Sony Swallows $3.3 Billion in Losses to Boost PS3
June 25, 2008
Sony’s newly released fiscal 2008 annual report indicates it put up the big bucks in order to reduce the initial price points of its popular PlayStation 3 game console (each of which comes with an internal Blu-ray Disc drive) and help establish it in the marketplace against the Xbox 360 and Wii—big bucks totaling $3.32 billion in fiscal 2007 and 2008. (More than $2 billion in losses came in fiscal 2007.)
Sony states candidly in one part of the report that “the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered.” Sony pointed out that introducing any new platform is costly, and that research and development, the PS3’s technical requirements (such as automatically including Blu-ray), and its required manufacturing, shipping and marketing efforts grew both fiscal years’ loss numbers to more than $3 billion.
In order to stay competitive, said Sony, it had to invest large amounts of money in research and development to introduce the PlayStation 3 into the market, and these sorts of expenditures don’t always get recouped, especially if a platform “fail[s] to achieve such favorable market penetration ... resulting in a significant negative impact on Sony’s profitability.”