Earnings reports: Sony slumps, Nintendo, Microsoft surge
A trio of publicly filed financial reports for the most recent quarter (July through Sept. '06) have shed some light on the fiscal fates of the three major consoles makers going into the critical holiday period.First up is Sony, which posted massively reduced earnings as expected. The ongoing laptop battery recall accounted for much of the 94 percent reduction in profits, but slow sales of the PSP and Playstation 2 accounted for a 43.5 billion yen operating loss in the games division. Research and development costs for the PS3 also cut into Sony's bottom line for games. Sony is still predicting sales of 6 million Playstation 3 units by March '07.
Nintendo's financial situation is much rosier, with profits rising 72 percent on strong sales of DS hardware and software. The company is shipping 100,000 DS units a week and is still unable to meet demand in some Japanese stores. Nintendo expects to sell 20 million DS units and 6 million Wii units this fiscal year (ending March 2007), helping pad down an net income forecast of 100 billion yen.
Spurred on by higher software sales, Microsoft announced game revenue for the 360 and PC increased 107 percent ($319 million) in the past quarter. Microsoft's Entertainment and Devices Division (which includes the games unit) grew by 70 percent over the same period last year. The Xbox 360 sold 900,000 units in the quarter, pushing it over 6 million units sold worldwide, and putting it well on its way to selling an expected ten million systems by the end of 2006, according to Microsoft.
Read: Sony report
Read: Nintendo report
Read: Microsoft report
Reader Comments (Page 1 of 2)
Saint @ Oct 26th 2006 6:29PM
Wii360 FTW!1!1!!
Joe P. @ Oct 26th 2006 6:31PM
Anyone still saying 10 Million 360s sold by the time Wii and PS3 hit the market? Anyone? Anyone? Bueller?
tracked @ Oct 26th 2006 6:31PM
Sony deserve this. I hope next year you enter the Big red with the PS3 .Nintendo FTW!!!! At least you know how to make good games/consoles.
Don't disappoint us Ninty.
First post
potato @ Oct 26th 2006 6:32PM
I hate Wii360
just 360
wii can die by itself
GWBUSH 2004 @ Oct 26th 2006 6:35PM
How many Xbox 360's sold by the time Sony can actually solve supply problems and meet the demand? May I say 12 Million.
Dave @ Oct 26th 2006 6:38PM
Wii360 ALL THE WAY!!! After what FONY did to lik-sang they can suffer.
Psaakyrn @ Oct 26th 2006 6:44PM
Of cause, it's easier to report a higher growth percentage when you start off as a loss maker (converting from loss to profit is a profit difference not measurable by conventional mathematics..
gamerx @ Oct 26th 2006 6:44PM
Wii360 all the way baby!
Rabish12 @ Oct 26th 2006 6:46PM
Joystiq failed to mention that Microsoft's Entertainment and Devices division, the part involved with their consoles and such, ended up with an operating loss of $96 million. Still only a little over half as bad as Sony's $176 million operating loss, but large nonetheless.
They're doing better, but they still have a long way to go before their consoles are anywhere near profitable.
Tyler @ Oct 26th 2006 6:49PM
It's important to note, fanboys, that this doesn't tell the whole tale. Both Sony and Microsoft are counting on Game licenses to make up for the loss they're taking on consoles. The hope is to an overall rise in profits to effect their bottom line for years. Microsoft estimated that every consumer would need to buy 10 games to break even on the XBOX. It turned out to be closer to twenty, in the end, and they didn't break even. Sony barely broke even with the PS2, after years of dominating in both game and console sales. Nintendo did very well, largely because of the DS, which is making money hand-over-fist.
Regardless of their business plan, however, no investor likes to see his stock drop as far as Sony's has, and their plan is to not make it up for years to come. That's scary to investors. Nintendo, on the other hand, is making good money from the get-go - a plan proposed to great success by Apple recently. Regardless of fanboy console wars, I know which stocks I'm buying.
james f. @ Oct 26th 2006 6:55PM
This article has gotten me thinking:
I'd love to see a weekly market wrapup report that combines console sales, game sales, stock prices and all things gamerwise on Joystiq. I've thought about investing in gaming, and I'm sure I'm not alone. A comprehensive look would be nice and would bring more of us in on the weekend for something other than just the comic wrapup.
