Do the Math: Will Sony Go Broke?

Whoever wrote that article needs to take an accounting class. There's more to it than the initial (meaning it will decrease over time) cost of goods sold. Oh well. :)
 
Hmm

Pros- He can multiply
He's not stupid enough to think everything is rosy at Sony



Cons- He has no idea of the costs associated with producing, but for the sake of arguement, let's assume his costs are correct, or close enough to correct:
1.) He doesn't allow for decreasing production costs within the Six million Ps3s. Though I doubt that the costs will decrease dramatically by April, let's say that each month the costs of making an additional Ps3 goes down by $20, so by April it costs $100 less to make a Ps3. Now, the assesment would be accurate If all the Ps3's were made before the costs decreased.

So, using the numbers above, and the initial launch of 500,000 units between Japan and america, the total costs would be 1.579x 10^8 USD (For Japan, since the price is cheaper by $79, add $79 to initial launch and mult by 100,000 units. For America, mult remaining units by 300, then add).

Now, let's say Sony ships another 500,000 the next month when it costs them $20 less to produce. So, you have for Japan (assuming they split the allocation evenly) 250,000(379-20), and for America 250,000(300-20). The Sum of these is now 1.5975x10^8.

As this is a constant decreasing cost, we can put it into an Algebraic function so that (let the variable x equal the amount lost, "U" equal total units, and "m" the total number of months since launch) L= U(300-20(m)) for the US and L=U(379-20(m)) for Japan If we do this for each month until April, we see that the losses are 636million in Japan and 370 million in the US. While sizeable, it is 794 million less than this guy's calculation, and a sizeable chunk of change. We do not know the decreasing costs of the PS3, so it could be even more.

Then there's the software. He assumes that people will naturally buy the 360 version. There are a few things wrong with that. First of all, not everyone wants a 360. Brand loyalty can play a huge part in things. There's also Japan which..well, hasn't taken well to it. Secondly, he's ignoring exclusives because he assumes the launch exclusives (or lack thereof) are indicative of future exclusives. Fundamentally untrue.


2.) He assumes that since Sony only has a value of 27 Billion USD, they are limited by it such that if they lose that much they will go out of business/ be bought. This is only true if Sony has NO MORE OPTIONS to get money (borrowing, holding dividends etc). Additionally, accounting losses do not always lead to hostile takeovers. In reality, sales data (if good) could increase the amount of stock purchased by investors, which is countered to what is desired in terms of a takeover (where the opposing firm hopes to acquire stock incredibly cheaply)The explanation is longer than this, but you guys get the point.


IF the Ps3 becomes significantly cheaper to produce within an acceptable timeframe, AND the software prices are not off-putting, then it is absolutely baseless to claim that the Ps3 will put sony out of business. Their game division has been keeping the company from sinking, and I don't doubt the Ps3 will do the same.
 
[quote name='Sarang01']Their other products are REALLY selling that abysmally Reality? Ouch.[/QUOTE]

Mm? I don't know, but I do know their Home Entertainment division is taking huge losses. The above example is actually in DEFENSE of the PS3.



HAS THE WORLD GONE MAD?!

In all honesty though, I would be more concerned with lost revenues in relation to its free online service.
 
My big concern about the PS3 is getting shoved with an inferior HD disc format, this includes even if Sony gets their head out of their ass and goes with the VC1 codec. Toshiba has proven so far they can do EVERYTHING Sony claimed and failed on to my knowledge with the exception of offering a 100 gig. disc. So far they've been able to triple layer it to yield 45 gigs which is just slightly less what the DL Blu-Ray disc would achieve and I'll take that over Blu-Ray even if the MS copyright protection scheme fucks up the picture just a LITTLE over HD-DVD's, I'd even go so far as to pay a $1-2 more per HD-DVD compared to Blu-Ray if that ended up the case, that's how big I am on getting a GOOD HD picture. I won't suffer a shittier picture for video unless we're talking about TV offerings which I'll still bitch about. fucking Dish Network and the rest of em'. This is what happens when the average consumer is an idiot when it comes to home video.
 
Reality's Fringe;2227410]Mm? I don't know said:
Their television devision only recently regained its footing and is heading in the right direction with more quality televisions, but their t.v.s are still exceeding the competition in terms of price.
Click to expand...
 
Sony broke the record this year for most #1 films at the box office with ten films debuting in the top spot domestically. They did this in September with Gridiron Gang meaning they've still got another 15 weeks to pad their record (and their wallets) some more.

Sony will be fine.
 
