It looks like the group over at Sony’s gaming unit will be singing the Red Ocean Blues. In the company's fiscal 2008 annual report, Sony revealed that they've now lost roughly US$ 3.3 billion on the Playstation 3 since its launch. Why is Sony’s PS 3 such a lossmaker? One has only to look at its traditional, red ocean-like approach in which it has had to overinvest in an overly complex end-product in which the target price can’t even cover the production or investment costs.
In the company's fiscal 2008 annual report, Sony revealed that they've now lost roughly US$ 3.3 billion (that's billion with a B) on the Playstation 3 since its launch. That breaks down to $2.16 billion in 2007, followed by a notably smaller but equally daunting US$ 1.16 billion loss in 2008.
The reason? Pricing the console below its production cost. That's right - that hefty US$599 you paid for the PS3 back when it first launched was significantly cheaper than the cost of producing it in the first place, and while the retail price has come down some, the losses keep piling up.
Investors have reason to sweat. In a statement, Sony claimed "the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered." They went on to note that they've invested a great deal of money into R&D for the console, a sum they might not be able to recoup if the PS3 "fails to achieve such favorable market penetration."
Now that’s in stark contrast to the Blue Ocean Strategy success of Nintendo. Related stories:
[Image via ihunteverything1990.]