It's well known that Sony's latest console is a powerful, expensive piece of tech. When Sony launched the PS3, it lost over $200 on every unit sold -- in spite of its $600 price point. However, over time Sony has been able to reduce the costs of manufacturing the system, by removing PS2 compatibility and switching over to a more efficient 65-nanometer chips.
iSuppli, the company which broke down the PS3 at launch, estimated the cost of making a PS3 was more than $840. Now, they say the PS3 costs 53% less to make -- at around $445, for a system which sells at $400. Sony is still losing money on each system sold, but in a much less extraordinary way.
Not only are the individual components cheaper to make, there are simply less things inside a modern PS3. According to iSuppli, the number of parts inside a PS3 has fallen from 4,048 to only 2,820. Since launch, Sony has reworked the innards of the PS3 to include combined chips. The falling price of components also helps Sony a lot: the Cell processor cost $89 at launch, but now only costs $46 to make.
Sony should be able to break even with the PS3 starting in 2009, which makes us wonder if they'll start adopting a more aggressive price strategy late next year. We hope so -- they need a way to make themselves attractive to customers, without breaking the bank.
Sony stock fell 5.9 percent in Japan today as two analysts downgraded their investment rating of the company, "citing a loss of competitiveness." Credit Suisse reduced its rating of Sony from "neutral" to "underperform," believing "fundamental changes" are needed to get Sony back on track. The Credit Suisse analyst cut its share-price estimate of the company by 59 percent, to 1000 yen. He predicts Sony's net loss for this fiscal year will be 150 billion yen ($1.66 billion).
Deutsche Bank AG also cut its recommendation from "buy" to "hold," as it lowered its share-price estimate by 49 percent, blaming Sony's "high level of operating costs." It appears drastic measures, and further layoffs, will be necessary to restore investors' faith in Sony Corporation.
As expected, this month's NPD numbers look grim for PS3. 378,071 hardware units sold in one month is certainly not a figure to scoff at, and we're glad to welcome these new PS3 fans. However, Microsoft's Xbox 360 outsold PS3 more than twofold due to its attractive new $199 price point.
It's incredibly costly to fight the console wars, and Sony's high-tech console is a pricey gadget to manufacture. Instead of focusing on the grim, Sony should be proud of its software numbers, with more than 3.5 million units sold in November alone. That represents a year-to-date growth of 150%. Sony can also take comfort in having sold a million hardware units across the entire PlayStation brand, with PS2 and PSP picking up the slack. To see the numbers, click past the break. Update: Software sales added!
While the holiday battle is clearly lost to Sony, fans of the platform can still look forward to 2009, where releases like Heavy Rain and Killzone 2 will undoubtedly reinvigorate sales. However, we urge Sony to consider a price drop -- no matter how insignificant -- as soon as possible. In economic times like these, people are far less willing to buy a $399 system over a $199 one, no matter how much more the PS3 may offer.
November won't be a good month for Sony, if the analysts at EEDAR are to be believed. According to Jesse Divinich, Sony can expect double digit percentage declines from the successful sales of November '07. PSP sales will have plummeted 25% from last year, while PS3 sales will have dropped almost 20%. The softening economy and fierce competition from Microsoft and Nintendo will certainly affect Sony's install base.
At the very least, Sony can take comfort in knowing that PS3 software sales will be up from previous years. However, due to the incredible drought of PSP software, Sony's handheld will be the only platform which will show a decline in software sales.
Double Fusion, a company specializing in in-game advertising, has expanded its PS3 portfolio by securing exclusive "advertising opportunities" with new publishers: THQ, SEGA, Eidos and Midway. This announcement offers the first details of Double Fusion's partnership with SCEA to provide ads in PS3 games since unveiling their plan in July.
"One only has to look at the recent videogame sales figures to realise that games are the one form of entertainment consumers don't want to live without," states Jonathan Epstein, president and CEO, Double Fusion. "We are pleased to partner with and provide incremental revenue opportunities to game publishers by offering advertisers a variety of hand-selected cross-genre games we know will be a hit with gamers and the marketers looking to reach them."
Double Fusion will be specifically targeting male consumers, ages 18-34 in their various campaigns. Next time you play a Sonic game, don't be surprised to see him wear some Nike shoes.
