Record loss for Sony predicted by Bloomberg

by Ross Miller on May 15th 2007 4:27PM

Sony could be posting a net loss of ¥75.8 billion (US $630 million), its biggest in four years, in the fiscal quarter that ended March 31, according to Bloomberg. The financial publication took a median estimate culled from 11 surveyed analysts.

Five of the analysts expect the games division, home to the PlayStation, to post a 121 billion yen (US $1 billion) loss and a record deficit of ¥245 billion (US $2.04 billion) -- figures that may not be offset by Spider-Man 3's record-setting box office returns. Production delays are cited as one of the reasons Sony is currently in third place in worldwide hardware sales, though Sony is still the world's largest console maker due to its PS2 sales. All other divisions are expected to have generated profit.

CEO Howard Stringer, pictured, has promised to raise the company's annual operating profit to 5% of revenue by March 2008; analysts expect Sony to have a 4.1% operating margin. Merrill Lynch analyst Hitoshi Kuriyama believes that Stringer can still reach that target if there is no price cut with the PS3. "But I'm expecting a 20 percent price cut," he said. That's a steep figure that, if true, would put the 60GB version at ¥48,000 (US $390) in Japan and $480 in the United States.

See Also:
Xbox 360 still bumming cash from Microsoft
Nintendo announces record year, thanks DS and Wii

Source

Tags: bloomberg, howard stringer, HowardStringer, PS2, PS3, PSP, sony

Reader Comments (95)

What's the 360's loss at this point? I think gamers of both sides should be concerned about where things are going with these kinds of losses added to the highly increased publishing costs. Profit seems to lie with easier to produce games; a la Nintendo. Rather than a total market crash, as predicted by some, I could see a high-end gaming crash. With M$ and Sony trying to outdo each other, it may end up that no one wins, especially the gamer.

MS is not loosing anything on the Xbox 360 any more. In fact it's been reported that MS is set to make a profit next year for the first time ever on the Xbox 360 / Xbox venture.

There is no way Sony is going to cut the price $100 or more...as they just basically raised the price $100 by eliminating the $500 version just a few months ago.

At this point...I wouldn't touch a PS3 with a Ten foot pole.

As I understand it, the 360 is no longer a loss leader for Microsoft; they're breaking even on the hardware costs. It's likely the Elite is profitable.

- Xbox 360 still bumming cash from Microsoft
- Record loss for Sony predicted by Bloomberg

and

- Nintendo announces record year, thanks DS and Wii.

Yet even last year, what did we hear from the idiot fanboys devoted to these, (/spits) other companies? Nintendo should stop making hardware and just make games? Excuse me while I shit myself with smug glee.

What do we still hear from these morons? Nintendo arnt fooling anyone, and the faddyness of the DS and Wii will show themselves any minuite?

Laughable man. Hahahahahahaha!

To all my nintendo loving bredrin - When these idiots henceforth speak, do not rise to their brainless taunts: close your eyes and picture Iwata, Miyamoto and reggie swimming laps in their olympic-sized pool of monies, and the truth of the situation will become clear.

Nintendo, always number one, and rightfully so.

Based on what Sony's been saying, I wouldn't be surprised at a price cut before the holidays. If they truly are looking at a "10 year" lifespan, than capturing market share early may be worth the increased losses now. Eventually the hardware cost will come down, and they'll need a vibrant platform in place to take advantage when it does.
Of course, if Sony does cut the retail price, I'm sure Microsoft will do the same.

$460 is still way way too much for a console unless you're a die hard nut.

Most of us are still waiting until they're $250 or less. Until then, we'll keep buying Wiis, DSs, and PS2s.

Sorry Jon the 360 is still losing money for microsoft

http://www.dailytech.com/article.aspx?newsid=7173

It will become profitable in 2008, but at the moment it still burns a hole it their wallet.

I'm not sorry to say that, to me, spending $600 on an $800+ machine has a ton more value than spending $250 on a $170 machine.

