Sections

Xbox 360 and PS3 losses total $8 billion, ex-Sony employee paints grim future

Monday, 7th January 2013 16:17 GMT By Dave Cook

Xbox 360 and PS3 have cost Microsoft and Sony a combined total of $8 billion, according to a new article penned by industry veteran Ben Cousins.

According to Cousins’ report on Kotaku, Microsoft has spent some $2.996bn on Xbox 360 since it launched in 2005, while Sony has fared worse, spending $4.951 billion on PS3. Both figures are a loss, and you can see an overview of both company’s losses in Cousins’s financial table here.

Cousins, who has worked at a string of high-profile studios over the years – including Sony EA and Lionhead – has shed serious doubt on the future of the home console as we know it, citing SOny and Microsoft’s plan to sell each console at a loss as a reason for such poor fortune. It’s a poor strategy he says, as even with a combined total of 70+ million consoles sold, both companies are still losing money.

“Consoles like Xboxes, PlayStations & the Wii U are sold at a loss”, said Cousins. “It costs more to manufacture and distribute the device than it is sold for. Console manufacturers do this because they hope to make back the money from the license fee they charge for every game sold on the system.

“In order to offset the huge cost of hardware production, distribution, R&D and marketing, a hardware platform holder must sell vast quantities of hardware, and even bigger quantities of software. So much needs to be sold, in fact, that the data points to PS3 and Xbox 360 having made huge losses, despite having sold 70+ million units of hardware each.

“Of those 70 million Xbox 360s sold, a large proportion (approx. 40%) were bought after the most recent price cut of August 2009. Of the 70 million PS3s sold, a large proportion (approx. 42%) were bought since the introduction of the PS3 Slim.”

With such a large proportion of consoles being sold post-price cut, it seems as if the loss-leading strategy is failing to bear fruit for both companies. The issue isn’t being helped by some 50% of home console owners also owning a smartphone, tablet or both, devices which are seeing a rapidly advancing capacity for supporting triple-a game content.

Today’s reveal of the Tegra-4 powered Project Shielf from Nvidia shows that mobile gaming is rapidly gaining ground, and could pose a real threat to the home console market as we know it in 2013. As a final bullet point in his report, Cousin addressed this very issue, “Mobile developers and publishers are starting to target these ‘mainstream console gamers’ aggressively. I work for a mobile publisher just slightly smaller than EA, and we are targeting them aggressively.”

Predicting what he sees on the horizon for the industry, Cousins continued, “In the future, I see gaming as having two main markets:

“Mobile devices like smartphones and tablets will serve the biggest market—covering kids, casual gamers and the mainstream console people.

“The core and ultra-core gamers would be served by PC gaming, which will be smaller than mobile, but that will continue to grow. Many of the old-school PC gamers I know that moved to playing games on Xbox over the last 10 years are coming back to PC because of free-to-play and indie games, controller and TV support, as well as incredible digital distribution on platforms like Steam.”

So now it’s over to you readers. Which of the two brackets above would you say you’ll fall in to, should Cousin’s predictions come to pass? Are home console manufacturers really in trouble, or is this a knee-jerk reaction? Let us know below.

Thanks MCV.

Breaking news

24 Comments

Sign in to post a comment.

  1. Dragon246

    That is why both sony and MS are diversifying their products. I hate this stench of negativity. The time for nostradamuses is passe.

    #1 1 year ago
  2. Ristas

    So, is “Console gaming is dying” the new “PC gaming is dying”?

    #2 1 year ago
  3. Erthazus

    Sony and Microsoft are doomed next gen. Well, Microsoft maybe not because they have tons of Cash from Windows platform/PC Platform, but Sony is in deep shit. Nintendo is also not in a good position with WiiU tright now, although from the Wii they had tons of cash anyway so they will survive.

    In my opinion Sony as a 3rd party publisher could be much better in the end.

    Look. PS Move failed, PsP Go Failed, Ps Vita so far failing (Project Shield with TEGRA4+HDMI is the ultimate kick to the Sony’s handheld division), Xperia Play failed, PS3 as a system is almost a failure (if not it’s previous glorious successes with PS1,2 it would die a horrible death at launch.) Imagine if Samsung or toshiba showed PS3 like system in 2006, lol.

    Console business is dead and soon will be just a service with a controller, PC on the other hand lives and moves forward because of the technology and as a platform it is open.

