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[explodet]

http://quote.bloomberg.com/apps/news?pid=nifea&&sid=a05dggw2V4PI

Basically it's a bunch of analysts blah-blah-blahing about Sony and the PSP. Not a bad read. Some highlights:

The PlayStation Portable has to go right for Sony to stanch profit declines in its electronics, music and games divisions, which account for 80 percent of sales. Those three divisions are cooperating to produce the PSP, as the console is called. It will be introduced in the U.S. next month.

"They need the PSP to be a success,'' says Yuuki Sakurai, who helps manage $4.7 billion at Fukoku Mutual Life Insurance in Tokyo, including Sony shares. "A hit would show that Sony is able to coordinate the different businesses to make a product the public can be excited about.''

The overall market for hand-held game players will almost triple to $11.1 billion in 2007 from 2003 as improvements draw more buyers, David Cole, an analyst at DFC Intelligence Research in San Diego, estimated in September.

"From what gamers have seen in the West, the PSP has been received incredibly well,'' says Amir Anvarzadeh, the director of Japanese equity sales at KBC Financial Products in London. "Sony will sell out of every single unit they ship to Europe and the States over the course of the next fiscal year.'' Anvarzadeh says he's advising clients to buy Sony shares because people who already own PlayStations are likely to want portable players and to buy more games.

Still, the PSP release wasn't entirely smooth. Only 200,000 models were initially sent to retailers in Japan, partly because Sony ran short of 90-nanometer graphics chips for the PSP, according to Yoshiko Furusawa, a spokeswoman for Sony Computer Entertainment. The company is making the PSP at only one factory, in Chiba prefecture east of Tokyo.

Limited production was a business decision, Kutaragi said at a New Year's reception in Tokyo. The company also wanted to avoid building up inventories. "We needed to balance the investment with the risks,'' he said.

Sony probably spent $100 million to $300 million to develop the PSP, says John Yang, an analyst at Standard & Poor's in Tokyo.

"Sony wasn't completely prepared for the PSP,'' says Kazuya Yamamoto, an analyst at UFJ Tsubasa Securities Co. in Tokyo. "They are limited by the number of highly specialized chips they can make. It's not as if they can suddenly make it in large volumes.''

Shortages won't stymie demand, says Paul-Jon McNealy, an analyst at the American Technology Research Institute in San Francisco. "If anything, it creates hype, and hype rarely hurts demand,'' he says.

Each PSP sells for 19,800 yen in Japan and currently costs Sony 30,000 yen to make, says Yamamoto of UFJ Tsubasa Securities. Sony hasn't disclosed U.S. pricing for the PSP.

This guy obviously missed the recent US announcement.

 

[TTP]

Sony hasn't disclosed U.S. pricing for the PSP.

:lol

 

[jarrod]

Each PSP sells for 19,800 yen in Japan and currently costs Sony 30,000 yen to make, says Yamamoto of UFJ Tsubasa Securities.

Now that's interesting. Can I get some damage control over here?

 

[GSG Flash]

currently costs Sony 30,000 yen to make, says Yamamoto of UFJ Tsubasa Securities. Sony hasn't disclosed U.S. pricing for the PSP.

So sony loses money even on the value pack? That is pretty bad.

 

[kaching]

Now that's interesting. Can I get some damage control over here?

DC and his contacts normally aren't around until later in the evening...

 

[Elios83]

Now that's interesting. Can I get some damage control over here?

It's a lot less than many many people believed.

 

[jarrod]

DC and his contacts normally aren't around until later in the evening...

Heh... so would it be safe to say Sony probably loses about $50 on each US PSP sold while Nintendo probably makes about $50 on each DS sold?

 

[Vark]

So sony loses money even on the value pack? That is pretty bad.

This is news to who?

They're pulling a Microsoft as the only way they feel they can get into the handheld arena is by bleeding profit for a year or two until they can get costs down.

 

[Kung Fu Jedi]

Really not a big surprise. This has been stated for some time, although this is the first time I've seen someone attempt to put actual numbers on it.

 

[Insertia]

So sony loses money even on the value pack? That is pretty bad.

Uh, no shit.

 

[TTP]

If I recall correct Sony adopted the same strategy with the very first PlayStation.

 

[Kiriku]

I thought it had already been stated numerous times that Sony are losing money on PSP. Actually, I remember estimations on these very forums for PSP manufacturing costs being as high as US $400-450 (about 42000-47000 yen).

 

[teruterubozu]

Memory Sticks, Movies, Software, Music download site - recoup, recoup

They've gotta be making $ hand-over-fist from those way over-priced mem sticks.

 

[kaching]

Heh... so would it be safe to say Sony probably loses about $50 on each US PSP sold while Nintendo probably makes about $50 on each DS sold?

To be fair to DC and crew, I don't necessarily want to put more weight on what this analyst says. I have no idea what the source of his info is. I wouldn't be surprised if your estimate of the PSP losses are pretty accurate, but I'd tend to think that you're being a little generous on the DS side. I'm not sure I'd buy that there's a $200 difference between DS and PSP manufacturing costs.

 

[teiresias]

So if I'm to believe everyone in this thread they admonish Sony for giving us amazing technology at cut-throat prices even though they're losing money in an attempt to break into the market, but they praise Nintendo's overpricing of old technology that pales in comparison to what Sony is offering the consumer at the same price?

GO NINTENDO!!!!!!!

 

[Funky Papa]

I can see Sony making a profit from the european hardware AND selling all the units at the same time. And all because nerds like me whom will buy disgustingly expensive hardware even if they already own a japanese PSP.

My gf is pressing me to buy a new one. This is not fair =(

 

[Drinky Crow]

Yeah, I can't believe that gamers around here are COMPLAINING that Sony is taking a loss. It's almost akin to getting a free $100 bill with your PSP purchase. And Nintendo is idealized because they MAKE A PROFIT on the DS at the expense of subpar hardware?

