Awhile back I read an article about how Sony has lost 3 billion dollars on the PS3 (2.16 billion in 2006, 1.16 billion in 2007). The artile does point out that losing money on gaming hardware is actually normal (money made on software) and PS3 sales have been better in 2008.
Regardless of what the bottom line says, the PS3 will end up being a huge cash cow for Sony. Why you ask?
Royalties, blu ray royalties.
I blogged pretty extensively about the HD format war between HD DVD and Blu Ray and accurately predicted their demise and subsequent surrender. So while accountants and Wall street throw stones at Sony for bleeding money, you have to consider that the PS3 was essentially the biggest difference maker in the format war.
With blu ray prevailing, the Blu Ray consortuim (1/3 of IP believed to belong to Sony) can sit back and collect money as the technology is slowly adopted. CNET has a great article about the royalties Sony will be seeing.
The article points out that hardware manufacturers had to pay $15-$20 in royalties to install DVD drives in computers, dvd players, cameras, etc. But for every player in the market came dozens or sometimes even hundreds of DVD disks. Royalties for the disks ranged from 7 cents to 4 cents over the years.
While Sony will only get about a 1/3 of these hardware and disk royalties, Blu Ray via the PS3 is entrenched to replace DVD in terms of consumer adoption sometime in the next 3-6 years. Its going to take time but as more shelf space at Blockbuster, Best Buy, Circuit City, push Blu Ray Players, and the the Blu Ray drive begins shipping in new computers, its only matter of time until Sony dwarfs their loss with substantial profits.
