Sony Cuts 8,000 Jobs — Time to Cut the PS3, Too?

55 Comments

playstation-3With the economy deep in the throes of a recession, the only question these days is who — or what — is next? Today it was Sony’s (s sne) turn, which, citing “the sudden and rapid changes in the global economic environment,” said it’s laying off 8,000 employees in its electronics division and shuttering 10 percent of its manufacturing facilities. In the subsequent corporate restructuring to come, “unprofitable or non-core businesses” are in the firing line, Game Industry Biz reports — most notably, the company’s Playstation division is under review.

What this means is too soon to tell, but if you were to ask me, I’d say it’s time for Sony to walk away from the Playstation 3 as much as possible. Its $400 price point is uniquely ill-suited for these recessionary times, and while the company could lower that MSRP, it already loses $130-$260 on each sale (depending on who you believe.) Meanwhile, the Xbox 360 sold twice as many units as the PS3 in October, the most recent month for which data is available (though both consoles trail far behind the Wii.) With the PS3’s install base so small in comparison, and the appeal of its highly touted Blu-ray drive questionable at best, it’s hard to see Sony benefiting from Playstation 3.

I checked in with Wedbush Morgan game analyst Michael Pachter to get his take; he thinks that with the PS3, Sony has “too much at stake to walk away.” Instead, he continued in his email message, the company needs to “plug away until manufacturing efficiencies allow them to be cost competitive. I don’t see them taking many risks over the next few years, but think that they can get by with a relatively lean operation until they become profitable.”

Maybe so. I think Sony could invest more resources in its Playstation 2 line, which is still selling almost as well as the PS3, and can easily be revamped into an attractive, cheap alternative to the Wii. Even at an $130 MSRP, Sony sells the PS2 at a profit, and the line’s record-breaking install base of 140 million units means a large audience to which Sony can sell peripherals and upgrades.

Whatever they decide, Sony has some tough choices to make. Of course that’s true for most game companies nowadays, but since Sony’s stuck with the white elephant called the Playstation 3, that pain will be all the more keen.

55 Comments

Grace

ps3 prices have been on the down for a while. i have a look on here for a cheap deal evey week. cheap would be under £200. http://www.ps3.uk.net/
then i might give up my ps2.

Richard

Wagner,

I own an XBox 360, but I think I can speak about some of the reasons why people defend their game system of choice so strongly.

1. Buying a game system is an expensive proposition in a number of ways, especially early in the console’s life cycle. The system itself runs $400.00 to $600.00. If you want to play with other people on the same console, you’ll need to buy additional controllers and headsets. Want to play some games? Launch systems don’t come with any. You’ll need to factor those into the price, and at $60.00 a pop, it ain’t cheap. We won’t even speak of the retailer bundling that goes on early in a system’s life cycle.

2. When I was a kid, I had 2 or 3 game systems strewn around on the floor in my bedroom in front of my 17 inch TV set. Now I do my gaming in the living room. Making space for another game system can be tough, let alone getting the wife to agree to “Yet Another Box”.

3. The incremental cost of buying a second game console is (essentially) double. When you compare the value that you get from buying a second console to the value you could get from buying games for the console that you already have, you get a strong incentive to hope that the horse that you’re backing at least survives until the end of the race.

4. History has been tough on early adopters of game consoles. As a former Atari 7800, Sega Master System, and Nintendo 64 owner, I know what it’s like to back the loser. In this day and age, not only can companies hear what consumers have to say, but the media can report on what consumers have to say. I think that people fear that if the general sentiment about their console of choice turns too negative, their investment can turn to dust as quickly as the console manufacturers can say “we’ll get ’em next generation”.

Take all of the above, stir in the passion that gaming inspires, add a dash of “John Gabriel’s Internet F**cwad theory” ( http://www.penny-arcade.com/comic/2004/03/19/ ) and a pinch of jealousy, and you get a group of folks ready to fight to the death to defend their platform.

