Sony's Gaming Department Crashes and Burns under a $2 Billion Loss

http://www.bloomberg.com/apps/news?pid=20601080&sid=aTVZj2sgVtvk&refer=asia
It is now tomorrow http://kotaku.com/gaming/oh-snap/playstation-biz-almost-posted-2-billion-loss-260809.php

Sony says it only managed to earn a total $596 million this year, and this is against a $1900 million dollars lost by it's gaming division.  It was looking like they would still earn around $1 billion in net income, but seems the PS3 has dealt a pretty big blow to that number.  Sony of course says they expect a sharp turn around, but do they mean as the company as a whole?  Since next financial quarter expects large gains with Spiderman 3.  Is the PS3 just going to bleed and leak money like crazy?  Guess we'll be waiting for Sony's next earnings release to find out how much massive damage is going to be inflicted overall.

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For the "don't want to read" guys:
Sony's gaming division will most likely post a $2 billion net loss for the year ($1 billion net income for Sony as a whole)
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In a few hours time we will find out how much Sony's Gaming Department will have cost Sony as a company as a whole.  The PS3 has caused a net loss for their gaming division for the past 3 quarters, each time the amount increasing.
http://www.sony.net/SonyInfo/IR/financial/fr/index.html

Q1: $233 million net loss  /     $281 million net income overall
Q2: $369 million net loss  /       $14 million net income overall
Q3: $455 million net loss  /  $1,344 million net income overall

Totals:  $1,057 million net loss  /   $1,639 million net income overall

What that means so far the gaming division has costed Sony as whole 1 billion dollars in 3 quarters.  The forecast for Q4 is roughly another 1 billion dollars.  Putting the total money that their gaming division has lost to a total of 2 billion dollars for the year.  (The previous forcast was 700 million dollars about a month earlier)

Most likely, the Gaming Division will be the only one that reports a loss for Sony, especially with its successes with electronics and Spiderman.  The 2 billion dollar net loss will most likely prove to be a huge blow to the company's bottom line.  Especially if the forecast of a $630 million dollar net loss for the company in Q4 ends up being true.  If that's the case their $1,639 million net income suddenly drops down to $1,000 million.  Stand that beside a $2,000 million net loss from their gaming division and it's not a pretty picture.

True, the PS2's dominance allowed the gaming division to earn over $500 million per quarter, but the PS3 is far from the PS2 right now.  Instead of earning $500 million, they are losing $1,000 million.  Even if they started making $500 million per quarter for this year, it's still going to take them a year to make up for what's happened this past year before they can turn a profit.  Not going to happen since the gaming division will most likely post another loss for Q1 of this year as well.  How big of a loss of course has yet to be determined.

The question is for how long is Sony willing to endure these kinds of losses.  For all the money they have sunk into the system, they have very little to show for it so far.  People say it's a system designed to last 10 years, but for the higher ups in Sony, I don't think they will want to endure 10 years of dismil sales and stomach wrenching net losses.  The management has a lot to answer for, and if they don't answer well we could very well see the PS3 crash and burn within the next year or two.  Don't fool yourselves here either, there's no way they can turn a $2 billion net loss over 1 year into something profitable in the next few months and over the year is extreamly unlikely. 

---

But hey, who knows, maybe the professional financial analysits are all way off base.  We'll all find out soon enough when Sony goes public with it's Q4 earning releases.

EDIT:

For the sake of comparasion, here are MS's numbers for it's "Entertainment and Devices" division:
http://www.microsoft.com/msft/earnings/default.mspx
Their fiscial year is different from Sony's so I'm starting with Q3 of last year which is their March 31, 2006 release.

Q3: $388 million net loss  /   $2,997 million net income overall
Q4: $437 million net loss  /   $2,828 million net income overall
Q1: $ 96 million net loss  /   $3,478 million net income overall
Q2: $289 million net loss  /   $2,626 million net income overall

Totals:  $1,210 million net loss  /  $11,929 million net income overall

Take that as you will.  MS has lost less money with the 360, but makes way, way more money as a company overall.  Don't ask me what Nintendo's are because I can't make heads or tails out of their earning releases.

Why are they saying 1000 million as opposed to 1 billion?Led_poison

   Man, this was brought up earlier today and the best the cows came up with is bu bu bu Spiderman 3 is making money. It's refreshing to see the realists have arrived.

   I still find it funny that cows always brought up MS's losses fromthe Xbox as a badge of ownage, yet come up with dumb excuses as to why this isn't big for Sony...

Sony wants Blu-ray to be the dominate format, and the PS3 is the only thing driving sales... stand alone players arn't. So i think they are willing to take a loss on the ps3 to potentially see alot of money from blu-ray winning the format war.