Ouch! At least profits from the PS2 and PSP are helping to ease the pain. It may hurt profits, but a price-cut this year is necessary to keep the PS3 alive. A price-cut and release of more games later this year should help bump-up PS3 sales.

@Matt B - If only there was an even more expensive console, that would be the most valuable game system of them all! Even more valuable than the Neo Geo!

Not true, the recent MSFT earnings report cited poor 360 sales and that the game dept is STILL losing money.
Sony will keep losing money till games come out for the ps3 and sales start to pick up.

Last I czeched spending $250 on a system that comes with a 5-1 game is a better value than spending $600 on a system with ZERO games.

Gamerankings.com right now shows 55 released Wii games and 33 released PS3 games, only counting disc-based games. And the VC has 90 downloadable games and the PlayStation Network has 25 downloadable games.

Where's your 800 dollars of value again?

@8.

It doesn't matter if its a hardware bargain, the bottom line is that $600 is to much for a machine designed to play video games. When a luxury item starts to cost nearly two to three times more than the competition it will have a hard time with market penetration, period.

@ everyone/rant

A Lack of market penetration means that designers will not see as much profit and default to creating another product with greater income potential. This is a problem for everyone, like it or not, gamers need choice in consoles. If there is not war for who has the better games then innovation won't happen at any rapid pace. Sony needs to do something to increase its sales, not just for its share holders but for gamers in general.

Some people are saying that the XBox is going to be profitable next year. Well... I was thinking about it and I thought: Don't you have to recoup all your investment before making a profit? Just a thought though.
Honestly I don't think this business model will apply when we see the next gen systems. Expensive machines that may or may not sell. Years of losses before making money. I expect minor upgrades for the next generation. Who wants to keep losing money?

@Matt B
If your talking about value, don't forget that the the $250 system comes with an excellent game. Not only that, you have to consider research and development costs. The Wii remote is awesome. It wasn't something thrown together over night. I don't mind paying more for a system than the face value of it's parts are worth.
No matter what kind of value you're getting, $6oo for a system is a lot of money. I have a good income, but that's too much money to invest just to play games.

YAY. Microsoft wins!!

kidding....

a price cut and release of more games would bump up any consoles sales. 360 and PS3 will both be price cut by this holiday, the question is which games and how much is the price cut.

regarding value, how much something is worth is very subjective. my PS3 may have $800 worth of components in it, but i won't see the value of that for a very long time it seems. if ever.

by the time Home and Sony first party and exclusive games come out (you know the compelling reasons to buy a PS3), the PS3 will not be $600.

the Wii can be considered worth $250 for admittedly old tech, when you consider the R & D in that controller has made games accessible to those who never could enjoy games before. the value of individual full-priced GAMES however....

.

@12

To be fair, neither system really has a stellar line-up. And the VC is hardly a fair comparison. Nintendo is just dumping old games on emulators. Big deal. I'm not saying the VC is bad, but I'm waiting for something more compelling to spend my points on.

Anyway, I'm sure a few people will proceed to tell me how many games they have bought for their Wii, but I have only bought 1 for mine (TP), and it was a GC port. I'm still waiting something to really stand out. Most of the Wii games are poor to average.... sort of like the PS3's line-up.

In the end I hope the PS3 and 360 become profitable. As valid as Nintendo's approach may be, I still want a powerhouse console to play with. As fun as I'm sure many of the game will be, I need some HD loving too. Yeah, I've got a PC, but consoles and PCs serve largely different gaming needs.

14: MS may or may not start having profitable quarters next year (we got this same song and dance regarding the first Xbox), but you're right that the Games Dvision is still, overall, a couple bilion in the hole. And the R&D costs for the next Xbox, unless they take Nintendo's path, will probably put them back in the red a few years from now.

Sony's losses are more interesting. The Games Division has been one of their most profitable units, and for it to have suchtrouble means big trouble the company as a whole. It's not reasonable to expect them to leave the business, as fanboys might, but it's going to have serious repercussions.

Putting all this together with the bank-breaking software budgets and Nintendo's record earnings, we might see a "less-is-more," belt-tightening trend.

