Sony Expects PS3 Losses to Increase
Posted on Friday, July 28 @ 11:04:34 Eastern
Over the past several years, Sony Computer Entertainment (SCE) and the PlayStation brand have fueled revenue and profits for Sony as a whole. However, with the mounting costs of the PlayStation 3 launch the tables have turned, with posted losses for SCE totalling up to ¥26.8 billion ($231.1 million). However, Sony as a whole announced better than expected results for it first quarter, ended June 30 and they posted strong earnings (profit of ¥ 32.29 billion ($278.5 million)) thanks in part to Sony Electronics performing well throughout the quarter.
While R&D for the PlayStation 3 has been a major sinkhole for SCE profits, the system will finally start generating some revenue when its released this Fall. However, Takao Yuhara, Senior Vice President of Sony, stated that the PlayStation 3 could be the source of even greater losses over the course of the current financial quarter.
"We might see valuation losses of a size that we cannot laugh away in the quarter," stated Yuhara to Reuters.
There is quite a bit riding on the PlayStation 3 for Sony, between vested interests in Blu-Ray, Cell, HD TVs and not to mention their gaming division. When the price of the console was announced at the 2006 Electronic Entertainment Expo, the company received a tremendous amount of negative feedback. Sony has had to deal with pricing the PlayStation 3 so that consumer would consider purchasing the console, but keeping the price high enough so that the company would not stay in the red for too long.
With lower priced next generation console options from Nintendo and Microsoft, Sony will have an uphill battle this holiday season. However, if the PlayStation 3 is successful, Sony will have a large user base of Blu-Ray players across the world, benefiting the consumer electronics division has well as the gaming division of Sony.
Sony's marketing arm will have its hands full in an attempt to get the consumers to spend hundreds of dollars more when compared to the Nintendo Wii and Xbox 360 and is perhaps SCE's greatest marketing challenge yet. When the dust settles in 2007, it should be interesting to see which console lead the holiday shopping rush.