A picture is worth 1000 words.

Sony wants Blu-ray to be the dominate format, and the PS3 is the only thing driving sales... stand alone players arn't. So i think they are willing to take a loss on the ps3 to potentially see alot of money from blu-ray winning the format war.

 

 

-DarthVader-

A picture is worth 1000 words.

goblaa

Yeh, just open the lid & place the 360 in their & the picture will tell the story.

You guys crack me up, lost this gen, please. Its been 5-6 months, you guys are retards, MS if anybody, has betrayed there fans, they cut xbox short to rush out the 360, sony still puts out great stuff for the ps2 GOW2. MS loves to nickle and dime us for everything, devs wnat to put out free maps ect.. Ms "nope sorry you have to pay for that".

I'm just sick of all the sony bashing, I think they will turn it around and pass 360 in 2 years time. MS lost 4 billion on the xbox brand before the 360 even came out, so I would love to see what it has lost up to date. (http://msftextrememakeover.blogspot.com/2006/11/can-someone-please-justify-xbox.html)

I own both systems, the stupid three rings of death has struck me two times, the ps3 has been very relable thus far. I love them both but MS is really starting to great on my nerves with all there faulty bS hardware and coming out with the elite boning every one who already got a premium.

OK I'm done.

You guys crack me up, lost this gen, please. Its been 5-6 months, you guys are retards, MS if anybody, has betrayed there fans, they cut xbox short to rush out the 360, sony still puts out great stuff for the ps2 GOW2. MS loves to nickle and dime us for everything, devs wnat to put out free maps ect.. Ms "nope sorry you have to pay for that".

I'm just sick of all the sony bashing, I think they will turn it around and pass 360 in 2 years time. MS lost 4 billion on the xbox brand before the 360 even came out, so I would love to see what it has lost up to date. (http://msftextrememakeover.blogspot.com/2006/11/can-someone-please-justify-xbox.html)

I own both systems, the stupid three rings of death has struck me two times, the ps3 has been very relable thus far. I love them both but MS is really starting to great on my nerves with all there faulty bS hardware and coming out with the elite boning every one who already got a premium.

OK I'm done.

rx876t10

 Wow 4 billion in it's lifespan and Sony has lost 1 billion in 3 months.Gee, I wonder who is doing worse right now?

[QUOTE="goblaa"]

A picture is worth 1000 words.

Roy_Drage

Yeh, just open the lid & place the 360 in their & the picture will tell the story.

Yea Sony's gaming department crashes and burns under a $1 trillion loss too.drsports1980

Just for you I put up Microsoft's last 4 quarters.  They have lost less money than Sony has with their console and posts earnings that's 12 times greater.

That's half of what the Xbox lost throughout the four years of its life...

Ouch.

[QUOTE="drsports1980"]Yea Sony's gaming department crashes and burns under a $1 trillion loss too.RahnAetas

Just for you I put up Microsoft's last 4 quarters.  They have lost less money than Sony has with their console and posts earnings that's 12 times greater.

Thats might have something to do with the fact they have had 5-6 quarters longer than PS3 in market place to turn loss/profits around. 

[QUOTE="RahnAetas"]

[QUOTE="drsports1980"]Yea Sony's gaming department crashes and burns under a $1 trillion loss too.Roy_Drage

Just for you I put up Microsoft's last 4 quarters.  They have lost less money than Sony has with their console and posts earnings that's 12 times greater.

Thats might have something to do with the fact they have had 5-6 quarters longer than PS3 in market place to turn loss/profits around. 

Historically Microsoft has not managed to pull off losing $1 billion in a single quarter from their console.  Feel free to try again though.

You guys crack me up, lost this gen, please. Its been 5-6 months, you guys are retards, MS if anybody, has betrayed there fans, they cut xbox short to rush out the 360, sony still puts out great stuff for the ps2 GOW2. MS loves to nickle and dime us for everything, devs wnat to put out free maps ect.. Ms "nope sorry you have to pay for that".

I'm just sick of all the sony bashing, I think they will turn it around and pass 360 in 2 years time. MS lost 4 billion on the xbox brand before the 360 even came out, so I would love to see what it has lost up to date. (http://msftextrememakeover.blogspot.com/2006/11/can-someone-please-justify-xbox.html)

I own both systems, the stupid three rings of death has struck me two times, the ps3 has been very relable thus far. I love them both but MS is really starting to great on my nerves with all there faulty bS hardware and coming out with the elite boning every one who already got a premium.