Really, any self-respecting gamer should be ENCOURAGING hardware manufacturers to take a loss in order to give you the best. Anything else is indicative of self-abusive fandom.

 

[DCharlie]

well we got the info we got from multiple sources that were as close to the source as we could possibly get. If that info was wrong from those several people, then either there was a large amount of disinformation, or a large amount of misinformed people. I dunno, given that everything we've heard from the same sources has been 100% correct, i find it difficult to believe that there isn't an element of truth in there - perhaps the figure was overkill, but to hear the same exact figure from various different people... anyways....
Also, in the financial world there was a leaked doc prior to the final price announcement stating the price of the base PSP was to be 33,000 yen, then either Sony were going to attempt to release the PSP here at a profit, or as close to the base price as they could get.

No one will ever know exactly what is going on internally until the next financial report where someone maybe able to figure out how the PSP is doing (but it's unlikely given that most the costs have shifted to electronics and that there will be interference from their usual game sales streams).

As for the Analysis - looks to be business based and includes quotes from Kutaragi etc. and basically looks spot on - except for not being up on the US price of course.

It's these peoples job to know about business, we just know about games.

What may give further creedance to the high production cost is that Kutaragi seems to be saying that it's a deliberate decission to not hit the targets ; due to losses i'd suggest - hardly surprising, if they *are* losing $100 a unit, then a $100m loss a month could really kick them in the teeth (lets face it these units are gonna sell! I've never seen demand like this before). Yet Ken puts it down to Inventory control.... bwahahaha ... come now.... you have a hot product that you can't keep on the shelf for more than a couple of hours, and you are talking about being prudent with inventory and balancing risk? That's either bad management or you are taking a loss.

However, at the same time, he's throwing around sales figures that are just wrong (800,000 sold in Japan as of 21st Jan), and stating that we are going to be getting a million units a month in Japan starting Feb - even thought they've not been lucky to hit 250,000 a month. Will they have 1 million units for US launch? I wouldn't bet on it. Are we getting a million a month now? Are we f....

 

[Mrbob]

So if I'm to believe everyone in this thread they admonish Sony for giving us amazing technology at cut-throat prices even though they're losing money in an attempt to break into the market, but they praise Nintendo's overpricing of old technology that pales in comparison to what Sony is offering the consumer at the same price?

GO NINTENDO!!!!!!!

:lol :lol

Sad thing is the PSP was compared to the Xbox in terms of losing money, when the PSP is planned to be turning a profit later this year. BLEEDING MONEY YEAH. But I'm not gonna cry if Sony wants to give me a great deal on a sexy piece of kit like the PSP.

 

[Jonnyboy117]

Nintendo fans tend to support the company's profitability because N is a smaller company with a greater focus on gaming. Thus, it's easier for us to "armchair CEO" and see the company from a business perspective, while both the business dealings of Sony and MS are both too large and complex for the layman to understand, much less to comment intelligently on.

 

[Deg]

People here cant even handle Nintendo's stuff anyway. The stuff that come out of people's mouths like Matt and Olimario is astonishing and pathetic. :lol

 

[norinrad21]

People here cant even handle Nintendo's stuff anyway. The stuff that come out of people's mouths like Matt and Olimario is astonishing and pathetic. :lol

:lol :lol :lol

 

[Gattsu25]

This is news to who?

They're pulling a Microsoft as the only way they feel they can get into the handheld arena is by bleeding profit for a year or two until they can get costs down.

They did this with the PS2 and I'm sure they did this with the PS1 as well

you just seem to be ignorant on the issue as MSFT pulled an overly extended 'Sony'

 

[jarrod]

To be fair to DC and crew, I don't necessarily want to put more weight on what this analyst says. I have no idea what the source of his info is. I wouldn't be surprised if your estimate of the PSP losses are pretty accurate, but I'd tend to think that you're being a little generous on the DS side. I'm not sure I'd buy that there's a $200 difference between DS and PSP manufacturing costs.

Well, the only source I've heard was about $100 per unit for DS manufacturing... I think it came from Chittagoing? Really though, I don't see a $200 difference being too unlikely given the technology in both machines.

 

[Axsider]

Yeah, I can't believe that gamers around here are COMPLAINING that Sony is taking a loss. It's almost akin to getting a free $100 bill with your PSP purchase.

Not gamers! SONY-haters + Nintendo-fanboys!

 

[jarrod]

Just where are these phantom Nintendo fanboy complainers? The only bitching I see in this thread is the usual suspects pointing fingers at nameless Nintendo fans.

 

[Vark]

They did this with the PS2 and I'm sure they did this with the PS1 as well

you just seem to be ignorant on the issue as MSFT pulled an overly extended 'Sony'

What they did with the PS2, PS1 etc was the same thing all console manufactures do, take a loss, make it up in software sales, useless overpriced periphials do etc.

What Microsoft did, and where the difference is, was take a HUGE loss that was very likely NOT to be regained on a system that has never become profitable for them. In any other business thats just a shitty short term way to do things because without the giant gold reserves, you're slowly putting yourself out of business (which MS obviously doesn't have to worry about). But they did it to get precious marketshare so that later on they can play the game the 'normal' way (as they're doing with the slightly more modest Xbox 2) It was a 5 year plan.

Unless you can show me that Sony took a 33% loss on the PS2 like they're doing with the PSP then I'm going to assume Sony is going the way of Microsoft and temporarily undercutting their own bottom line just to spite Nintendo. They're hoping overpriced Memory sticks and more expensive software will help them recoup their costs but unlike a 'usual' console launch, the amount of crap they have to sell with the system to even break even is retardedly high.