FuzzyPickles @ Oct 26th 2006 6:59PM
Wow, does this mean the Big N is finally recovering from that near-fatal mistake of making the N64 cart-based ten years ago?
Joe P. @ Oct 26th 2006 7:03PM
@ 10: "Sony barely broke even with the PS2, after years of dominating in both game and console sales."
Again with the way-out-of-left-field-made-up-BS! This barely even warrants a response, given the HUGE profits the PS2 business has raked in for Sony. But you should be aware that posting a comment like this only makes you look ignorant, or pathetic, or another of the rabid anti-Sony-force, or all of the above. Go away.
@ 11: I'd love to see regular updates with actual market data as well, but it ain't gonna happen. There are too many players with a vested interest in obfuscating actual sales and economic data.
james f. @ Oct 26th 2006 7:11PM
Your probobly right Joe P. but at least a stock rundown is viable. Something in the vein of the japanese hardware sales post would be cool.
Mark @ Oct 26th 2006 7:15PM
I hope the X-flop 360 dies.
m3mnoch @ Oct 26th 2006 7:17PM
a few things:
it's pretty well documented that the ps2 is a crazy successful cash cow, deep in the black. not even remotely close to "barely breaking even."
microsoft as of august (according to an internal memo) is no longer taking a loss on their consoles.
microsoft's ed division's $96 million loss also includes cash dropped by zune.
m3mnoch.
m3mnoch @ Oct 26th 2006 7:18PM
mark.
"I hope the X-flop 360 dies."
why?
m3mnoch.
nea @ Oct 26th 2006 7:21PM
10,000,000 is a hell of a head start right?
Psaakyrn @ Oct 26th 2006 7:23PM
to #12 FuzzyPickles
I misunderstood your statement. We're talking about overall profits here. Nintendo has always been making the most profits compared to Sony (console division) and Microsoft (console division).
garyEGO @ Oct 26th 2006 7:23PM
Sony and Nintendo both predict to sell 6 million systems by March '07. Is Sony able to manufacture their systems faster than Nintendo who already has a slight head start? Are they going to out sell Nintendo in North America and Japan (the PS3 won't be available in Europe till March)?
m3mnoch @ Oct 26th 2006 7:26PM
one last thing.
"Anyone still saying 10 Million 360s sold by the time Wii and PS3 hit the market? Anyone? Anyone? Bueller?"
me. 80% of the industry's revenue comes from q4.
m3mnoch.
Robotic House Plant @ Oct 26th 2006 7:30PM
It's a little early to predict much, but I do know Sony has already stated they plan to lose 1.6 billion this fiscal year, as the result of the PS3 launch.
http://www.ecommercetimes.com/story/hEHGtMfYa3LpC4/Sonys-Q2-Profit-Plummets-Amid-Battery-Recalls-PS3-Delays.xhtml
but they're also expecting to ship 6 million units by the end of next March. I'm sure everyone will be watching to see if they can meet their goal.
The whole laptop battery recall mess was unexpected, and will certainly hurt them this year.
It appears the PSP is not selling as well as expected, which I sure we can attribute to the success of the DS, and Sony's reluctance to update the PSP. Perhaps the PSPs integration with the PS3 will help spur sales.
As far as a weekly market recap, I think that'd be a cool idea.
Mullinator @ Oct 26th 2006 7:33PM
err, m3mnoch the statement wasn't that Microsoft could sell 10 million before the year was over, it was to sell 10 million before the PS3 or Wii was out. And by the looks of it Microsoft is not going to sell 4 million before that happens. Sorry.
elmer @ Oct 26th 2006 7:33PM
@ FuzzyPickles
It's funny you should say that because:
1. Nintendo have only ever posted 1 loss making quarter, EVER (I believe it was in 2003) meaning since NES they've never been "practically dead". This was from memory so I'll admit I could be wrong.
2. Sony was fully expecting UMD would do to the DS cards what CD did to N64 cards. They were wrong (the demands of handhelds are of course different).