What happens when people are reluctant to spend money? Well, they're reluctant to buy a $400 games machine, that's what. As reported yesterday, Blu-ray predictions are down due to the struggling economy. PS3 sales should also be affected, an obvious conclusion made by analyst Piers Harding-Rolls. "At the top end, the PS3 with its high price is arguably more likely to be impacted by a recession than the other platforms. This may prompt consumers to consider other consoles or wait for the PS3 price to drop."
But, sluggish sales of the PS3 won't be the only outcome of a recession economy. Credit has dried up in many areas, meaning developers of games may be forced to cancel or stall projects, before funds become more readily available. "Where I do see an impact is with regards to access to credit for publishers that look to borrow to invest in content production. Obviously credit is less available generally so this may result in cost cutting and some projects being canceled and put on hold."
Of course, when developers and publishers can't try something new, you know what they turn to: less original IPs as investors become increasingly wary of games with ambiguous potential.
PS3 sales in October have dropped from the last month, despite the launch of many of this year's big hitters such as LittleBigPlanet and MotorStorm Pacific Rift. Around 190,000 units were sold in October (an increase of 56% over October 2007), though this is almost half of the nearest competition's sales, with the Xbox 360 selling around 371,000 units and the Wii continuing to storm ahead with over 800,000 sold during the month.
Despite being outsold to this extent PS3 software sales increased to 2.3 million units, a 200% increase over October 2007 sales. SCEA expects software sales to increase throughout November, in the lead up to Christmas and with the launch of Resistance 2. There are also more than 14 million registered users for the PlayStation Network worldwide. An increase of 166% since January.
The numbers are in. While Metal Gear Solid 4 has shipped three million copies around the world in the first two weeks, it's already gone off to sell over four million copies worldwide. 4.33 million copies have been sold from June up to September -- that's four months after launch. Hmm, the fourth game sells four million in four months? We sense a Patriots conspiracy here.
With conspiracy theories aside, MGS4 alone accounts for 38 percent of all Konami games sold between April and September 2008. This ties in with previous reports where Konami predicted an 88 percent increase in profit.
Konami is a publisher of games on every platform. However, it appears that their greatest success comes on PlayStation consoles. In 2007, sales were largely dominated by PlayStation platforms. The PS2 represented 39% of Konami's overall sales, while the PlayStation brand accounted for 58%.
2008 looks no different, as PS3 now represents 38% of Konami's overall sales (thanks, Metal Gear Solid 4!). The PlayStation brand accounts for a whopping 67% of sales for the Japanese publisher.
Without MGS4 in the company portfolio, the numbers may skew a bit differently. However, it's important to note that Konami seems to be struggling in getting a key audience on non-Sony platforms. Xbox 360 is home to most of Konami's multiplatform efforts, and that's yielded quite an insignificant return. We're surprised by the success they've found on PSP, especially in comparison to the DS figures. So long as PlayStation can offer these kinds of numbers, Konami may continue being one of Sony's greatest partners.
Publishers need to tell their investors what platforms they think will succeed, and Activision CEO Mike Griffith did exactly that during the company's Q3 earnings conference call. According to Griffith, he believes the Xbox 360 will grow an additional 6-7 million units for the calendar year. However, he believes the PS3 will grow by 8 million. Sure, it's not a tremendous victory, but it shows that publishers are confident that Sony will chip away at Xbox 360's one year headstart in this console generation.
While this is good news for Sony, one can't help but be amazed by the incredible growth Nintendo will continue to experience. According to Griffith, another 15 million people will be added into the Wii family. No wonder Sony is so quick to jump on the bandwagon.
Konami is forecasting some rosy numbers for the first six months of the fiscal year. They are forecasting an 88% rise in profits to ¥11.8 billion ($119.6 million), up from ¥6.3 billion ($63.7 million) during the same time last year. Konami attributes this largely to the adventures of a prematurely aged geriatric in Metal Gear Solid 4, which has shipped over three million copies worldwide as of August. Konami also expects revenue to increase by 9.8 percent to ¥146.9 billion ($1.49 billion). Now who says a PS3 exclusive can't prove to be extremely profitable for a third-party developer?
