It’s all part of the plan.
The PlayStation 4 is off to a strong start, with seven million units sold since it launched in November 2013.
But what’s the long term view?
During a corporate strategy meeting today, reported on by Japanese website Impress Watch and spotted by NeoGAF, Sony boss Kaz Hirai said that the strong hardware sales, coupled with the growing popularity of digital services, should allow the PS4 to produce profits beyond what Sony managed with PlayStation 2 – the best-selling console of all time.
Here’s the direct quote, translated for Eurogamer by Digital Foundry contributor John Linneman.
“It is likely that PS4 will become the platform which exceeds the profits earned with PS2.”
Before the quote, there is a line not in quotes, which specifies strong sales and network services as a driving factor.
While Sony is suffering billion dollar losses – and expects those losses to continue – PS4 is doing well. Sales for the company’s Game segment were up 38.5 per cent during the last financial year, but it still posted an operating loss of $78m due to the costs associated with the launch of the PS4 and the write off of some of Sony Online Entertainment’s old MMOs.
Sony expects to shift a total of 17m PS3 and PS4 consoles combined during the current financial year.
Console hardware manufacturers typically make a loss on each console sold during the early years of its life in an effort to establish an install base. The real money, however, is made from software sales and network services. That’s stuff like PlayStation Plus subscriptions, and digital sales of game content, movies and the like.
This is in keeping with comments made to Eurogamer by Sony Japan executive Masayasu Ito in September last year. He said the PlayStation 4 hardware would make a loss at launch, but insisted Sony expected to immediately recoup the costs when a typical user also bought a PlayStation Plus subscription and games.
It was a different case with the PS2, of course, which launched in 2000. That console didn’t have a digital storefront to sell subscriptions and downloadable content from. But it was hugely successful – it’s the best selling video game console of all time, with an incredible 155m units sold globally.
Sony made well-documented losses on the PlayStation 3 during the early years of its life. And it was always part of the plan to avoid a similar situation with PS4. Back in May 2013, Sony chief financial officer Masaru Kato explained the difference.
“Unlike PS3, we are not planning a major loss to be incurred with the launch of PS4,” Kato said.
“At the time we developed PS3, we made a lot of in-house investments to develop the Cell chip. Development of the chip saw the silicon processing and all the facilities invested by us ourselves. But this time, yes we have a team working on chip development, but we already have existing technology to incorporate and also product investment, and all the facilities will now be invested by our partners, other foundries, so we don’t have to make all the investment in-house.”