@10. I'm pretty sure financial statements from both Sony and Microsoft do in fact include royalties paid by their 3rd parties. The statements are required to tell you exactly how much money they're making (or losing).
Joe P. @ Oct 26th 2006 7:34PM
@ m3mnoch: "microsoft's ed division's $96 million loss also includes cash dropped by zune"
It also includes other businesses which generate profit. Who's to say how big the 360-related loss actually is?
"me. 80% of the industry's revenue comes from q4"
Oh no, it's not "thru q4", it's "by the time the Wii and PS3 hit the market" (three weeks, in other words). MS only has to sell 200,000 units EVERY DAY for the next 3 weeks to hit 10 million. Good luck with your prediction.
JUJUSTSHUTUP @ Oct 26th 2006 7:34PM
i think this is the straw that broke the cammels back, i am sick and tired of this playstation gang rape here, everything i hear is titled for the xbox 360 and sometimes the wiis favor. reports are only on the good things that happen for microsoft and the bad things that happen to sony, even though they both have good/bad news. then gears of war comes out with this cinematic trailer with a song from donnie darko, and sudenly that pretentious piece of crap trailer is introspective, touching, a masterpiece, the end of the next generation. if sony had done the exact same thing it would be called out for what that kind of trailer really is. a pretentious misleading trailer. have any of you heard the dialogue in the cutscenes, it is the cheesiest in a long time, the voice acting is horrible (that cliche commando big man gravel voice). if you want to call me a sony fanboy, you do that, but one thing i will not do is let any misinformed nerd around here to FTW or wii360 like its all good.
SecondChance @ Oct 26th 2006 7:35PM
"Again with the way-out-of-left-field-made-up-BS! This barely even warrants a response, given the HUGE profits the PS2 business has raked in for Sony. But you should be aware that posting a comment like this only makes you look ignorant, or pathetic, or another of the rabid anti-Sony-force, or all of the above. Go away."
I LOVE it! Such unabashed criticism of another's post, and you offer NOTHING constructive in return! Unless, of course, we are counting the word "HUGE." If using big words is all I need to make an argument, then Wii sales in 2007 will be a BANANA. You cite no facts to dismiss what he said, not even a number; just insults and the word HUGE. Take a time out kiddie, it is you who are ignorant.
FuzzyPickles @ Oct 26th 2006 7:35PM
@ 19
My bad then. I knew their console division has been pulling in more than MS for quite awhile now, but I could have sworn Sony was miles ahead of them for quite a long time now. ::shrugs:: I never really started paying attention to the business side of gaming until recently, and no one can deny that Sony got their momentem entirely from Nintendo's own mistakes (PSX add-on for SNES fiasco, key third parties like Square developing for PS instead of N64).
Joe P. @ Oct 26th 2006 7:47PM
@ 27: "You cite no facts to dismiss what he said, not even a number"
Okay, my bad. You really want me to go do the research and pull all the numbers together for you? It isn't enough to just ball-park it and say that a console that's sold over 100 Million units, plus who knows what "HUGE" number of software units, is in the black more than "barely"?
Perhaps I can do a little web surfing and prove to your satisfaction that the earth isn't flat, while I'm at it? Like I said - barely worth a response.
And BTW, since I know someone will insist on it, here's one of the many links:
"Before our competition even enters the marketplace, we will have a 10-million-unit head start with Xbox 360," said Microsoft boss Bill Gates"
http://news.bbc.co.uk/1/hi/technology/4756645.stm
Lefty @ Oct 26th 2006 7:47PM
all i know is so sony ahd only 12 million in total profit for this quarter while microsft had 4 billion. 96 million loss in gamiing is nothing for a company making 4 million operating income
and the 10 million by time ps3 launches is not relevant in the terms that ms will hit 10 million plus with in that 1 month period. just as a launch game may not be out till some time in decemeber? and these numbers do not include oct sales. by time the ps3 gets 1 million units on the amrket ms will be at or above 10 million. if u want to say oh you didnlt do it this day yet with in 30 days from the launch fo said console they will have 10 million. probly more specially since the 360 is now availibe in 32 countries and the ps3 will barfely be availible in 3. mising the whole pal territory entirely till march
elmer @ Oct 26th 2006 7:47PM
@ m3mnoch "me. 80% of the industry's revenue comes from q4."
