was entirely responsible for the $50 billion Yen loss he mentioned.

Now that we have that assumption, we can also fairly certainly make the claim that Oneda was also being specific about the PS3 when he said: "The company stopped losing money from PS3 consoles in March and will likely post an annual profit of at least 1 billion yen this year from PS3." So how much money is 1 billion Yen in USD? Well it's $10.82 Million USD.

So Sony expects to make $10.82 Million USD off of 15M PS3's. That means that from now until the end of March 2011, each PS3 sold would make Sony an average of 72 cents...

Interesting, no?

Now consider that Oneda said "PS3" and thus far, I've taken it to mean "PS3 hardware" and not "PS3 platform" as one would expect. To come to the conclusion that Sony are profiting 72 cents per PS3 without taking into account other profitable parts of the PS3 platform like peripherals and games. So one HAS to come to the conclusion that a price cut is on it's way and because I don't want to look deeper into the numbers right now, I'm not going to speculate how much that price cut will be but I'd assume $50 would be the safe bet.

Again, may have been responded to by someone else, but the discrepancy could be currency conversions. Currencies have fluctuated a bunch last year. So your comparison is likely off. I still think he really meant the PS3 (or gaming as a whole), division. Probably a typo or he misspoke.

If the hardware itself is profitable this year, than it was likely near profitability for much of last year (the busiest months of the year by far). And if that were the case, they wouldn't have posted a loss last year of over 800 million USD when you include software and peripherals.

The numbers just don't add up to the hardware itself being profitable.

 

[yurinka]

There is no 10 year cycle... new consoles will be here in 2012 - 2013 the latest, and SONY will support the PS3, but it won't be the main focus at that point. They can maybe squeeze 45m more for a total of 80m and that's being optimistic, unless someone wants to bring in the clown gif... or the one that had negative install-base for the Wii + X360 gif, one of my fav's.

PS1 and PS2 had 10 year cycle, if not more. These consoles saw the release of the next gen inside this cycle (I would say around the 6th-7th year). I think with the current gen will happen the same.

But in this gen, PS3 and 360 are getting new revisions, both in HW (HDD, Wifi, HDMI, Natal, Move, etc) and in SW (firmware updates with new features and new on-line services like 3D, Facebook or movie stores).

And hardware wise, I doubt next Nintendo console won't outdate the PS3. I think tech wise will be near the PS3/360 and will be focused in new features (like Motion Control was in Wii) instead of tech power.

We also have to consider that to release a new console is everytime more expensive both for 1st party and 3rd parties, and not everybody can't afford it.

So I think this time maybe we will see a PS4/Xbox720 at least in 2013/2014 if not later, because the HD consoles won't be outdated this soon even if a new Nintendo console is released and because the gaming market won't be ready for that, unless PS4 is a PS3.5 and the same for XB720.

 

[Elios83]

Since the NPS group was created it has been really difficult if not impossible to say how much profit or losses are due to the gaming division alone. It's kinda pointless to consider the NPS results as SCE results. Vaio and portable music are significant businesses.

You have PS3 software increasing in terms of contribution to profit. PS3 hardware neutral (?) - OR, if they're budgeting for a price cut - losing money again at some point in the future.

I don't think they're planning to lose money on the hardware anymore. What they might be willing to do is to sell the hardware at a break even point to spur substantial installed base growth hence software sales growth, which is what they really care about. They will never make as much profit on the hardware as selling huge amounts of games.
In this sense if the current Slim is already profitable for them, I think that with the next hardware revision coming this fall they will pass the savings ( 50$).

 

[SlipperySlope]

Re. hardware, they said that it was now profitable 'on a gross margin basis'.

Regarding game profitability for the next year...you have PS2/PSP declining in terms of their contribution to profit. You have PS3 software increasing in terms of contribution to profit. PS3 hardware neutral (?) - OR, if they're budgeting for a price cut - losing money again at some point in the future. You have R&D spending ongoing (a negative contribution...that might significantly weigh on PSP/PS2 and PS3 softwares' contribution to profit). Shuffle those things together, and it's quite possible that they're profitable on hardware NOW on a gross margin basis, yet not expecting great profitability overall for Game in the next FY.



If that 50bn is actually for the Game business as opposed to simply for PS3, it'd mean the game business accounted for ~60% of NPS's loss, not the full 900m or whatever.

I've little doubt that if you take the 900m loss as representative of the game business' loss, that that's significantly overstating the loss in the game business. Vaio was unprofitable last year along with unspecified 'others'. Other NPS units were so unprofitable in the last quarter that the overall division posted a loss of 75m, while game posted a profit.

Gross margin? Alright then, I was correct. I thought the numbers didn't add up, and that could explain it.

Gross margin doesn't include so many expenses.