    #3 1 year ago
  4. _LarZen_

    “Many of the old-school PC gamers I know that moved to playing games on Xbox over the last 10 years are coming back to PC because of free-to-play and indie games, controller and TV support, as well as incredible digital distribution on platforms like Steam”

    THIS!

    #4 1 year ago
  5. gomersoul

    we’re all doomed i tell ya! the end is nigh for humanity…. or is this just some more meaningless bullshit figures that affect nobody. apart from erthazus and his excellent insight :)

    #5 1 year ago
  6. Eddie Rodrigues

    @1 They invested, that is loosing for some people, even though Sony had lost money last year it was due to other factors since it is a company that works on TVs, Smartphones and other ‘high end tech’

    @3 Your first argument can be easily misjudged, for the fact that Sony also makes money outside their console marked. I used the word misjudged. Their outside console market is what make the terrible loss of money last year. No doubt, they have gone through worse times. ‘Sony as a whole lost money last year’, that would be a better statement.

    Although your third paragraph isn’t quite accurate either. The PS3 didn’t fail at all, only if you pack up all the years it had on the market. From 2009 the console sold so many copies that it ‘overruled’ 360. The Xperia Play is part of the Xperia brand, which is Sony’s best smartphone series, although the Play wasn’t the top seller in the series, it was in fact good.

    @4 Guilty, I did that.

    @5 Insight? lel

    #6 1 year ago
  7. polygem

    steambox+wiiu+3ds—-could very well fix all my gaming needs next gen.

    #7 1 year ago
  8. Cobra951

    I don’t trust this guy. I looked at his numbers, and he seems to be taking liberties with them in order to arrive at this doomsday scenario. I won’t speculate about his motivations, but it’s clear from his text what future he’s already decided is going to happen.

    For one thing, the (alleged) Microsoft financials he’s tabulated* back to 2003 are for the entire gaming division. Then he assumes every bit of them applies to the Xbox 360 (which is bullshit, given how many fish MS has been frying since ’03). He’s also ignoring the strong upward trend for years, as well as incidental facts such as *this is war* with Sony and Nintendo. If MS slacks off, the other two get all the pie. It costs big bucks to stake out your territory in that arena, and stake it out they will.

    MS also allocated $1 billion to deal with the RRoD fiasco, caused by a severe design defect. Such a rare circumstance needs its own article, and has its own implications, separate from the foregoing.

    Now Sony’s picture does look bleak. There’s no 2 ways about that (again, assuming the numbers are real and accurate).

    * https://docs.google.com/spreadsheet/ccc?key=0AmSmlk-Wo4uhdEhXMy1GcmFERGQ2TGtkdll2OVBXNGc#gid=0

    #8 1 year ago
  9. Francis O

    But I thought Sony and Microsoft were “Destroying” Nintendo?

    #9 1 year ago
  10. Eddie Rodrigues

    @9 I wouldn’t say that because Nintendo has always the upper hand due to their portable market (while Sony’s PSP took 2 years to finally get excellent results, DS always sold, the same is happening in the fight Vita X 3DS) although yes, in Table Consoles Market, Sony and Microsoft tend to get a different yet notable audience.

    #10 1 year ago
  11. BraveArse

    “I work for a mobile publisher just slightly smaller than EA, and we are targeting them aggressively”

    Someone with vested interest, says thing to boost that interest and damage competition. Yet again. He’s talking to investors, not us plebs.

    #11 1 year ago
  12. sh4dow

    Somehow I doubt the validity of these comments (in the article, not the comment section). Because everybody knows that wealthy people don’t do business out of benevolence. Would the gaming business not be profitable for the heads of Microsoft, Nintendo or Sony, they’d simply shut it down and do something else.

    #12 1 year ago
  13. Gadzooks!

    I don’t see the relevance of increased sales after price cuts. By that time manufacturing costs had dropped.

    This idiot seems to be implying that Sony and MS made bigger losses as the price dropped, which is the opposite of what happened.

    Terrible article, IMO. Not VG’s fault, but the source is complete garbage.

    #13 1 year ago
  14. Gadzooks!

    Also what #12 said.

    They wouldn’t still be in the business with the supposed losses in the article.

    #14 1 year ago
  15. Mike W

    @3

    Sigh….your stupidity is beyond words.