David Macphail

This article is a freaking joke. Why would Sony bother to walk away from the PS3??? Any money Sony lose on hardware sales they can easily make up for from their game sales. The same cannot be said for the Xbox 360 (Partly because it has no games coming out next year and partly because the games it does have are garbage).

Microsoft have lost over $1 Billion from the RROD fiasco, while that’s not going to bankrupt a company like Microsoft if you add everything up, Microsoft have lost more money on their 3 – fix – me then Sony have with the PS3.

As for the PS2 selling almost the same as the PS3 – it sells almost as much as the 360 as well, moron. The Xbox 360, for sure, will finish last this generation and the fact that it has no games isn’t going to help that cause…………

whatigotsofar

Sony will weather this economic storm. Dropping support for a product such as this is very unlikely. Although the economy is in a rough shape, high-end products will always stick around, just in smaller numbers. Sony isn’t some fly-by-night operation, they know what they’re doing.

dan

everybody here, especially the authour are nerds. both systems r good. i have ps3 but also like xbox 360. who gives a fuck what everybody has just as long we all enjoy the consoles. at the end of the day big companies like sony and microsoft are laughing because idiots like you guys are promoting these things so much. we are spending OUR money on these consoles and profiting those big companies so lets no give them anymore than we have to. LOOK OUTSIDE OF THE CIRCLE.

Big D

All I got to say is that the PS3 is a beast. Hook it up to a 1080p LCD and you’ll see what power is. This console was built for the future and it shows. 1080P, Blu-ray, 7.1 surround sound, a library of sick games. Articles like this mean nothing. I’m pretty sure the PS3 will be $300 by March in preperation for God Of War III. Everyone needs to calm down. The PS3 is here to stay.

resipsal

Sony might want to try to get more “PS3 only” deals for some popular games.

steve

I guess the the sony fanboy club just discovered this article and had a collective diarrea. Of course sony wishes they didn’t invest billions in the PS3 now they’re stuck with a ridiculous money pit. But why bother. Let the fanboys blow out their arses.

Tony

Wagner James Au, you’re an idiot if you’re just going to base all your conjecture about the DOOM of the Playstation on NPD sales figures (aka, American sales figures). YES, indeed the XB360 has a substantial lead on the PS3 in AMERICA. But overall, in the whole entire world (you get that concept? The fact that there’s a whole rest of the WORLD?), the PS3 is NOT that far behind overall in total units sold behind the 360.

Besides, the 360 sales figures might be heavily inflated because of all the RROD defective 360 units (estimated to around 1/3 of all 360’s were defective), which needed to be replaced.

Fact is, the PS3 hasn’t gotten started yet with it’s biggest brands and strengths, and with a price that isn’t mainstream competitive yet. Particularly in JRPGs that are eventually going to give the PS3 an even bigger lead in Japan over the 360 when they inevitably release more Japanese titles. And When the price eventually drops to a mainstream consumer-acceptable level (~$250), the PS3 will finally start to skyrocket in sales.

All in all, you calling the PS3 a “white elephant” or painting it as a failure is MORONIC, and at best premature. It’s armchair economics.

Brian

Why would Sony cut the PS3? Even if it’s in third place it’s breaking even at least and gaming has kept Sony in business a while during bad times. If Sony needs to cut anything they should look at all of their divisions and see the ones that are losing them money. When you have 160,000 employees you can easily cut 16,000 and not notice it. They probably need to slim down a lot of divisions that aren’t actually contributing to the bottom line.

While they’re at it they should give all divisions a demand. That is all of them are one company and will work together. Why did their music division sign a deal for Xbox Live instead of going with the Playstation Network and PS3? Why did the movie division allow the Ghostbusters property to be made into a multiplatform game? It should be a PS3 exclusive.

Sony will do fine but they have to force everyone to work together.

