Here’s some interesting ammunition for PS3 fanboys to use in the console wars — Sony is finally making money on PlayStation 3 hardware sales. Normally, console companies follow the razor-and-blade model, initially losing money on hardware (razor) and making it up in software (blades). As manufacturing becomes more efficient and die shrinks lead to cheaper silicon, consoles become cheaper to make. Sony is at the point where it’s making money on console sales instead of losing it. In an interview with IGN UK Sony Computer Entertainment president Shuhei Yoshida said:
This year is the first time that we are able to cover the cost of the PlayStation 3. We aren’t making huge money from hardware, but we aren’t bleeding like we used to.
The news is great for Sony and even greater for message board fodder. The Internets are already blowing up with the news…and I still don’t understand why. It’s great for the company, but I don’t understand why it matters to Joe the Gamer (Joe the Plumber’s nephew). That said, the flame wars are amusing. Fore!!!
I don't think we have flame wars here, I think we do it civilized by pointing out each others flaws in our theories and taking the constructive criticism and building a better community on Rpad.tv.
With that said, its about time Sony!!!
Here is the key to the whole post "We aren’t making huge money from hardware, but we aren’t bleeding like we used to."
To me that sounds like there are losing less money but are not gaining much either, I know Sony has a lot of money behind them, but they still have to make up for the previous years of being in the red.
I am a bit angry with Sony currently. I would like to buy into Playstation Plus, but that means I will have wasted the money I already spent for the next 10 months of Qore. Sony isn't offering refunds or discounts. I may just wait now. So the fact that they are profiting off the hardware too makes me want a refund even more.
RPad called FORE!
That's awesome.
@Big Blak Yeah, I was speaking about other sites I visit. For reasons that escape me, some gamers are proud of Sony for achieving profitability.
@Ray
I think of those gamers who are proud of Sony's trophy for profitability are similar to anyone who is "proud" or overly excited about the Xbox 360S. I am excited enough in the 360S, but I do wish that some of the features it has would have been on the 360 all along. In my mind at least those are similar comparisons.
Suck it Xbots!!!! Now what?!
That seemed fitting to say in here from me.
@RRODisHere Ah, just like old times. Also, Bleahy sucks at Street Fighter IV!!!
.-. .- -.– / — -. -.-. . / -.. . .-.. . – . -.. / .- / -.-. — — — . -. – / .. / — .- -.. . / .. -. / — — .-. … . / -.-. — -.. . –..– / .- -. -.. / … .- .. -.. / … .- — ..- . .-.. / — — .-. … . / .– .- … / .- / .–. .-. .. -.-. -.-
To translate:
http://www.qbit.it/lab/demorse.php
Lies!
Never trust a corporate mouthpiece. I've said it once, I'll say it a million times; the only SURE way to know how much money Sony has made (or lost) on the PS3 since it first came out is to look at their books… or have Smartguy look at their books. Everything else is just people talking hot air.
To this day I will never understand why gamers so blatantly believe corporate executives and representatives (or other third-party companies) that claim that their (Sony, Microsoft, etc.) company is losing money on the sales of their products. It's smoke and mirrors. No company goes into business saying, "Gee, why don't we make a kick-ass product and lose money on every unit sold and hope we later make up the costs by selling something else to go with that product?" It's retarded to think that. If you have your own business, you would never, ever do that or you would fail. Gillette makes money on the razor and the blades. They may make more on the blades than the razor, but they will not jeopardize the financial stability of the company by losing money on the razors and then cross their fingers and hope they sell enough blades to survive.
If Sony truly took a loss on each console sold, they would be out of business or close down their gaming hardware division and just focus on publishing, like Sega. I don't care how deep a multi-billion dollar conglomerate's pockets are, ALL companies have limited resources and they sure as hell aren't going to squander those resources on producing an expensive item that loses money every time someone buys it. They are a for-profit company, not the federal government. At the very worst, Sony has broken even selling PS3s.
