Sony's Profits Down 5%; Games Division To Blame

As recently discussed, Sony’s game division is doing poorly this quarter. The development and manufacturing costs of the PS3, as well as taking a loss on the hardware, has dropped their profits by roughly 54%. Hey, that’s the business, right? You have to spend money to make money? Well, what if you don’t really have all that much to spend any more?

Sony currently, and in the past few years, has had problems with competition that can put out a comparable product at a better price-point. However, while the company has struggled with most of its product offerings, the games division has shined. The Playstation 2 has sold 102 million units since 2000, and has helped keep the company afloat. Now, in an odd turn, the PS3 seems to be playing the part of the anchor. Why?

According to a piece in the NY Times, analysts believe that the PS3 has “a high price tag and a complexity that is scaring away all but die-hard game fans.” The PS3 has a great deal of power and blu-ray is a fairly exciting format… to me, but being part of the so-called “hardcore,” I don’t really look to my opinion as a base of general consumer appeal. With the severe push for blu-ray and the Cell processor, Sony seems to have hit a snag in their plan: maybe not everyone is ready for it yet.

The PS3, to me, is very reminiscent of the Neo Geo. The Neo Geo was a home console released by SNK in 1990 that made use of the company’s arcade board. The system was much more advanced than anything on the market, but because of that fact it also cost a lot more, debuting at $649. Because of the high price, even though the system was technically superior to everything else on the market, the Neo Geo was a failure.

It’s early in the game, so the situation hasn’t hit critical yet, but I’m sure Sony doesn’t want it to. With a few price drops and some manufacturing changes, the PS3 could become profitable, but it’s going to take some work.

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