There’s good news for Sony overlord Kaz Hirai: the PlayStation 4 is selling spectacularly. Not even the most optimistic of industry analysts could have predicted that the next-gen system would sell over seven million units in its first six or so months on the market, but that’s exactly what it’s achieved, and it’s showing no signs of slowing down. Alas, the bigger picture isn’t brilliant for the Japanese giant.
In a move that’s sure to have added a handful of grey hairs to the abovementioned executive’s perfectly groomed head, the firm has warned that its financial loss for the 2014 fiscal year will be significantly worse than it touted in February, totalling a terrifying ¥130 billion ($1.27 billion). That’s an increase of around 18 per cent, as the company originally expected a substantial loss of ¥110 billion ($1.07 billion).
So, what’s gone wrong this time? Well, you may recall that the manufacturer opted to sell off its Vaio business earlier in the year. However, sales in the interim have been slower than anticipated, with the organisation being forced to compensate suppliers for unused components and excess inventory. This will cost the company a whopping ¥30 billion ($293 million), which is a sizeable chunk of change.
The good news is that the firm expects to offset these charges next year, as it’s getting restructuring costs out of the way early. However, in all of our time reporting on PlayStation, we feel like we’ve heard the manufacturer say this several times, and it nearly always manages to result in more losses. Another issue it’s facing right now is a contraction in physical media sales, which is hurting its disc manufacturing business.
Despite all of this, though, there are glimmers of hope. The profit warning may read disastrously, but the company has actually seen a 14 per cent increase in sales year-over-year. It’s also worth remembering that, as already mentioned, the PlayStation business is doing very well, reporting a profit of $172 million at the end of December. There’s no reason to believe that that won’t continue over the coming year.
As such, it’s the colossal scale of the company that’s continuing to bring it down. Since taking the reins of the Japanese giant a few years back, Kaz Hirai has been eager to trim the fat, selling off buildings, businesses, and unnecessary assets. From what we can tell, the firm is heading in the right direction – operating costs have been cut significantly over the past few years – but there’s still a lot of work left to be done.
[source eurogamer.net, via vg247.com, gamesindustry.biz]
Comments 30
Oh look, SCE has posted another profit for Sony. Kinda makes all the doom-mongerers regarding the future of Ps4 & Sony's Worldwide Studios look a little silly of late. Its obvious where the companys losses are coming from while its being restructured. Give it a couple of years and things will look ok for Sony
@MadchesterManc Yeah, I actually think Kaz Hirai's doing a really good job - I just worry how many more losses like this they can realistically take. No doubt that PlayStation is one of the big priorities for the company as a whole, though.
This article is very contradicting. First it talks about a 1.30 billion loss, then it says Sony made a profit of 173 million. If sony made a profit, that counters that 1.30 billion because it's profit. Otherwise they would have made a loss of 1.1 billion or whatever. LOL
@get2sammyb Profit is changable but cash is king. As long as Sony can attract cash and pay of their short term debts they are fine.
@Demi_God The loss is for the company as a whole. The profit is for the PlayStation division, at least that's what I understand. They need more than just the PlayStation division to make a profit to offset that company loss.
@Demi_God To clarify: the loss is for the company as a whole for entire fiscal year (April 2013 to March 2014). The profit is for the just the PlayStation division in Q3 (Oct-Dec 2013). It's worth remembering that any profits that PlayStation makes could easily be wiped out by losses in any of the company's other sectors, which is what's happening here.
I don't get it! Sony makes films too. Eg. Amazing Spiderman 2 cost $230 million but made $730million so far. That's like $500 million profit or 0.5billion. So how come with all these blockbuster profits and from Sony game division that as a whole company it's still making a loss!! Come on Sony get with it - become profitable like Apple or Disney plz! !
@bbq_boy Sony is just not Movies and Playstation. It's a conglomerate. Look at the whole list of their divisions and subsidiaries on Wikipedia and you'll see it's huge. PlayStation 4 and Sony Pictures can't compensate for all other divisions if all those others make losses.
Besides, it's not like this stuff has really from a consumer standpoint. Okay, if the losses are really that big and across all divisions to the point where the whole conglomerate could go bankrupt, then it obviously it holds relevance. I don't think it's the case here, Sony has quite some profitable divisions, but they also have a few divisions making a lot of losses. If it perceives they will have to continue to spin-off and sell non-profitable divisions. Playstation will probably always be safe since that's a huge brand, so those fans have nothing to worry about.
Hopefully the whole company will manage to turn it around imo. The ones from that I have products from have always been great quality, so it's not like they don't deserve it. Xperia Z2 and tablet Z2 looks fantastic. Their imaging division (cameras) are extremely good, quality-wise, but their DSLR cameras are still not as popular as the Nikon's and Canon's, but quality-wise they hold up. They're one of the few who still support A-mounts. In terms of mirrorless cameras, the Sony's are top of the market in terms of quality. The Sony KDL TV's from 2013 and 2014 have been consistently great from what I've gathered from multiple tech sites. Their TV's also covers all the market ends now. And I don't know about the rest. But from what I've gathered and experienced myself in terms of quality you're usually getting top-notch stuff with Sony electronics at least, so it's sad to see they're still eating losses.
@bbq_boy - "Eg. Amazing Spiderman 2 cost $230 million but made $730million so far."
Where did you see that $730m? I can only find $132m but it is 4 days old. The original Amazing made $490m foreign total so $730m already would be really impressive.
http://www.latimes.com/entertainment/envelope/cotown/la-et-mn-amazing-spiderman-2-box-office-20140427,0,553490.story#axzz30T8TNGpd
The non-amazing Spiderman 2 made $783m worldwide total in 2004, maybe you confused the 2(s)?
http://www.boxofficemojo.com/movies/?id=spiderman2.htm
As for Sony's losses - their tv and stereo business has been losing $ the past few years. I'ld bet their other consumer electronics businesses have suffered as well. It's been a long time since the Sony Walkman was relevant.