Just think about this: Imagine if you were an executive vice president at Sony and you had a board meeting with all the heads of department. They each go down the line, one by one giving you an update of that particular division. Finally, the gaming hardware manufacturing division head stands up and gives you his report: “Well, great news! For the past fourteen consecutive quarters we’ve been hemorrhaging money like oil in the Gulf with the PS3, but now we’ve finally broken even! We can start to recoup our losses that we’ve incurred over the past three and a half years. At this rate it’ll take us another three years at the current growth rate to recover those losses adjusted for inflation and finally start making a profit in the fourth or fifth year.”
Do you really think this is reasonable? Do you think this really happens at a fiscally responsible company? What would you do/say if you were the vice president of that company (and not a biased gamer)?
I really do apologize for the agonizingly long rant, but I want you to wake up, my brothers. We can go back and forth and argue and debate like rational adults, or you can quote third-party websites that track the prices of different PS3 components, but the fact of the matter is that we don’t know the facts. None of us will truly know what these companies make (or lose) as the result of hardware sales. Ergo, we shouldn’t go around quoting, repeating and believing what these suits or corporate cheerleaders say as fact when there is no real way to verify what they are saying.
-M
@Iceman Shu is a stand-up guy. I wouldn't call him a corporate mouthpiece. Secondly, it's completely believable that companies initially lose money on consoles. The machines are expensive to make and hundreds of millions go into R&D. Sony makes money from every piece of software sold and every piece of content downloaded. That's the razor-and-blade model I referred to.
@n8r
the translation didn't work. or maybe i'm just doing it wrong.
@ tokz (and anyone else who tried)
The comment was:
"Ray once deleted a post I made in Morse code and said Samuel Morse was a prick".
But apparently, Ray's hatred for Samuel Morse runs so deep, that he made it so Morse code could never be typed correctly on his site. His checklist probably read like this:
1) Secure server space.
2) Convince some douchebag to make me some graphics.
3) Eat Lunch.
4) Block the bastard code from ever being on my site.
5) Start writing about games, gadgets, and geek culture.
@n8r
haha.
@ Mr. Padilla;
I never said Yoshida-San wasn't a stand-up guy. I'm sure that if I ever met him, I would fall in love with the sound of his voice. "Corporate Mouthpiece" is not a negative term to me. It simply means that he has more loyalty to his company (that pays his salary) than he is to you or me. If propagating a myth will help him and his company sell the consoles of the company he is vested in, then that's what he's going to do.
Oh, and by the way, I'm not accusing all of the good people at Sony of outright lying, but please keep in mind that due to clever accounting techniques, it is possible to show a "loss" in the gaming hardware division on paper while in reality, you're making money on each console sold. I know this because my company does it. I am not going to get into the nitty-gritty accounting details of how this is accomplished (ask Smartguy if you're really interested), but it really is accounting smoke and mirrors. Whether Mr. Yoshida knows this or not is irrelevant. If somebody shows him something on paper that makes the company look like they are doing gamers a favor, then he is going to run with it regardless of where those numbers came from or if he had anything to do with it or not.
Yes, it is possible to take an initial loss because of the R&D and certain sunk costs that have to be absorbed, but the money is recovered after the sale of x amount of units… and I guarantee you that it is not over 20 million units.
All I'm asking is that people be open to the possibility that taking a loss on the sale of each PS3 (whether it be fifty cents or fifty dollars per unit) for so incredibly long is something that is exaggerated by Sony's bookkeeping as a marketing tactic to win over gamers' hearts. Is that really so difficult to believe?
-M
LOL @ N8
-M
@bsukenyan
What Sony isn't telling you is that they make money from licensing their R&D to other companies.
Iceman is right in that at the very least they are having break even costs on the machines. If your roommate takes a cost accounting class she'll better understand how this works.