Whats sad is that almost all the other divisions posted hefty profit.

Sony would be better off cutting the PS3 and sticking to what they know, instead of trying to bumble their way to victory again.

Because lets face it, PS1 was a success because it was at the right place at the right time: N64 couldn't hold the games people wanted to make, sega saturn was a POS total failure due to bad Sega marketing. PS2 succeeded because sega was on the way out, it included DVD as extra functionality, and the competitors were at least a year away.

Sony got lucky both times. This time, there luck has run out.

19 Craigo
I believe low upgrades will keep the price down and they will eventually lead to a market growth. Cheaper consoles will lead to gamers owning more than one system just like we saw during the 16 bit era. I had a Playstation and an N64 just because they were both affordable. I own the Wii and I'm defenetely going to buy an XBox as soon as theres a price cut. I would love to buy a PS3 but it is just too expensive right now.
If the next gen starts with all 3 systems at the same price range we all win. Manufactures, developers and, of course, gamers.

@20

You can't claim it's all luck. Sony did a lot of things right with the PS1, that's not luck. Same with the PS2... though to a lesser degree. They've just over extended themselves with the PS3. Even just leaving out the BR drive might have been a tremendous help to the PS3 because the price would have been a couple hundred less. The PS3 itself really is a sold piece of hardware. It has no more hardware issues than the Wii, which is quite a bit less advanced. That's not bad. They've just killed themselves on the price and with delays.

IMO, the PS3 will be fine in the long run. The price of the lasers used in the BR drive are going to be falling fast soon and the PS3 looks to have a pretty good fall line-up. If their gamble with putting the BR in pays off on the format war, Sony may actually come out looking pretty good at the end of all this.

it was a platform strategy not prioritizing games that got PS3 where it is now. perfectly illustrated by the fact that it's going to depend on a movie format acceptance to decide its fate.

.

doom and gloom.

-"superfan" tactics.

MS will be profitable "next year". Translation: Next fiscal year. FY08 starts in July 07 I believe.

Meh.. more doom and gloom from Ninten-X-bots... if Nintendo or MS ever sell 100+ million of any of their home consoles, they can talk. Good luck with that.

@ 26

Is your console more fun to play now that the company that made it achieved some statistical benchmark?

Stupid fanboy.

I thought the Game Boy sold more than that... oh... you don't count handhelds, I get it. If you counted handhelds you'd be too embarassed by the PSP. Nice logic.

Rubang B, the PSP is doing very well on all fronts, example:
http://www.pspfanboy.com/2006/10/17/psp-second-place-behind-ipod/

Think about this, though

Even as the price of the actual components goes down, they'll just use that ability to drop the price to stay competitive, they lose $200 per unit now, when it goes down to where they're only losing $100 per unit, they'll drop the price by $100 to try and boost sales

The loss-leader strategy is really starting to show its disadvantages

And Ian, just because Windows has sold more does that make it inherently cooler than Linux?

didn't think so...

Hey required that made no sense. It's second place to the iPod in the same way that the XBox was second place to the PS2, by about a gazillion. Wow, so it's second place to the iPod by about 80 million as a PMP and 3rd place to the GBA and DS as a gaming system by 20 million. So it's a jack of all trades, and master of none. Kinda like an N-Gage when you look at it that way.

similar logic: the ds is a failure because the yo-yo has outsold it - they're both toys and they both play games where you can walk a dog.

The yo-yo doesn't have the amazing third-party support that the DS has. The yo-yo doesn't PRINT MONEY. The DS and the iPod do, and the PSP doesn't either.

I'm curious, what other systems support locationfree Rubang B?

And I wonder, do you really feel that every non-ipod mp3 player is a failure?

Wrong again Rubang B, Google search: yo-yo third-party

I didn't say the PSP was a failure, and I haven't called anything a failure yet. The PS3 is a failure (so far, but that could change with magic).

Earlier I was referring to the PSP as the only Sony gaming system that didn't break 100 million, which is why people like you try to argue home consoles only, to make Sony look like they broke 100 million with 2 out of 2 instead of 2 out of their 3 systems. And that way you can ignore the Game Boy.