@Cyrso Well, in defence of the consumer... Sony overprices everything... Their TV's are outragesly overpriced
@rjejr @bbq_boy Haha - I wasn't sure where you got that figure from either! It's not even out in the US yet!
I know what you mean, though, @bbq_boy - it's amazing to think of a company as big as Sony with so many big names and brands under its wing losing money. From what I can see, the sheer scale of the company seems to be its biggest problem - it operates in far too many sectors where it loses money. That's why the Vaio sale is probably a good thing.
@Sanquine I wouldn't say they overprice things, it seems like they sell their products at a high price because of the quality.
@Sanquine very true. They need to do to the TV's with what they did to the PS4, knock the prices down.
@Sanquine They used to be, buy they aren't anymore.
You can buy a Sony KDL W665A 42 inch for €450 (which is a good price for the specs and image you're getting).
Not such bad news, if they're getting rid of the trash then the next few years will be pretty good for Sony.
@BornOfEvil I agree with @Sanquine they do overprice things sure they make quality products but so do there competitors and there products are cheaper Sony could learn a thing or two from Vizio when it comes to pricing there TVs
Yes this is very concerning news indeed. Whilst I'm thrilled that the PS4 is selling nicely it would seem that the games business isn't that strong of a money maker. I know that $172 million sounds like a lot to you and me but in business terms it represents quite a poor return on investment. For certain PlayStation is a superb extra string to Sony's bow but it becomes a problem when it is the string, the bow and the whole instrument.
It's a tough situation for Sony to be in without a doubt because at the moment lots of other companies are actually expanding and diversifying their product ranges but Sony is having to cut back just in order to reduce their losses. The likes of Netflix and Microsoft are moving into TV and movies as well as Lenovo and Samsung mopping up in areas of the hardware market that Sony is retreating from.
The PlayStation brand isn't going anywhere in a hurry and nor is Sony. As a PlayStation fan I'm enjoying some really good gaming of late. My real and biggest concern isn't Microsoft (as some simpletons think) but it's Sony's ability to raise healthy funds and attract talent to their group operations. Sony and PlayStation won't die but I dearly hope that they don't turn into a different beast altogether. As a fan I care about that.
This article was great reporting IMO. Really gave a concise acurate representation of the situation.
Sony is in trouble and have been for quite some time now. In saying that, Kaz seems to be an excellent CEO and I think he has what it takes to sort Sony out. Trimming fat (*Sony is obease) is the perfect start.
Sony have been making overpriced, inferior products for years, scraping by on brand name. Quite rightly the market has spoken and Sony are now in the position they are.
They still have time to turn things around Sony is doing ok there not in a Sega or Atari position yet
@Demi_God
The PS division made a profit, little over a hundred mil. The company as a whole made a loss though, well over a billion, and that's after accounting for the little hundred mil profit from the PS division. Which means no matter how good the PS division is doing, it's not enough to counter the incredibly poor performance of the rest of the company.
You know what I say? I say Sony should trim the fat. ALL OF IT. If it ain't making money, and hasn't in a long time, cut it. In fact, Sony could become like Nintendo and just be a video game company. Maybe keep a few divisions on the side if they're doing well. Unfortunately, I don't think that will ever happen. They have too many products and too much brand recognition they'll never want to give up.
@JaxonH Smart guy here! Please Sony listen. I have been calling for years that Sony should sell the TV business
@bbq_boy I'm not getting it either. It's not like their brand isn't popular. When people see my tv they be like "oh nice, you have a Sony tv". Their brand is popular like Samsung. Wtf happened in the first place to make them lose a lot of money anywayz?!
@DaftPlayStation yeah or Capcom.
@Sanquine Would suck since Sony TV's are great.
I think the problem is that they don't position their products in the market well enough.
They're a bit stuck in the same position as Philips was a couple of years ago.
Sony, what exactly are you doing wrong, or not investing in correctly to be this far in the financial hole?
@JaxonH I agree they should trim all of it they should bring it down to 4 divisions TV Sony pictures Sony pictures television and PlayStation of course @Sanquine I disagree i don't think sony should sell there TVs they just need to drop the price of them and advertise them more
Keep in mind that the Dreamcast was doing very well while Sega was posting losses. Even if one branch is doing well, the whole company could bring it down with them. Hopefully this won't be the case in a few years
@Unca_Lz - Yeah, the situation seems eerily reminiscent of Sega in its final days. Indeed, the Dreamcast was actually the fastest selling games console ever during its early days.
Still, Sony is far bigger than Sega, so it has a better chance of bouncing back, IMO. But the company really is on the razor's edge at the moment. It'll be interesting to see how it'll fare in the next few years.
I don't know if we can even use the size of Sony in this argument. The problem is most of their branches are bleeding and are not very competitive in the markets.
@Cyrso i love the explanation you've given. But although the Playstation and i'm guessing movie/music media sections are doing well. The others, how do i kindly put it...? Suck b@lls. I don't see Apple having a weak division. Anyhow, I'm sure they are going in the right direction. But for the love of God I wish their tv's, laptops, zperia, etc divisions would learn from the competitive pricing models from the playstation division.
@rjejr and other fine folks. Sorry I meant the Amazing Spiderman 1 (2012 release). http://en.wikipedia.org/wiki/The_Amazing_Spider-Man_%282012_film%29 - sometimes I type too fast and too easy to excite!!!
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