Reading further into the article made me want to do this example, for completion sake.



Let's assume that Ps3 games sell for $60, with an average profit for sony of $15 (let's assume this). Well, all we have to do then is put it into a similar function. So, say Sony sells 1 Million units of MGS4 in the first month, that's 15 million, obviously. Now, let's say that the amount of sales decreases by 20% each month (relatively realistic..at least for this example). Thus we get P= [1000000-(1000000(.2(m))](15) for each month after the launch date, so by April we have 45,000,000 in profit. Now multiply that by, say, 3 games at launch that can do the same thing. Now you have 135 Million. That's just from 3 games, and not counting any games that came out in the meantime. If Sony's production costs continue to decrease as this type of trend remains and is multiplied by the number of hot exclusive games, then (disregarding any other missteps) they'll make a profit on the Ps3 no prob.

Of course, this is "fuzzy math" and ignores a LOT but it's just to show that the loss CAN be made up in the games division assuming certain things.
 
Hehe good work RF.

This guy also ignores retained earnings. I have no stats but the retained earnings in video game sector at Sony must be through the roof from the PS2 alone.
 
[quote name='totalkone']Who ever this is needs to be examined because nintendo is the sh*t its time for nintendo to take over this industray again wit mario. IF u watched G4TV than u know [Its goin down]!!!!!!:applause: :applause: :applause:
 
If you think the Wii alone is going to topple Sony then you need to do some serious rethinking. Please keep fanboy talk out of this honestly. I don't think Sony is going to totally die out this generation if the PS3 dosnet do wel even though I dont see how it won't it would severely hurt the company and that leaves nintendo and microsoft open to take over marketshare my money right now would be on Nintendo if Sony bombs this time around though Microsoft is showing the more promising games out of the two to me so far. Reason for this being the japanese hate anything non japanese still Nintendo is established there and would more than likely inherit more developers from Sony if they were to fail than Microsoft making Nintendo much much more competative.
 
Reality's Fringe;2227688 said:
Reading further into the article made me want to do this example, for completion sake.



Let's assume that Ps3 games sell for $60, with an average profit for sony of $15 (let's assume this). Well, all we have to do then is put it into a similar function. So, say Sony sells 1 Million units of MGS4 in the first month, that's 15 million, obviously. Now, let's say that the amount of sales decreases by 20% each month (relatively realistic..at least for this example). Thus we get P= [1000000-(1000000(.2(m))](15) for each month after the launch date, so by April we have 45,000,000 in profit. Now multiply that by, say, 3 games at launch that can do the same thing. Now you have 135 Million. That's just from 3 games, and not counting any games that came out in the meantime. If Sony's production costs continue to decrease as this type of trend remains and is multiplied by the number of hot exclusive games, then (disregarding any other missteps) they'll make a profit on the Ps3 no prob.

Of course, this is "fuzzy math" and ignores a LOT but it's just to show that the loss CAN be made up in the games division assuming certain things.
Click to expand...


If your scenerio were remotely possible, you would have a good point, but you are making some strong assumptions, and the "LOT" that you are ignoring is called reality. First off MGS4 isn't a launch title. Now, you are saying 3 games (launch titles no less) will sell over 3 million units each by April (and 1 million in the first month...how many launch units will there be? oh yeah, 500,000). Assuming the PS3 actually has 6 million units manufactured by April, 50% of PS3 owners will have to buy at least two of these games.

For comparisons sake, COD2 has sold ~1.4 million copies (one could assume that there are currently over 6 million 360s sold) GRAW 1.3 million and Oblivian 1.2 million. As is the case with most games, the majority were sold in the first month.

A more realistic number is one or perhaps two games with 300-400,000 in the first month followed by a 20%+ decline each month (remember, there will be ~15 launch games, each gamer is likely to purchase only 2-3 games). When the 2nd batch of games arrives, you might see 1 or 2 selling 500,000+ in the first month, but the decline rate will be much higher, 50% or more.
It won't be until next fall when games like GTAIV arrive that they will sell 1 million+ in the first month.

As far as the console goes, it could be 6 months to a year before Sony realizes a cut in production costs. Where Sony will make up some of the losses will be in big name PS2 games.
 
[quote name='totalkone']Who ever this is needs to be examined because nintendo is the sh*t its time for nintendo to take over this industray again wit mario. IF u watched G4TV than u know [Its goin down]!!!!!!:applause: :applause: :applause: [/QUOTE]
Our site keeps getting worse. :cry:
 
PS3 will own the 360 and PW'n the wii

It will take over the world Nothing can beat it .