And what do you mean by locationfree? Isn't that what the N-Gage had? I'm not sure. I don't have either.

Rubang B, LocationFree allows you to see and control everything your TV can from anywhere you have a network connection. This includes your cable channels, your DVR, your DVD player, your PS3, etc.

Sony has sold a lot of PSPs probably more than the DS phat and back to the iPod, it seems like you are comparing sales of all iPod variants including oddballs like the shuffle. Keep in mind the PSP is still an original product, unlike the DS lite.

Does anyone think Wii is going to hit 100,000,000+ units sold in its lifetime? Seriously think about that.

Nintendo has had two consecutive console flops, they kill off and repackage the GC and market it to game deprived noobs and nintenbots ... and all of a sudden you guys think they know how to make a console?

The comparable sales of PS2 and Wii indicate that people are happy with last gen technology.. thats what is driving their sales.

http://www.pspfanboy.com/2007/03/16/the-first-2-years-psp-has-sold-better-in-the-us-than-ps1-ds-m/

Yeah the PSP has outsold the Phat but not the Lite. More than half of all DS sales are already the Lite. But you get to include both Phats and Lites as DS sales because they can both play DS games so they both count as the same install base. You also get to count every iPod in the same group because they all play .mp3's, so they all contribute to the same potential install base for iTunes, even the measly Shuffle.

No I don't know anything else that does LocationFree. Maybe the Apple TV?

Hey Ian, "The comparable sales of PS2 and Wii indicate that people are happy with last gen technology.. thats what is driving their sales."

So what's your point? You sound like you're on my side. The average consumer stopped noticing the advantages of upgrading graphics, but kept noticing the disadvantages of upgrading the launch price.

"they can both play DS games"

by the same twisted logic, you could add them to the gameboy sales

Hm, interesting charts required. The PSP is doing as good as the XBox and GC, which both did really good, but all 3 are dwarfed by the DS and PS2, respectively.

Is anybody counting DS sales as GB or GBC or GBA sales or counting PS3 sales as PS1 or PS2 sales? No. But it does help the install base. I got a DS before I got a GBA, and I got some GBA games.

"Sony has sold a lot of PSPs probably more than the DS phat and back to the iPod, it seems like you are comparing sales of all iPod variants including oddballs like the shuffle. Keep in mind the PSP is still an original product, unlike the DS lite."

So you count the PS2 and the PS2 slim as two separate entities, huh? I guess Sony hasn't sold 100+ million either.

39: Perhaps the worst bit of sophistry I've seen lately. The PSP is not a failure, it's doing fairly well, but to pretend that "it's not trailing that far behind" when it's sold half as many units as its competitor is just idiotic. Even if you're focusing on US sales only, the DS has sold about 50% more.

Cost comments really don't make any sense to me. I paid $200 for an intellivision in 1981. In 1995 I bought my PSX for $300. In 2000 my PS2 cost me $300.

Bargains, the PSX and PS2, in my opinion. I used the systems for about 4-5 years each. That's ~$60 a year. Break it down by hour...my god it's an insane value.

So $600 for a PS3. Seems high, until I recognize that we watch 4 movies a week on DVD. So we get BR movies from Netflix instead. We'll say 4 hours a week on just movies. 200 hours of entertainment a year with just movies. We'll peg game play at a modest 5 hours per week. 450 hours of entertainment per year. Lifespan of say 3 years... 1350 hours of fun from one system. That's less than $0.50 an hour for entertainment.

Craigo, the charts in the link I posted cover US sales.

Well Rubang B, if you dig bundling than you might as well bundle all portable game systems and let their collective sales fight the tethered TV-based systems sales. I bet portables would win. unless you went all the way back to the pong era.

>>Record loss for Sony predicted by Bloomberg

>>Sony could be posting a net loss of ¥75.8 billion (US $630 million), its biggest in four years

OK, so which is it?

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Record loss for Sony predicted by Bloomberg

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