OK I'm done.

rx876t10

Exactly, it's been 5-6 months and in just 3 Sony's gaming division bleed out around 1 billion dollars.  There's no issue of Sony betraying anyone, they just made a really bad mistake.  Everything else about Sony has done great, it's the PS3 that's dragging down the company as a whole. 

As far as the PS3 turning around in 2 years time, don't count on it.  Odds are there will be another year, if not two or more in where Sony's gaming division will post losses.  Microsoft's consoles are perpetually costing them money with no real turn around.  Sony's console costs even more, and is selling at about the same level as the 360.  Unless the PS3 magically turns into a PS2 somehow, odds are very likely that Sony will continue to post millions in dollars in net losses from its gaming division.  If that's the trend, don't count on the PS3 living the full 10 years it was planned for.

Wasn't Sony expected to take losses in the beginning? Or are these types of loses more then what was expected?youngtongue

its more than expected but anyone who thinks this is the begining of the end really doesn't know what they're talking about. 

Wasn't Sony expected to take losses in the beginning?  Or are these types of loses more then what was expected?youngtongue

They expected it, but they also expected the PS3 to be a massive hit.  Around the levels of success the Wii is currently enjoying.  For their 10 year plan to pan out, and to recoup the losses they expected, they needed to come through the gates at full speed and overtake the 360 quickly.  They didn't even consider the Wii a threat untill now.

Unless the PS3 starts showing signs of something greater and grander than it is now, it pretty much will be the end for it in a few months to a few years.  The line is that the PS3 is a 10 year unit, and that the first few months don't really matter because if management starts looking at their first few months they will eat their ties thinking about how much money they'll lose in the next financial year.

Why are they saying 1000 million as opposed to 1 billion?Led_poison

[QUOTE="rx876t10"]

You guys crack me up, lost this gen, please. Its been 5-6 months, you guys are retards, MS if anybody, has betrayed there fans, they cut xbox short to rush out the 360, sony still puts out great stuff for the ps2 GOW2. MS loves to nickle and dime us for everything, devs wnat to put out free maps ect.. Ms "nope sorry you have to pay for that".

I'm just sick of all the sony bashing, I think they will turn it around and pass 360 in 2 years time. MS lost 4 billion on the xbox brand before the 360 even came out, so I would love to see what it has lost up to date. (http://msftextrememakeover.blogspot.com/2006/11/can-someone-please-justify-xbox.html)

I own both systems, the stupid three rings of death has struck me two times, the ps3 has been very relable thus far. I love them both but MS is really starting to great on my nerves with all there faulty bS hardware and coming out with the elite boning every one who already got a premium.

OK I'm done.

RahnAetas

Exactly, it's been 5-6 months and in just 3 Sony's gaming division bleed out around 1 billion dollars. There's no issue of Sony betraying anyone, they just made a really bad mistake. Everything else about Sony has done great, it's the PS3 that's dragging down the company as a whole.

As far as the PS3 turning around in 2 years time, don't count on it. Odds are there will be another year, if not two or more in where Sony's gaming division will post losses. Microsoft's consoles are perpetually costing them money with no real turn around. Sony's console costs even more, and is selling at about the same level as the 360. Unless the PS3 magically turns into a PS2 somehow, odds are very likely that Sony will continue to post millions in dollars in net losses from its gaming division. If that's the trend, don't count on the PS3 living the full 10 years it was planned for.

While the Xbox has been a large money hole its net losses have started to come down dramaticaly and is expect to profit in 07.  Lucky M$... Sarcasm...htekemerald

Sony will probably be able to pull that off as well.  Though the fact that Sony has dug this hole so deep, so fast, really makes me wonder if Sony will go through with a price drop before Xmas this year.  Another factor to consider is how scared developers will be if they start thinking that Sony might not back up the PS3 because of the huge financial drain it is to the parent company.

You guys crack me up, lost this gen, please. Its been 5-6 months, you guys are retards, MS if anybody, has betrayed there fans, they cut xbox short to rush out the 360, sony still puts out great stuff for the ps2 GOW2. MS loves to nickle and dime us for everything, devs wnat to put out free maps ect.. Ms "nope sorry you have to pay for that".

I'm just sick of all the sony bashing, I think they will turn it around and pass 360 in 2 years time. MS lost 4 billion on the xbox brand before the 360 even came out, so I would love to see what it has lost up to date. (http://msftextrememakeover.blogspot.com/2006/11/can-someone-please-justify-xbox.html)

I own both systems, the stupid three rings of death has struck me two times, the ps3 has been very relable thus far. I love them both but MS is really starting to great on my nerves with all there faulty bS hardware and coming out with the elite boning every one who already got a premium.