You think a stupid little editor from a stupid website can see these things and sony who has the billions at play won't , do yourself a favor and don't believe this nonsense !
 
[quote name='totalkone']wii will own the ps3. Playstation has just start but nintendo will kick back to the top like the old days.:applause: :)

It will take over the world Nothing can beat it .

You think a stupid little ps3 can take wii than u mind as well sh*t ur on urself, do yourself a favor and shut tha Fu*k up what ur saying cuz it may be good now but ps3 will burn it self.:hot: HAHAHAH!!!!



 
Sony is in trouble on the gaming front for sure, and the company is really fucking up a lot. I don't think they will be going away but they will need to do some downsizing. Over 6 million laptop batteries are fucked up because of Sony. The number might be 8-10 million by now but I lost count. That's a huge fuck up. The PS3 in itself is a huge fuck up and it hasn't even been released yet. I guess it's a good thing they have been doing well with shitty movies recently.
 
[quote name='[COLOR=red']totalkone[/COLOR]] pple wont ps3 to fail cuz theres to much completion in this industry. like xbox, and nintendo alot so so that y i want ps3 to fail and i want GTA series to be on nintendo. thank god GTA is going on wii.:lol: :cool:
 
[quote name='totalkone'][quote name='[COLOR=red']totalkone[/COLOR]] pple wont ps3 to fail cuz theres to much completion in this industry. like xbox, and nintendo alot so so that y i want ps3 to fail and i want GTA series to be on nintendo. thank god GTA is going on wii.:lol: :cool:[/QUOTE]

Man....if I had a lightning bolt......I'd so smite you.
 
[quote name='h2dk']If your scenerio were remotely possible, you would have a good point, but you are making some strong assumptions, and the "LOT" that you are ignoring is called reality. First off MGS4 isn't a launch title. Now, you are saying 3 games (launch titles no less) will sell over 3 million units each by April (and 1 million in the first month...how many launch units will there be? oh yeah, 500,000). Assuming the PS3 actually has 6 million units manufactured by April, 50% of PS3 owners will have to buy at least two of these games.

For comparisons sake, COD2 has sold ~1.4 million copies (one could assume that there are currently over 6 million 360s sold) GRAW 1.3 million and Oblivian 1.2 million. As is the case with most games, the majority were sold in the first month.

A more realistic number is one or perhaps two games with 300-400,000 in the first month followed by a 20%+ decline each month (remember, there will be ~15 launch games, each gamer is likely to purchase only 2-3 games). When the 2nd batch of games arrives, you might see 1 or 2 selling 500,000+ in the first month, but the decline rate will be much higher, 50% or more.
It won't be until next fall when games like GTAIV arrive that they will sell 1 million+ in the first month.

As far as the console goes, it could be 6 months to a year before Sony realizes a cut in production costs. Where Sony will make up some of the losses will be in big name PS2 games.[/QUOTE]

First of all, the the MGS4 thing doesn't really matter too much. I was picking a game for the sake of picking a game. Maybe MGS4 will sell better than Resistance, maybe not. Secondly , it would be possible to assume sales of 100,000,000 games for a system that only has a certian amount of launch units depending on store contracts. The store purchases the units from Sony to sell them, and usually when a store sells games they have more than a 1:1 ratio on the shelves. Thirdly, I'm assuming the PS3 will be more popular, significantly, than the 360 in Japan which will also lead to higher than average sales and inflated inventory numbers.

That being said, he point wasn't to come up with a realistic retail function, but a model that was just as hyperbolic as what the article was purporting. He's claiming that the PS3 will immediately bankrupt Sony and that there's no hope for them, all the while using a model that ignores a lot of things. This is kind of like my model for game sales which ignores a lot retail trends. The sad fact is, without knowing Sony's actual ATC on hardware and profit margins on software, we can't say anything. Is Sony in financial trouble? Yeah, but we'd be foolish to think they haven't hired a team of Economists to see where things are headed.
 
[quote name='totalkone'][quote name='[COLOR=red']totalkone[/COLOR]] pple wont ps3 to fail cuz theres to much completion in this industry. like xbox, and nintendo alot so so that y i want ps3 to fail and i want GTA series to be on nintendo. thank god GTA is going on wii.:lol: :cool:[/QUOTE]


Hi Newbie.

On this board we normally use somethnig that looks close to English and not some AIM talk from a 6th grader.
 
You must log in or register to reply here.
bread's done
Back
Top