I'll believe it when I see it, and even then I won't. MS has been claiming their sales are over 6 million but if you add up what numbers are available and (fairly reasonably) extrapolate what numbers aren't, they're barely at 5 to actual consumers. Quoting MS on 360 sales + projections is very much like quoting Sony on PSP sales + projections.
Facing two system launches, still having an effective $400 price tag and having a holiday linup that essentially consists of Gears of War and Viva Piniata, I'd say yeah, I have serious doubts about their winter. The pent up demand appears satiated, it sells consistently poorer than PS2 and there are very few NEW reasons to get one (I don't believe lost PS3 sales automatically convert to gained 360 sales).
And I wouldn't put it past them to continue running into manufacturing problems. It STILL has a good 500 million transistors crammed into two chips. That still ain't cheap or easy.
Retrojunkie @ Oct 26th 2006 7:51PM
OMG LIEK JOYSTIQ IS SO BIAS FOR SAYING BAD THINGS ABOOT SONY ADN LIEK NOT SURGER COATING EET OR LYING ABOUT IT LIKE SONY
UR SO BIAS
Seriously Who ever says anything remotely hinting a "JOYSTIQ IS BIAS comment" needs to pull there head out their ass, Sony is in trouble, no doubt about it
What you want joystiq to say "LOL THE SONY IS DOING FINE PERFECTLY FINE" if that was the case, you might as well slap a big "SONG HQ" on the title of joystiq
Face it, The companies that happen to have a bright Fiscal future Is nintendo, and maybe microsoft
Sony's Future is unknown
so come to your own conclusion
Their is no bias, Just "stuff" you don't agree with
m3mnoch @ Oct 26th 2006 7:54PM
ah. joe. i see. yours was an arbitrary deadline. i missed the random "when they hit the market" qualifier you tacked on there.
from the article:
"The company previously mentioned that it had sold 5 million through June and expects to sell 10 million by the end of 2006."
so, yeah. "the end of 2006" is "thru q4."
m3mnoch.
m3mnoch @ Oct 26th 2006 7:57PM
"And BTW, since I know someone will insist on it, here's one of the many links"
so. does that count for the marketplace in europe too?
m3mnoch.
Joe P. @ Oct 26th 2006 7:58PM
@ 33: In case you missed it...
"Before our competition even enters the marketplace, we will have a 10-million-unit head start with Xbox 360," said Microsoft boss Bill Gates"
http://news.bbc.co.uk/1/hi/technology/4756645.stm
The deadline was neither arbitrary, nor mine :)
Joe P. @ Oct 26th 2006 8:06PM
@ 34: "does that count for the marketplace in europe too?"
LMAO! Is that you, Major Nelson? Something about the way you're now trying to parse Bill's language makes me smell someone on-the-payroll (or perhaps in the Bush administration).
I suppose MS could continue to play that game, ad infinitum. "We meant by the time they launch in Australia". "No, wait, South Africa." "No, wait, Burkina Faso."
buh-bye.
Anonymouse Rep @ Oct 26th 2006 8:06PM
Just to convert everything into the same currency for ease of understanding - nothing personal against the reports, but when you're reporting yen, pounds, euros, and dollars indiscriminately... (And I'll use the same 115 yen to the dollar that Nintendo did, although it looks like Sony was using about 119 yen to the dollar.)
> Sony --
"Sony posted a 43.5 billion yen operating loss from its games division" - That's a $378 million dollar loss from games.
"The group's operating profits slump in the third quarter came despite record electronics sales, up 8.3 per cent to 1,850 billion" - $16 Billion dollars in sales from electronics - which the game and pictures losses, along with the battery issues, wiped out these profits.
