Tuesday, June 29, 2010

PS3 Hardware FINALLY breaks even

Shuhei Yoshida, head of Sony Computer Entertainment Worldwide Studios

Check out this article.  Yoshida says they're finally breaking even on hardware sales (but he said nothing about net gains, just current ones.  I'm guessing they've still "lost" money as a whole.

Many claimed that the PS3 was NOT ready to enter the market, but was released anyway to compete with the Wii and new Xbox.  (I remember internet communities making fun of the initial $599 pricetag to no end during the time.

People also knew it would sell at a loss back in 2005.  Part of the culprit for this pricetag was for Blu-ray support (disc drive category), and processor.

So was this extra investment worth it?  A lead programmer for both platforms says the following:

"Performance: On paper, the PS3 is more powerful. In reality, it's quite inferior to the 360. Without getting into too many details, the three general-purpose CPU's thexbox360 has are currently FAR easier to take advantage of than the SPU's on the PS3. I suspect a few years down the road some high budget, first party PS3 exclusive titles will come out that really take advantage of the SPU's and do things the XBOX 360 can't, but I don't think the console is worth buying based on this speculation (for some it will be though, we'll have to wait and see how these games turn out)."

And whether it was about performance, price, or something else, Xbox HAS sold more consoles this far.

So did Sony make a mistake in stuffing its console and selling at loss?
Supposedly the approach of getting an early foothold at the expense of profit isn't new.

I think there's something smart about this move though.  The people scrambling to purchase a console when it first came out in late 2006 were likely the types who were willing to pay more than the average "casual" gamer.  It also gave Sony a good deal of leverage/wiggle room to make future, lower priced hardware releases seem like a really good deal.

So what does it mean for investing in this market?  My gut would say it's better to invest in software companies, instead of the oens that make the hardware AND software, as the 3rd party ones don't have to worry about offsetting the cost of selling at a loss.  OR is there a tactical advantage for developing software as part of the same company making the hardware?  Does this put Sony of Microsoft programmers in a better position to take advantage of their console than third party ones?  Perhaps it all balances out...

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