Many of you should know that Sony makes far more than electronics. They're one of the largest distributors of media in the world, with their hand in Sony Pictures Entertainment and Sony BMG. While the company has been trying to use its incredible library of assets across multiple divisions, the decisions of a few stubborn-headed executives have prevented such corporate synergy.
One of the most ridiculous examples, presented by The Associated Press, is about Sony's music division, Sony BMG. The Sony BMG label is the second largest in the world, including artists from AC/DC to Will Smith. However, why is it that music videos from Sony BMG are available on Xbox 360 and not PS3? Because Sony BMG demanded it. Bertelsmann, the "BMG" part of the Sony BMG partnership, insisted that music videos are available on Xbox 360 instead of PS3 "to make sure it's a fair deal" for Bertelsmann, said a Sony executive. We're not sure how many heads have been face-palmed by that kind of ideology.
Thankfully, things will start changing, now that Sony has bought full control over the music division. Sony BMG will now be called Sony Music Entertainment. With more and more of Sony's media empire coming under one house, we're hoping it won't be too long before some not-so-stupid decisions are made at Sony HQ.
DFC Intelligence, a firm that specializes in marketing research for the video game industry, have had mixed feelings about the PS3 since its launch. Just compare some of their predictions from the past here, here and here, with other ones here, here and here. Their latest forecast for PS3, unfortunately, includes a little more doom and gloom for our favorite console.
Senior technology analyst Wanda Meloni believes "Sony has the most to lose this current generation" and she doesn't believe the PS3 will "break even" in its lifetime. Additionally, she predicts only 40-50 percent market share for Sony, as oppose to 67 percent during the PS2 era. Regardless of what place the PS3 ends up this generation; in the end, do you think PS3 will make a net profit for Sony?
If you've opened a newspaper, turned on the TV, or looked at your stock portfolio, you must know the story: the global economy is in shambles. And that hurts large global companies, like Sony. Sony has updated their 2008 forecast, slashing profit expectations 38% to to 150 billion yen ($1.5 billion). A strong yen makes Sony, a export-centric company, do worse. The global downturn in the economy is likely to strongly the affect the sales of their top-ticket items, such as high definition TVs, cameras.
In spite of promises to make the PS3 profitable this year, it appears that may be cast in doubt. With the system significantly more expensive than its competitors, and a price drop not likely in the immediate future, this holiday season may not continue PS3's momentum from the beginning of the year. That's a shame too, considering the slew of high quality titles that's just about to come about.
"This is just the beginning of a big earnings collapse," said a Tokyo-based analyst to Forbes.com. "Given the track record of this company, it will under-deliver all the way." He added that there is a "good chance" Sony will post a loss this year.
PS3 sold an impressive amount of hardware in September, according to the NPD Group, with 232,408 hardware units sold. While this represents a 94% increase over September of 2007, the PS3 failed to outperform the Xbox 360, which recently received a price drop. (The cheapest Xbox 360 is now $200 cheaper than the cheapest PS3 system.)
With Sony opting out of a price drop this holiday season, it seems as though Xbox 360 will grow its lead over Sony's hardware in the coming months. Good news for Sony, though: software sales have experienced a 130% growth, with 1.72 million units sold.
"We remain confident that our footing is solid as we enter the holiday season this year. Our new 80GB PS3 model has made its way to retail shelves and into consumers' living rooms as the best value for both their gaming and entertainment needs. If the impressive pre-sale numbers and ratings for LittleBigPlanet, SOCOM: Confrontation, and Resistance 2 are any indication, we anticipate hardware and software sales to continue to lift in October as we officially kick off the broadest and deepest software line-up this holiday, including LittleBigPlanet, SOCOM: Confrontation, MotorStorm: Pacific Rift and NBA '09: The Inside. - Jack Tretton, president and CEO, Sony Computer Entertainment America
As expected, this month's NPD numbers look grim for PS3. 378,071 hardware units sold in one month is certainly not a figure to scoff at, and we're glad to welcome these new PS3 fans. However, Microsoft's Xbox 360 outsold PS3 more than twofold due to its attractive new $199 price point.
