Sony Still Posts A Loss For Every PS3 Sold

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Japanese mega-corp Sony revealed their earnings recently, and the Wall Street Journal picked up on a very small, but notable point – Sony loses .06 for every $1.00 of PS3 sales sold, so basically, they take a $18 hit on every unit sold. However, they’re looking to make that back soon, and sales of the PS3 and its games were very well for the year 2009.

For those out of the know, video game console manufacturers often operate on the “razor and razor blades” model of economics. When a console first comes out, it often is made with new, cutting edge parts that are expensive, but the console must be priced competitively to sell (ahem, unlike the 3DO). To make money on the venture, they charge a licensing fee on the games themselves ($10 in the case of the Xbox 360 and PlayStation 3, hence the $10 premium on console games over PC games).

Over time, as the hardware in the console gets older and cheaper, the manufacturer eventually begins to make money on every console sold. The hardware gurus at iSuppli had guessed that Sony had finally managed to make a profit on every unit sold, but Sony’s earnings report proved them wrong. The PlayStation 3 is still powerful hardware, despite being four years old. Now, nobody buys a PlayStation 3 without games, and Sony makes their money on the games.

Still, Sony expects to drop manufacturing costs by 15% on the PS3 by March of 2011. As said above, the PS3 did exceptionally well, with sales up 44% in 2010. This was led by the improved game selection, which some industry pundits thought was lacking until last year. Action-adventure game “Uncharted 2″ was picked to be Game of the Year by many in the gaming press, and the game is exclusive on the PS3.

Sony doesn’t think the new PSP Go will do so well, they expect sales of the new handheld, which features no physical media drive, to drop 33% this year. Over all, Sony is staying afloat and making profits, although they cut $3 billion in costs – at the expensive of 20% of its manufacturing plants and 20,000 jobs.