Jamie

I can’t believe that people have wasted the time to write comments. I havent even read this, but love how you all see yourself as economists. lol

Sean M

I generally disagree with your (Wagner) gaming posts, but on this one I think you’re on point. The PS3 suffered a number of unfortunate setbacks that let the XBox get a gigantic one year head start on them. That cost them the exclusive rights that helped propel the PS2 into a gaming legend. That cost them the early adopter sales. Now, with streaming Netflix, XBox has another leg up on those who don’t have the fancy home theaters that make BluRay worthwhile.

Funny thing is, I have one of those fancy home theaters, I’m a total geek with that stuff. But I still don’t have a BluRay player. For me it makes more sense to use my XBox for now and grab a BR player when they’re down to $70 than to buy a PS3. They were at a great price point as a standalone player *last year*, but now many players are well below the PS3 price point, and in six months they’ll be less than half.

I personally feel Sony won’t cut it off, they have too many vested interests in its success. But that doesn’t mean it’s the smartest move.

harrison schaerr

Now you too can feel the fury of 100,000 internet maniacs defending the only gaming system they could afford.

LBP was a massive flop, rumors abound that MGS goes multiplat, and the 360 outsells the PS3 every month, while Blu Ray suffers at retail in competition with the decade old DVD.

JT

PS3 is picking up in momentum. To quit now would be a peculiar and ignorant thing to do.

jaz

That’s crazy talk. There’s no better Blu Ray player at this price point. with games like LBP, Metal Gear 4 and the media playback functionallity the console simply needs to spread its legs a bit to capture more of the market. Drop the price $50 you’ll sell a huge number of units. Forget about the PS2, if sony brings back PS2 playback functionallity you have a winner.

Wagner James Au

Playstation fans, before you post here in Comments, let me ask you something: The PS3 is a cool system with a lot of neat features. If you like it, great, more power to you, whatever Sony decides to do with it in the next few years, you’ll get a lot of value out of it. So why does it cause you so much anger when its un-profitability or small install base is pointed out? What’s it matter to you whether the PS3 helps or hurts Sony’s bottom line, as long as you’re enjoying it?

Seriously, I’m curious to know why.

HAPPY PS3 OWNER

Of all the consumer electronics purchases I’ve made in my lifetime the only hands down winner in all my 40+ years is the PS3. Absolutely no failure problems (or defects) in 2 years.

I changed the internal HDD with a 160GB HDD (try that with any system on the market and still be able to game online).

The PS3 with its built in bluetooth provides my MICROSOFT bluetooth keyboard and mouse with endless useage of surfing the web and checking my email(s).

Yeah , that’s right the PS3 IS A FULL COMPUTER without a monitor.

Without a doubt the Ps3 is one of the best blu-ray players on the market.

Maybe Wagner James Au should look for a job where he can get his fact(s) straight?

Oh and SONY keep up the great work the PS3 is a monumental achievement (truly brilliant).

Sales will continue because I for one am a salesperson who keeps spreading the truth instead of speculation.

striggity

“This article may or may not be true, I don’t really care, I just love the way it’s reduced all you poor deluded fanboys to tears. Losers!”

I agree..lol.

I’ve owned both a Xbox 360 and a PS3. I got a PS3 after my Xbox kept freezing on me. I didn’t wanna suffer the red ring so I promptly sold it on Craigslist (I’m a jerk, I know), and I’ve been enjoying glitch free gaming (not to mention BLURAY MOVIES YAYYYY) ever since. There really isn’t a huge difference for the average gamer unless you’re obsessed with one consoles exclusives. As for the price, if you plan on playing online, they’re the SAME price ($299 plus $99 for the adapter = $399 for the PS3)

Wagner James Au

“You’re forgetting the years and years when Sony made a loss on every PS2. ”

@ Ian: That’s a good point, Ian, though I don’t think it’s an equal analogy. PS2 wasn’t competing against a system with the growth rate or broad market as the Wii, and the PS2 didn’t come with a disc drive system that had yet to be broadly adopted. Try as I might, I can’t envision a scenario where the PS3 comes out with anything near the PS2’s install base, and Sony start recouping its multi-billion dollar investment.

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