Close
Are you sure? Are you sure you want to report this comment? I understand, report it. Cancel

Retail

Sony loses $8m on games as overall business cuts forecast by 40%

Sony loses $8m on games as overall business cuts forecast by 40%

Thu 31 Oct 2013 10:10am GMT / 6:10am EDT / 3:10am PDT
Retail

Exchange rates hide some of the story as corp prepares for Q3/4

Sony's games business has managed to raise its quarterly revenues slightly year-on-year, but only thanks to the continuing crash of the Yen against both Dollar and Euro.

Global takings for the division for the quarter ending September 31, 2013 were 155.7 billion ($1.588bn) as opposed to 148.2 billion for the same quarter one year ago. However, that 5.1 per cent gain quickly turns into a 14 per cent downturn when calculated on a constant currency basis.

On either terms, that means an operating loss for games of 0.8 billion or $8 million for the three-month period, compared to a positive income of 2.3 billion a year prior to that.

"The decrease in sales on a constant currency basis was primarily due to a decrease in unit sales of PlayStation 2, PlayStation 3 and PSP hardware, partially offset by increased PS3 software unit sales compared to the same quarter of the previous fiscal year," the accompanying report reads.

Oddly, Sony's report also highlights the shifting financial market as a cause of lower operating income, despite a weaker Yen having a positive effect on non-domestic sales.

"Operating loss of 0.8 billion yen (8 million U.S. dollars) was recorded, compared to operating income of 2.3 billion yen in the same quarter of the previous fiscal year. This year-on-year decline was primarily due to the impact of a strategic price reduction for the PlayStation Vita and the unfavorable impact of foreign exchange rates, partially offset by the above-mentioned increase in software unit sales."

Elsewhere in the report, R&D costs for the PS4 are brought to bear, but remain unspecified. "In the Game segment, operating loss significantly increased year-on-year primarily due to an increase in research and development expenses related to the upcoming introduction of the PlayStation 4 and the impact of a strategic price reduction for the PS Vita."

Half year figures are more revealing, with Sony publishing the bottom line impact of the currency movements. Sales for the first half of FY2012 were 266.1 billion, increasing 2.8 per cent to 273.6 billion for the first six months of FY2013. Nonetheless, that's a shift from an operating loss of 1.3 billion to a loss of 15.6 billion over the same period: a 15 per cent drop in constant currency terms. To add insult to injury, those financial changes effectively added an extra 47.1 billion to Sony's coffers, as you can see from slide five here.

Sony's games forecast for the next quarter and the full year remain unchanged from the August report, in both operating income and sales figures, but the outlook for the rest of the business has been revised downward drastically. There's a 2.5 per cent cut to the expectations of company-wide sales for the full year, from 7,900 billion to 7,700 billion, cascading to a 26.1 per cent reduction in the forecast for operating income and a huge 40 per cent cut in predicted net profits for shareholders. That would mean a share of a 30 billion overall profit for the corporation, rather than the 50 billion forecast in August's report.

Sony Pictures is a one of the major culprits, with underperforming cinema titles and a reduction in TV optioning contrasting sharply with some major box-office successes in the previous year. Nonetheless, whilst sales in every segment other than Games and Music are expected to be below August's expectations, nearly every department is still predicting a rise in both raw sales and operating income, year-on-year.

6 Comments

Nicholas Pantazis
Senior Editor

1,020 1,467 1.4
Sony is very careful, as usual, not not reveal individual platform sales. They are also very careful to not blame any losses on the Vita, even though we all of course know lots of losses are coming from the Vita, especially post-price cut. It will be an interesting holiday for Sony, as the PS4 has incredible momentum... but the Vita will likely not fare well at all.

Posted:10 months ago

#1

Felix Leyendecker
Senior 3D Artist

181 200 1.1
I think they are banking on the Vita becoming the accessory of choice for PS4 owners which it might well become. It should see a serious boost once PS4 has a healthy install base.

Posted:10 months ago

#2

James Ingrams
Writer

215 85 0.4
If people aren't buying current gen games, can't see how they are going to buy the new next gen consoles and games!

Posted:10 months ago

#3

Nicholas Pantazis
Senior Editor

1,020 1,467 1.4
@ Felix as an existing Vita owner, I'm excited for the cross-platform features, but among the new PS4 buyers I know none own a Vita and none plan to. If I suggested to them they pick up the Vita as a $200+ accessory, they would laugh at me.

Posted:10 months ago

#4

Nick Parker
Consultant

283 150 0.5
These are not surprising financials for the games segment as the PS3 is almost 7 years old. I am surprised that Sony can shift some of the blame on to "the strategic price reduction for the PlayStation Vita". Sony must be running a very fine line between loss and profitability to suffer such an impact from a $50 price move on a relatively slow selling device.

As for the Vita, the PS4 marketing exposure and launch sales can only improve awareness and some sales activity for the handheld, I would have thought.

Posted:10 months ago

#5
It is interesting how many see this loss as an exaggeration of the reality of the console scene - but fundamentally, if Sony is not seeing a strong return from their game investment then things will change - possibly explaining why the PS4 is the way it has been designed?

Posted:10 months ago

#6

Login or register to post

Take part in the GamesIndustry community

Register now