OK I'm done.

rx876t10

I agree.  I just sold all my 360 stuff for a laptop and sold my wii for a ps3.  The list of amazing releases coming to ps3 are enough for me, and I think halo is overrated.  Ninja Gaiden Sigma, Burnout Paradise, Heavenly Sword, God of War III, SOCOM PS3, Uncharted: Drake's Fortune, Lair, Motorstorm, VF5, Tekken 6, DMC4, MGS4, FFXIII, FFXIII Versus, GTA4, Killzone 2, Chronicles of Riddick: Escape from Butcher Bay, Motorstorm II, Resistance: Rise of Man, Resistance: Fall of Man, Warhawk, WarDevil, Ratchet & Clank, GT5, Clive Barker's Jericho, Half-Life 2, Unreal Tournament 3, Assassin's Creed, Eight Days, The Getaway, RE5, Star Wars: Force Unleashed, White Knight Story, and that is all I can think of off the top of my head.  The point I am making is that the ps3 is not in as dire a situation as people make them out to be.  And the 360 is not sitting as high as people like to think.  Don't get me wrong the 360 is a great system and if I wasnt in medschool, I would keep both, but ps3 definitly has many more titles I am personally anticipating. 

[QUOTE="htekemerald"]While the Xbox has been a large money hole its net losses have started to come down dramaticaly and is expect to profit in 07. Lucky M$... Sarcasm...RahnAetas

Sony will probably be able to pull that off as well. Though the fact that Sony has dug this hole so deep, so fast, really makes me wonder if Sony will go through with a price drop before Xmas this year. Another factor to consider is how scared developers will be if they start thinking that Sony might not back up the PS3 because of the huge financial drain it is to the parent company.

The HUGE thing people seem to forget, is that Sony sank an amazingly high amount of money into research and development for the ps3.  A large part of there losses are a result of that, and considering that the worst losses are out of the way (launch and research/development), Sony will once again have a profitable future.  Finally, people are still playing there ps2, and I for one know several people who are planning to replace their ps2's with 3s soon.  So all the newly aquired loyal fans should be acknowledged as well.  All-in-all, Sony is not in as good shape as last gen, but they are far from being in a bad, bankruptable state.  So take it easy guys ;D. 

sony saw this coming, they made the PS3...and of course saw the loss coming.  They'll will recover, which is why they plan for the PS3 to be around for 10years as opposed to 6....

   The funny thing is that its lemming laughing at SONY ...


  hmm ... Xbox - $4 billion net loss ... (4 years)
              360   - $1.6 billion net loss ...  (1 year 5 months)
              Total - $5.6 billlion net losses ...

    Now that dosn't sound like much compared to what Microsoft makes overall, however consider what would of happened if Microsoft killed the 360, used its 1st Party software line-up as PS3 exclusives and instead of poting approx. $1 billion loss per year they reported a $200 million profit ...

   hmm ...
      i mean that would only boost Microsofts profit by $1.2 billion ... or around 9% growth in overall profit ...


  Now imagine SONY paid Microsoft for Microsoft to cover the PS3 OS - thats proberly around $50 million per year profit Microsoft could gain from that ...

  In the end think about it -- Microsoft SHOULD of from a business perspective entered the video game industry by selling SOFTWARE -- you know the way their dominate other industries ... and make their money ...

   Ohh and SONY is expecting PS3 profitability in FY08 ... same year Microsoft is predicting 360 profitability .... 

[QUOTE="Roy_Drage"][QUOTE="goblaa"]

A picture is worth 1000 words.

goblaa

Yeh, just open the lid & place the 360 in their & the picture will tell the story.

lol, nice one.

You guys crack me up, lost this gen, please. Its been 5-6 months, you guys are retards, MS if anybody, has betrayed there fans, they cut xbox short to rush out the 360, sony still puts out great stuff for the ps2 GOW2. MS loves to nickle and dime us for everything, devs wnat to put out free maps ect.. Ms "nope sorry you have to pay for that".

I'm just sick of all the sony bashing, I think they will turn it around and pass 360 in 2 years time. MS lost 4 billion on the xbox brand before the 360 even came out, so I would love to see what it has lost up to date. (http://msftextrememakeover.blogspot.com/2006/11/can-someone-please-justify-xbox.html)

I own both systems, the stupid three rings of death has struck me two times, the ps3 has been very relable thus far. I love them both but MS is really starting to great on my nerves with all there faulty bS hardware and coming out with the elite boning every one who already got a premium.

OK I'm done.

rx876t10

then M$ made trillions on XP. And microsoft are making money because they are charging for their online and map packs etc. its called business. u cant give eveything away and expect to make money