Here's my latest take on the whole "PSP profitability" thing.
Typically, if Sony is making a hardware product, they put some effort into using Sony-brand parts in the machine. One section of Sony will bill the other section for the parts, so there's really no "savings" in it, but it's more of a "keeping the money inside the family" kind of thing.
With the PSP, Ken Kutaragi has arranged for something like 90% of the parts to be made by Sony, and then ordered all the different sections of Sony to offer their parts to other Sony members at absolutely zero profit.
What difference does this make? Well, if every Sony branch were to bill each other at the full value, Sony would technically lose money on the PSP. This way, Sony in general loses money, but it's not the PSP that's losing the money.
That's detail is Kutaragi was shooting for. If everyone within Sony is playing along with his plan, then the PSP is only 20,000 yen, and at that price it'll "start turning a profit" after one year, and not be "losing money" at all.
If Sony was losing $265 on the PSP, they'd be "dumping", which is deliberately losing money in an attempt to drive their competitors out of the industry. This is especially frowned upon when you're trying to defend a monopoly, or expand from one monopoly to another.
One strategic problem with this plan is that "dumping" relies on your being able to kill off your competitors, so that you can later take over an entire industry unopposed, making back your money with an overpriced device at a later date. Nintendo will at least be competitive in the handheld arena for quite some time, and even if they weren't, there are always other groups trying to break into the industry.
Still, even if Sony only gets a hold of 50% marketshare for this generation, that would be considered a solid "breaking in", and could be worth it to Sony.
Problem is, Sony's gonna lose a lot of money all around, and the shareholders are going to want to know why, but Kutaragi can't explain the "dumping" plan to them, without getting in trouble.
Another problem with this plan is that Sony's divisions historically don't get along with each other. How will one of these divisions feel about making absolutely no money, perhaps even losing money, just so that another division can win all of the glory? Sure, they're under orders from Kutaragi to lose money, so they're not going to get fired over their lack of glory or anything like that, but how will their resume look compared to the guys in that other department after it's all said and done? IMO, the reports coming out about the "actual costs" of the PSP (which fit with all the "pre-announcement" rumors) are coming from these disgruntled divisions.
Plus, if the shareholders are on Kutaragi's back about the money losses, how long is he going to be able to hold off and not fire anyone from one of these "poorly run" unprofitable divisions? Any one of them could become a possible scapegoat at a moment's notice.
Also, of more concern to gamers, is that with the PSP's price being cut so close to the bone, there's almost zero chance of production costs coming down as the unit gets older. Obsolete parts don't suddenly become easier to make. It's mostly that as the hardware gets older, the guys making the parts can't get away with charging as much profit on them. So the PSP at 20,000 yen is basically it's "end of lifespan" price. The only way we're likely to see any price drops on the unit is if the PSP really does revolutionize the handheld industry like Sony keeps saying it will, and Sony earns $50-100 per unit in software royalties (which is high for a home console and unheard of in a handheld).
At least, that's how I think it's working right now. Feel free to point out any inaccuracies in my theory, expand on details you think are important, or bring up ideas that are completely different. I think I'm pretty close to the truth here, but I'm not trying to prove it to anyone (especially since this theory seems to be inherently unprovable). I'm just saying this because I've seen Sony fans get upset at parts of these suggestions.
Topic: PSP PRICE ANNOUNCED!!! (Read 89968 times)