To put it simply though, it just matters when you record revenues and what you record costs at. If you aren't adjusting inventory to LCM (lower cost of market) then your books are false. What's amazing is that in one quarter you are losing money, but the next quarter when you adjust to LCM then you are somehow profitable. Do you understand? Revenue recognition is typically the largest culprit though. That can range a whole wide range of possibilities. Recognizing revenues in the period in which they were received is the correct way. Though if you were to sell 200k units in December put recorded them in January you would be using incorrect or smoke and mirrors revenue recognition. Japanese companies use IFRS instead of US GAAP code. Their recognition principles could be way skewed. Valuing inventories and revenue recognition though are huge here.
Ever notice how MS reports that they expect to have a bad quarter but at an earnings conference they somehow "did better than expected"? yeah.
Watch a documentary called "The Smartest Guys in the Room". It's about Enron. you'll learn alot.
@BSU
I forgot to add…estimates are abused a lot. Depreciation, warranties, etc.
@Smartguy
Thanks, that does actually make a lot of sense. I never really would have thought of Sony licensing the R&D that they have done or anything like that. Switching sales records from one month to another also makes sense, although I would have thought that things of that nature would be more obvious to catch. Differences between Japanese and American accounting techniques is another big one that I would not have thought about, but does make sense as something that Sony and Nintendo (like they need any help to get people to buy their products) could take advantage of to promote themselves.
"Did better than expected" also always seemed fishy from any business, it would seem to me that they would employ someone smart enough to more accurately predict those types of things if everything was really straightforward.
I will have to move that documentary up in my instant que now, I love watching documentaries and just haven't gotten around to watching that one.
@bsu
It's a really good one. I feel pretty bad for the people who lost their retirements over it though.
Those people who do the better than expected are smart. One of the core principles of GAAP accounting is to use conservatism when unsure of an outcome. Well, being conservative all the time leads to you showing potential investors that you are doing great despite circumstances. It's definitely a bait and hook approach lol.
Some things are very hard to catch though. Here's why, an upper level CFO or any high ranking suit can draw off of accounts and put funds into some very important sounding account. Most lower level accountants will never ask about it for fear of coming across as stupid or a troublemaker lol.
True story, I worked for a local CPA a few years ago and I was recording expenses for the firm. He wanted me to deduct a standard mileage rate for the year as well as use MACRS (modified accelerated cost recovery system). Well, that is an IRS violation. Most people would not catch that if they aren't familiar with the tax code or are intimidated by someone asking them to do it. I told him I couldn't do it, and later that day he told me they didn't need me. That's what happens.
@Smartguy
I don't really remember or know a ton about Enron, I know one of the lead federal investigators but that is about it, but I do know that I also feel bad for people who lost their retirement over everything.
I can definitely believe that plenty of places use scare tactics to keep their employees simply doing what they are told to do. Plenty of people are very fearful of losing their job that they will bend the rules a bit to try and stay in good standing, which is sad. However, tax laws always sound like they are tricky like that, how many people would not catch errors if they do not stay up to date on the current laws.
@bsu
That's why I prefer tax over financial accounting. Less mess and easier to keep your credentials and stay out of jail lol.
I just do not like solving math puzzles for people.
@Smartguy
Yeah the less mess you have with all those numbers the better. I did basic accounting in high school for a couple years, and even that was easy to see that if you mess up in just one place you could mess up everything.
When you lie once on numbers it will only get exponentially worse as time goes. The most simple misstatement of the best intentions will cause a lot of damage in the end.
@ Smartguy;
You would totally love my wife. She's one of the greatest international tax accountants in the country. If you two ever start up a conversation about international tax (using Sony or Nintendo as examples), I fear that the conversation would drag on for days.
If we can ever get an annual "Padilla Party" together, I'm sure it'll happen.
-M
@iceman
Lol I'm sure. My girlfriend of 5 years is a financial accountant. She's taking the BEC portion of the CPA in the next two weeks.
@Iceman @Smartguy
I am actually a little interested in how the accounting smoke and mirrors trick works. One of my roommates is an accounting major, but she is definitely not really great at accounting and she is still pretty new to actual accounting classes, so she wouldn’t really be able to tell me anything.