Sony slashes 2008 earnings forecast by 38% - PS3 profitability uncertain
by Christopher Grant 
{ Oct 23rd 2008 at 8:41AM }
But it's not just the yen picking up; a global recession will take a bite out of entertainment spending, meaning things like LCD TVs and 4D game consoles may not fare so well. "Sony will make further losses in televisions, videogaming and mobile phones ... despite early 2008 promises of profits in TVs and its PlayStation3 videogame console," writes Forbes. Add in a steeper price than the competition – and no sign of a price drop – and you've got a recipe for red ink stew.
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Reader Comments (Page 1 of 1)
Muu @ Oct 23rd 2008 8:50AM
And it's only going to go from bad to worse; JPY-EUR conversion rates are at 125yen/EUR right now, and steadily worsening. Sony's revised profit forcasts assume a 140yen/EUR rate, meaning it's about 10% off the mark (in the direction that's bad for Sony). Wonder if they're going to do yet another adjustment before its conference next week...
michas_pi @ Oct 23rd 2008 8:50AM
Sony needs a bailout.
xFenixKnightx @ Oct 23rd 2008 9:04AM
I'll sign that.
samfish @ Oct 23rd 2008 8:52AM
Aren't worldwide financial collapses GREAT??
Ian @ Oct 23rd 2008 9:59AM
Here's what I don't get. If the whole world's currencies lose approximately the same % of value... what changed?
The_Black_Circle @ Oct 23rd 2008 10:47AM
Ian, currencies are dropping however the costs to manufacture goods and services are not. The cost of items on the shelf have been steadily increasing and the value of your dollar has decreased.
LaughingTarget @ Oct 23rd 2008 11:39AM
That's irrelevant. There isn't a worldwide deflationary pressure on manufacturing or other production. There'll be a massive inflationary spike in a year or two after all this bailout money hits, but that will have a different impact depending on who printed the most money over the time frame.
No, the problem is that Sony makes the bulk of its money overseas and the Yen has been strengthening, meaning they'll take in fewer profits due to exchange rates. They have to either ride this out or start hiking prices or cutting down manufacturing costs to be able to return to a prior equilibrium.
The financial problems only have an impact on risky short term borrowing called commercial paper or risky real estate loans. There isn't a credit freeze, there's just one on companies that need to rely on borrowing to pay off day to day operations (these companies really need to go out of business and free up market resources, nothing says a poor business than one that borrows money for payroll). If Sony is highly reliant on borrowed money to survive, as they were a few years ago, then the credit problems would hit them.
Balla360 @ Oct 23rd 2008 11:46AM
Ian, during a financial crisis (or any other market event), concerned investors will move their money into currencies that they believe will perform the best. The current market malaise has world investors very concerned, so one place they're moving their money is into Yen. Japan faced a similar credit crisis itself a decade ago, and has since become very conservative about debt. In theory, this means that the Japanese government is trustworthy from a credit perspective, and is likely to make good fiscal policy decisions. This increased demand for Yen has driven the price up, just as increased demand has recently driven the value of one of the world's other "safe" currencies: the US dollar.
Hyams @ Oct 23rd 2008 9:02AM
Surely the steep price and lack of a price drop means that Sony will be less in the red, not more? I mean, if they DID decide to slash the price, they'd be making less/losing more money on hardware, after all.
Ayrkain @ Oct 23rd 2008 9:12AM
The problem is really that the PS divisions and all the rest of the electronics divisions will all under-perform due to the yen being strong against the dollar. They'd have to raise the price to get as much as they were getting before the crisis.
Negativecool @ Oct 23rd 2008 12:35PM
Jesus, downvoted to oblivion because of a simple misunderstanding of economics?
Harsh people.
Hyams @ Oct 23rd 2008 1:57PM
Surely my point still stands, though? You're saying they have to be even more expensive to make a profit - which is true, I never said otherwise.
What I simply said was: if Sony *did* cut the price, they'd be losing even *MORE* money per each console sold, and so would be pushed even further into the red?
Why did I get downvoted for that?
Levi @ Oct 23rd 2008 9:12AM
what the hell is a 4D game console? Sony has discovered a way to manipulate a new dimension with their cell processor and I didn't know about it??
Oh, and something else I don't understand: how would the entire world fall under this economic crisis? I thought it only made sense that someone had to be rich and someone had to be poor :/
KGG @ Oct 23rd 2008 9:32AM
well the 4. dimension is time.... and a game goes over time.... so yeah, its 4 dimensions.... but then again im not completely 100% sure how the definision of the 4. dimension is.... but its time... :P
GearSecond!! (a.k.a AwesomeStuff) @ Oct 23rd 2008 9:46AM
4D = HD
Mep @ Oct 23rd 2008 10:50AM
If I remember correctly it was one of the Sony PR people who more or less said that if the competition was 3D, the PS3 was 4D. A funny moment in the corporate monkey shit fight.
sk8monroe81 @ Oct 23rd 2008 7:43PM
4D sounds like jargon just like " its in our HDNA " like that comment means anything outside of marketing...
levi- most of the leading countries of the world invested a lot of money in the united states and US real estate and US securities during the real estate boom in the united states. And most of the leading countries of the world depend on the american dollar and the american economy for their various industries and bottom line too.
where do u think sony japan sells most of the TV sets?
