PlayStation3: Costs and Pricing Analysis Ahmed Zeeshan Sheikh Denis Mysenko Miguel Gonzalez

Sony products

CONSOLIDATED SEGMENTS Q2 FY06 Q2 FY07 Change ELECTRONICSSales1, % Operating Income ,231% GAMESSales % PICTURESSales % FINANCIAL SERVICES Sales % Operating Income % ALL OTHERS Sales % Operating Income % Sony performance

Sony PlayStation Games division has been one of the most profitable divisions of Sony Since the break through success of PS ®2 followed by the PSP ®. Following that tradition Sony Released PS ® 3 with an Aim to change the gaming world.

Sony PlayStation3 PlayStation®3 is one of the most sophisticated gaming consoles with high resolution, multi processor Gaming functions. Main Market Competitors of PS®3 are Microsoft’s X-Box360 and Nintendo's Wii. PS®3 was released in the American, European, Australian and Asian Markets at the end of last year and beginning of 2007.

Sony PlayStation3 sales

Costs Break Down

Sony PlayStation3 An Operating Loss of ¥96.7 million. Was recorded, a ¥ 53.2 Billion deterioration year on year. The deterioration was primary due to the loss arising from the strategic pricing of PS®3 at points lower than its production cost and the increase in PS®3- Related inventory write- downs during the current quarter compared to the same quarter of the previous year. Overall Inventory Buildup. 30 September, June, September, 2007 Change Sep07- June %

Sony PlayStation3: Results * Sony is loosing money on each console they sell. * The announcement of the early “retirement” of the Gaming division President, Ken Kutaragi.

Main factors - Fluctuation of Yen against Foreign Currencies. - Problems with Late introduction in market compared to X-box 360 and Wii. - Problems with estimation of costs as well as potential future sales. -Huge unsold inventory, due to overestimation. -High prices compared to its competitors.