"Sony's pictures division also slumped further into the red at the operating level, posting a 15.3 billion yen loss, widening from 6.6 billion yen a year earlier"
- $133 million dollars in losses opposed to $57 million last year, sounds like movie making isn't making you any money
"The embattled Japanese group revealed an operating loss of 20.8 billion yen (£93 million) in the quarter, down from an operating profit of 74.6 billion yen a year earlier." - $181 million in losses versus $648 million in profits last year
> Nintendo --
"Operating profit, or sales minus the cost of goods sold and administrative expenses, more than doubled to 38.3 billion yen from 15.9 billion yen." - $333 million in profit, up from $138 million - small, yet growing larger
"Sales rose 59 percent to 167.9 billion yen in the quarter" - $1.46 billion dollars in sales - not bad at all, especially with a profit two years running
> Microsoft --
" revenue of $10.81 billion (up 11 percent) and net income of $3.48 billion (up from $3.14 billion last year)"
"Entertainment and Devices division, ... posted $1.03 billion in revenue and an operating loss of $96 million, slightly narrowed from last year's loss of $173 million during the same period."
"EDD operating loss in first quarter of fiscal year 2007 decreased primarily reflecting the increase in revenue, partially offset by a $268 million increase in cost of revenue primarily related to Xbox 360, increased sales and marketing expenses related to recent and upcoming product launches including Xbox 360 and PC games, and increased development costs associated with new and upcoming products, including Zune" - that's a fancy way of saying that they sunk a bunch of money into Zune, which is covered by the same division as the 360.
> Analysis --
Hey, what the hell, I'm almost as qualified as the guys who make the predictions - so let's look at the rough numbers.
Microsoft cut their ED loss in half, to $96 million, and as a company is showing over $3 billion in net profit on $10 billion in sales. This indicates also that Microsoft has a nice, healthy profit margain - which is no big secret.
Nintendo is much smaller (obviously) and showed almost double profits on their sales. On $1.46 billion in sales, a $333 million profit is respectable.
Sony is too big and diversified. Games lost money for them - even with the price cut and increased sales of the PS2 - so they lost almost 4 times what Microsoft did. The pictures division is a money sponge. Only in consumer electronics does Sony show great sales - and those profits were wiped out by the battery fiasco, games and picture losses. There's also something wrong when the company was showing $16 billion in sales and was only (pre-battery fiasco) was going to make $640 million in profit. Nintendo is doing one-tenth the business and making half the profit. Microsoft is doing two-thirds the business and showing five times the profit.
Sony needs to seriously rethink their business model. It's perfectly acceptable to have one division show losses to offset the profits of other divisions - Fuji Heavy Industries did that for years. It's not acceptable to have to eat a loss of $445 million due to possibly defective batteries on top of TWO divisions not being profitable.
I'm not saying it will - but should the PS3 not perform as expected (which, let's face it, you KNOW they're going to have launch problems just as bad, if not worse, than the 360 did) and if pictures continue to perform below expectations, then Sony as a corporation may need to divest itself of games and pictures in order to survive.
thegrey @ Oct 26th 2006 8:08PM
so
6 mill Xbox 360 vs. 500k PS3
FIGHT!
Lefty @ Oct 26th 2006 8:09PM
elmer
they ahve shippd 6 million xbox 360's as of oct 1. your disputing that? lol wow ok. and another 4 million worldwide is not even a stretch either. even the xbox could psuh 3-4 million worldwide every xmas with the ps2 killing it
and yes a system thats 129.00 with a library of over a thousand games should sell well. it be another thing if the xbox was outselling the xbox 360. the best way to measure a console is by its previous gen. xbox 360 is outselling the xbox by 600,000 units in the us alone over the past 8 months. thats a fact proved by npd sales data.
even if just xbox owners got a xbox 360 theres still 18 million worlwdie gamers to buy a 360 who were xbox users. but maybe you fail to see the huge 259,000 sales last month? or the huge hit games comming out next month. call of duty 3, rainbow six, gears of war. gamers play games and these games plus others will push them over 10, million with ease by the end of the year
FuzzyPickles @ Oct 26th 2006 8:09PM
Does shipping only 400,000 units in two countries even count as "entering the marketplace?" And he did say "competitors"... plural.
llollerz
I believe that the 360 won't fare as well this holiday as they expect, but if dissatisfaction with the PS3 is as bad as some of us are expecting, things will sure pick up for MS, though it will be over time, not quickly in one quarter.