Maverick Saturn @ Oct 23rd 2008 9:15AM
Economy is depressing ¬_¬
sk8monroe81 @ Oct 23rd 2008 7:44PM
when u listen to the media or work in an industry that is doing poorly right now, however many industries are doing fine now.
its a matter of not listening to the media also.
the media makes everything worse and gets people going which in turn affects the markets also.
Mr Khan @ Oct 23rd 2008 9:16AM
Gaming's generally been insulated from this, not really in the sense of stock value, but revenues haven't gone south that much (there was that decline from last september, but there was nothing nearly as big as Halo 3)
It will be interesting to slate this year against last year. More market-driving games this year, weaker market. Which will prevail?
Hyams @ Oct 23rd 2008 9:23AM
Well, to be fair, the article is talking about Sony as a whole, not the gaming division. Forbes only briefly mentions the PS3 in passing.
NaeemTHM @ Oct 23rd 2008 9:26AM
Well the 360 price drop certainly helped boost sales for Microsoft. Perhaps a drastic price drop will help the PS3 regain ground in Japan and the rest of the world.
Hyams @ Oct 23rd 2008 9:28AM
They'll gain marketshare, yes, but it'd cost them a lot of money.
ExMcCloud @ Oct 23rd 2008 10:13AM
They would lose way to much....So honestly what they need is a block buster title....This is where this whole "The PS3 doesn't have its defining game yet" convo we had like a month ago comes back in....We all see how NOT having a defining title can be negative for your system when the playing field is leveled out. No more RPG, driving, and sandbox(GTA) monopoly for Sony means that their 1st party guys have to step their game up and make a character and a game cool enough to be a world wide celebrity in the vein of Mario, and Master Chief......So things are gonna get interesting......{rubs chin}
E.J. @ Oct 23rd 2008 9:42AM
Let's hope the holidays bail Sony out now that the PS3 has some heavy hitting titles.
Duke @ Oct 23rd 2008 10:02AM
I think this holiday season is going to be pretty bad for everyone. They calculate projected holiday sales in when they figure out the years expectations and not many thought the bottom would fall out of the world economy as much as it has. Many people havedried up credit and no means to newly over-extend themselves this year. So, I doubt the holidays will be anything but more bad news for them.
ExMcCloud @ Oct 23rd 2008 10:14AM
I agree with Duke.....The difference is that MSGS, and Nintendo are in the Black though....Sony's still in the Red...So this will be a defining holiday for the PS3 AND the PSP
naxe @ Oct 23rd 2008 12:31PM
At exmccloud.
I know this is an old post but
http://www.engadget.com/2008/01/31/sonys-game-division-turns-a-profit/
also sony has movies and music. they also have PSP.. PS2.. And PS3.
I think they will be fine.
nick @ Oct 23rd 2008 10:21AM
Sony is expected to report their earnings next Wednesday. Since the whole financial crisis began, my first thought it that it would negatively impact Sony, which is already somewhat battered, and is expecting high end goods to carry the company, which may not be-- as of late, in great demand. I suspect the final quarter of the year to be even worse for Sony.
It would not suprise me if we see some serious price reductions on TVs come end-year. Unfortunately, I think the PS3 is price reduction proof for the foreseeable future. But we should be bundles or other incentives.
Vcize @ Oct 23rd 2008 10:24AM
"A global recession will take a bite out of entertainment spending, meaning things like LCD TVs and 4D game consoles may not fare so well."
Aren't videogames and most forms of enterainment generally pretty safe from this kind of thing? I mean sure, people have less disposable income, but people are also looking to stretch their dollar further. If a $60 game can last you a month, people strapped for cash are more likely to go that route than drop thousands of dollars on expensive vacations that don't last as long.
Vcize @ Oct 23rd 2008 10:25AM
"Sony will make further losses in televisions, videogaming and mobile phones ... despite early 2008 promises of profits in TVs and its PlayStation3 videogame console"
But....year of the PS3?
Hyams @ Oct 23rd 2008 10:33AM
Year of the PS3 got delayed to 2009.
HAZE turning out to be crap, Killzone 2 getting pushed back to 2009, and the 360 price drop all combined to halt the whole year of the PS3 thing.
Not that the PS3 has done bad this year. It's sold well, and there has been (and will be) a bunch of awesome games relased for it. 2008 has been much kinder than 2007.
ExMcCloud @ Oct 23rd 2008 10:33AM
Low Blow....lmao
timatl @ Oct 23rd 2008 11:17AM
Don't forget that you can get a decent standalone bluray player these days for $230-$260 (sony, samsung and sharp players). I will get rid of my PS3 when I can get a standalone that can decode DTS-MA for less than $300. The PS3 was the best option for the bluray but the gap is closing quickly.
