Sony's decision to market their next-gen console at a price point below what it cost the company to make has hit them hard in the wallet.
Large sums of cash were spent on research and development to help launch the PS3. Sony admits that these "expenditures don't always get recouped".
In 2007 it cost the company $2.16 billion and this year it has racked up to $1.16 billion Sony revealed. In their fiscal 2008 report they broke down factors to better clarify to investors, pointing out that "the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered."
Launching an entirely new console even from a well established company can be a huge undertaking. Sony have said that even a successful PS3 will take quite some time to repay what it cost to produce. They're understandably anxious of the outcome.
"In the past, large-scale investment relating to capital expenditures and research and development for the manufacture of key components, including semiconductors supplied for (PlayStation 3) was also recorded within the Electronics segment," Sony said.
Hardware changes within the console models have helped reduce the strain some but will these headaches start to make the big firms think twice about developing such ambitious new platforms? Can subsidies ever work?