Psaakyrn @ Oct 26th 2006 8:16PM
Just wondering though, seeing that the European launch is already confirmed to be delayed (which could be seen as a failed November launch), has XBox 360 sales jumped there?
m3mnoch @ Oct 26th 2006 8:20PM
heh. joe. i was totally being funny with the europe thing.
but, yeah. it's about shades of meaning. does 500k (maybe) consoles really count as "entering the marketplace?" eh. i dunno. tho, i don't really care either.
the crux of my thought was that i do think microsoft will sell 10 million 360s by year's end.
i also think the wii will hit its fy07 target of 6 million consoles, but i don't think sony will. not because nobody wants them, but, just because they can't make them fast enough.
which when you think about it, scarcity may be a good thing for sony. adding non-quantifiable value and whatnot.
m3mnoch.
p.s. not on the payroll. tho. if they wanted to buy my little company, i'd sell. heh.
Jeff @ Oct 26th 2006 8:29PM
Uh, guys, this is the important part of the MS release:
"The division posted $1.03 billion in revenue and an operating loss of $96 million, slightly narrowed from last year's loss of $173 million during the same period."
The "surge" was in going from a huge loss to a loss that was a little less huge.
Talk about positive spin...
It remains the case that Nintendo is the only hardware manufacturer currently making money in the game business.
Lefty @ Oct 26th 2006 8:35PM
m3mnoch
excatly how i feel and i think many market analysis see it as well. the 360 10 million is a pretty darn given. it should not be that hard. the real questions is can sony mnake enough ps3's by march 07. i also expect the ps3 to sale just fine and will at some point likley get the amrket lead. they ahve been the market leader for 2 generations now. its not a hard stretch to see they will likley do it again. Ms's goal is not to lead but to gain market share and with the sales of thexbox 360 better than the xbxo this early on they likley have gained some market share. and if reports are right the xbox 360 is now profitable so they are making money another good thing. and with their pc branding and vista launch i think the next year will be a very nice year for ms and its investors
Joe P. @ Oct 26th 2006 8:36PM
@ 42: "does 500k (maybe) consoles really count as "entering the marketplace?" "
Yeah, for the sake of apples-to-apples, let's say it does. There were somewhere around 500,000 units of the 360 available on day one, although it's tough to pin down a precise figure, as they were pumping them out as fast as they could, just as Sony's hoping to.
Psaakyrn @ Oct 26th 2006 8:37PM
to #43 Jeff
I just feel nitpicky so ignore this if you want.
Technically false, since Logitech is making a profit on gaming devices as far as I know, in addition to other 3rd-party controller manufacturers. Hardware does not only consist of consoles.
Ed @ Oct 26th 2006 8:37PM
It took MS 11 months to get over 6 million consoles sold, and Sony expects to sell 6 mil in 5 months even with their product shortages?
Psaakyrn @ Oct 26th 2006 8:43PM
to #47 Ed
Based on previous reports, they'll probably spin (shipped) to (sold). But for the purposes of profit, there isn't a difference, since the shops pay for the products first.
TwilightKnight @ Oct 26th 2006 8:49PM
Microsoft's gaming sector made money? Congrats.
Nintendo's projection was predictable, it was just a matter of how much money they made.
Sony was also expected, but I didn't know that PS2 sales have slowed down that much to have a negetive affect on them.
Also here is something for the Sony fanboys to chew over. Look at the report and it compares Sony's entire company profits against Microsofts total gaming operations. Not exactly equal in that sense, and this is moot for Nintendo since they just make games anyway.
FuzzyPickles @ Oct 26th 2006 9:14PM
"Based on previous reports, they'll probably spin (shipped) to (sold). But for the purposes of profit, there isn't a difference, since the shops pay for the products first."
This is the PS3, anything that's shipped is going to sell. The Playstation brand did prove it wasn't infallible with PSP, but I think it's strong enough for demand to outpace supply in the home console market. The bigger issue is whether they can churn the mothers out fast enough before folks unwilling to compete for the thing Tickle Me Elmo deathmatch style will get sick of the whole thing and look to competitors.