Mr Khan @ Oct 23rd 2008 11:41AM
All signs point to 2009 being a stronger year for Nintendo than anyone else. Yeah there's RE5 for both, Killzone 2 for PS3, and Halo Wars for 360, but what else?
Which isn't really bragging, i'm just like stacking up lineups to see how they compare
Vcize @ Oct 23rd 2008 12:15PM
Mr. Khan, that's what people were saying about 2008 at this point in 2007 though.
I really think we're just in an era of gaming where every holliday season is going to see a bevy of blockbuster releases. At this point last year we didn't know that games like Fallout 3, Fable 2, and Gears 2 would make it into this year. Heck, there wasn't even any official indication that Gears 2 was being worked on until almost half way into 2008.
I wouldn't be at all surprised if sequels to Mass Effect, Bioshock, and Assassin's Creed hit in 2009. God of War 3 and FFXIII could also make it. Looking at the huge names there, 2009 could be even bigger than 2008 (which sounds crazy right now, but saying 2008 would be better than 2007 sounded just as crazy at the time).
Mr Khan @ Oct 23rd 2008 12:32PM
I thought God of War 3 was on track for 2010, though? or am i not thinking straight?
FF XIII is likely, i had forgotten, as are Assassin's Creed and Mass Effect sequels
Equally, nobody knows what Nintendo has in stock. The next Zelda is iffy, the Factor 5 project more definite. Red Steel 2 (hopefully a much better game), Pikmin 3 highly likely, with the possibility of Monster Hunter 3 by that point
A lot could happen, i suppose.
j.howlett @ Oct 23rd 2008 1:26PM
it doesn't have to start in january, go from mgs4 releasing
xFenixKnightx @ Oct 23rd 2008 1:38PM
Mr. Khan
"But what else"
Halo 3 Recon thats whats motherfucking else!
:P
Hyams @ Oct 23rd 2008 2:04PM
Mr Khan:
Off the top of my head:
Killzone 2
God of War 3
Halo 3: Recon
Resident Evil 5
MAG
InFamous
Heavy Rain
Alan Wake
Halo Wars
Quantum Theory
Edge of Twilight
Bioshock 2 (most likely)
Uncharted 2 (probably)
Next Ratched and Clank Future (almost certainly)
Next Ico Game (well ... maybe)
Lookin' pretty good for both the HD consoles from where I'm standing. =)
sk8monroe81 @ Oct 23rd 2008 7:50PM
hymas- it seems many things sony says get pushed back..
so why do they even try to get us going and market these things..
year of ps3... lol.. maybe next year.
socom has been a nightmare so far... needs drastic patch work. released before completion.
tima- blu ray players = $ 300 and movies = $ 30.. people will stick with DVD players and upconverters for $ 25- $ 75 and dvd's for $ 5 - $ 20
JM @ Oct 23rd 2008 10:44AM
I understand they out to make money but they need a price drop. I personally think the price is right but I know their sales will sore if they drop the price.
Ohh and Sony you think selling that XBR 8 for $5k & $7k in todays economy people will bite?! For that I can pick up a Pioneer Elite or for half the price the Sammy 9 series.
What were you thinking?!
TheAbbotFire @ Oct 23rd 2008 12:10PM
LOL!
Great News!
Go to hell sony.
Chin-Poh @ Oct 23rd 2008 12:40PM
Sup AzureKnight?
Hyams @ Oct 23rd 2008 2:05PM
Please stop posting.
B @ Oct 24th 2008 9:53AM
Inevitably they'll pull threw this, but if somehow they do go down Sega & Dreamcast route it will do nothing more but hurt the industry as a whole.
Competition is healthy
thispaceforsale @ Oct 23rd 2008 12:22PM
it's hard not to look at the fates of sony and apple in the last 5 years and not see two companies heading in very different directions
sk8monroe81 @ Oct 23rd 2008 7:51PM
i couldn't believe that the iphone made up 39% of apples total revenues for the last period.
apple relies on a few products but those products seem to do well for them.
mookins @ Oct 23rd 2008 6:00PM
It's not Sony that will be in trouble. It's other companies as well because this economical crisis is crippling everyone. It's crippling jobs, way of life, homes, cars, everything that we know and love in America.
I'm sorry but I don't see a lot of spending this year, whether it be for toys or game consoles.
Things are really bad now and I hope they don't get worse.
sk8monroe81 @ Oct 23rd 2008 7:55PM
yeah like how many millions of people will skip a vacation this year that cost $ 500 - $ 5000 that put money back into the economy and supported many local towns and areas...
etc... etc.. etc...
who cares if sony decided to think way ahead and release a console that cost them more money to produce than they could sell it for at a time when developers did not want to fill up 50gb of space and spend millions of dollars more on added production costs.
sony took a gamble on blu ray and they will have to see what happens... upconverted dvds do not look that bad and close to blu ray quality, considered the much higher cost to watch blu ray.
ANYBODY REMEBER BETAMAX... that happened around a time with an american recession in the late 80's early 90's... most of us are too young to remember that or comprehend it at the time.