PS3 pricing caused $3 billion loss

Improved sales help games division reduce operating losses, but PS3 still sells for less than production costs

By pricing the PS3 below its production cost, Sony has lost over USD 3 billion during the past two years according to information revealed in the company's fiscal 2008 annual report.

According to a Kotaku report, Sony lost USD 2.16 billion in 2007 and USD 1.16 billion in 2008 on the PS3. The console allegedly cost over USD 800 to manufacture but which was sold in the USD 500-600 range when it was launched in 2006.

Sony has warned investors that its large-scale investment on the PS3 may not be fully recovered if the console does not achieve favourable market penetration.

For fiscal 2008, Sony's game division saw a 26.3 per cent increase in sales to JPY 267.5 billion (USD 2.5 billion). Nevertheless, it reported an operating loss of JPY 124.5 billion (USD 1.2 billion).

The company previously said that it expected the profitability of its game segment to improve significantly due to hardware cost reductions and a strong line-up of PS3 software.

Sony reported the following worldwide unit hardware sales for fiscal 2008, compared to 2007:

  • PS2: 13.73 million (- 0.98 million)
  • PSP: 13.89 million (+ 4.36 million)
  • PS3: 9.24 million (+ 5.63 million)

Sony also reported worldwide software unit sales for fiscal 2008, as compared to the prior year:

  • PS2: 154 million (- 39.5 million)
  • PSP: 55.5 million (+ 0.8 million)
  • PS3: 57.9 million (+ 44.6 million)

As the data shows, the PS3 saw the greatest year-to-year improvement in both hardware and software sales. However, the PS2 sold almost three times the amount of software as either the PS3 or the PSP in fiscal 2008 and the PSP sold more hardware overall.

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Latest comments (2)

Joćo Namorado Project Manager, Portugal Telecom8 years ago
If Sony doesn't find a way to reduce the manufacturing costs of the PS3 and Microsoft cuts the price of the 360 for Christmas, then things will not be easy for Sony in the coming year even though the Xbox seems to be losing momentum.

What it seems to me, though, is that nobody expected the Wii to be such a sucess, even if the DS had pretty much proved the concept.

Things should be very interesting in the "console wars" for the next months.
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Franck Sauer Creative / Tech Art Director, Fresh3d8 years ago
Well the software sales cannot be compared just in term of units since margins are very different depending on the platform. Still, incredible legs for the ps2.

Sony really needs to come up with something to push psp software sales upward. Direct access to psp store with the console please!
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