    #15 1 year ago
  16. Dean

    Man working in mobile sector says everything other than mobile is doomed. News at 11.

    #16 1 year ago
  17. Gama_888

    @15 Its really starting to get to me just recently. He seems to be getting stupider and more ignorant as this generation begins to come to a close.

    When i come to this site i read through a couple of the articles, read through some of the comments and maybe comment something myself if i feel like it.

    AND JUST FOR ONCE, please just one fucking time, i would like to do it without accidentally reading another one of this idiots biased, badly written & completely inaccurate comments.
    PLEASE OH GOD VG247, GRANT US A MUTE BUTTON!!

    And for the Article. I didn’t read through it all as it actually seemed like it was written by the aforementioned idiot himself.
    Fairly sure the writer seems to have disregarded a lot of information while going through. And i’m fairly sure Sony and M$ have not lost a total of 8 Billion this gen as i remember articles saying they had both started making profit on their investments maybe a year or 2 ago.

    #17 1 year ago
  18. OlderGamer

    ““Many of the old-school PC gamers I know that moved to playing games on Xbox over the last 10 years are coming back to PC because of free-to-play and indie games, controller and TV support, as well as incredible digital distribution on platforms like Steam”

    THIS!”

    Make mine a double, and give that man a cigar!

    #18 1 year ago
  19. fearmonkey

    @18 – ““Many of the old-school PC gamers I know that moved to playing games on Xbox over the last 10 years are coming back to PC because of free-to-play and indie games, controller and TV support, as well as incredible digital distribution on platforms like Steam”

    Yes that is me in a nutshell. Focused on console gaming with the launch of the original Xbox, then moved to the 360, played a few PC games in between including one year of World of Warcraft. Now I am pretty much bored with Xbox, and thanks to Steam sales and online deals, play almost exclusively PC in the last 6 to 8 months.

    If the next gen is really powerful I may play more console again, but with so many great games on digital distribution that I haven’t played and can get for cheap, its hard to want to spend MS’s premium cost for games. MS’s awful discounts pretty much ensure I never buy from them anyway. Skyrim, Assassins Creed III, and Borderlands 2 on 360 are great, on PC at 2560×1440 with all options and high end textures they are amazing, and cheaper too!

    #19 1 year ago
  20. Eddie Rodrigues

    @15 I’m not sure if this guy likes gaming or not, he sure as a hell have a grudge with Sony though

    @19 Ha! Completely agreed! I’ve moved to PC gaming after I saw Steam prices… technically I still play on traditional consoles but only for exclusives or games that have a huge gap between the launch of the console version and the PC version.

    The only thing that keeps me away from the 360 is Live’s Subscription feature for the console, while Games for Windows Live is free (only required in few games, Street Fighter, GTA IV)

    #20 1 year ago
  21. Mike W

    @21

    He/she sure does have a problem against Sony, but that’s fine. It’s just some shit this person states is pure stupidity and ignorant.

    #21 1 year ago
  22. Old MacDonald

    I don’t trust his numbers, or his motivations for that matter.

    He does have some valid points, though. At this time, I can’t see myself buying a next gen console. But that is partly because I just can’t see Sony or Microsoft, who are both focusing more and more on selling multimedia content, ads and casual gamers, making a proper effort to make a truly next gen console. I imagine what they’ll make will be comparable with a slightly better than average PC, and focus on Kinect/Smartglass/Move/Facebook/Spotify/Netflix/AND SO ON, with some Halo & Uncharted on the side.

    If that is indeed the direction they’re headed, and it seems that way from the way they’re handling their current consoles, then they’ll struggle when Apple & Google starts doing the same thing, and Valve releases their Steambox (which will probably do what gamers actually want consoles to do).

    #22 1 year ago
  23. MadFlavour

    I’m not expert, but this reeks of bullshit to me.

    #23 1 year ago
  24. kayoss

    There is something wrong with his numbers. It doesn’t give the amount of money Sony and Microsoft are making off of license fee for each game sold for that console. Sony and Microsoft have a very large library of games which the sold millions. I’m pretty sure they lost 8 billion on console sold but probably made billion more on game lincense fee, ps plus, xbox live, and accessories. That’s why I think the guy who wrote this article purposely left out all that detail and info to stir up the pot. No company will continue a business that they are losing money on especially 8 billion dollars worth. So I say this is bullshit and if you going to report something get all the facts.

    #24 1 year ago