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Is Sony Actually Turning Things Around Now?

from the given-enough-time,-anything-is-possible dept

Fri, Jul 27th 2007 3:58pm — Carlo Longino

Sony's attempts at a turnaround have been pretty slowgoing, but their latest quarterly results -- showing profits double last year's -- generated some enthusiasm that things were on the right track. Although some parts of the company's business have picked up, the biggest factor in the increased profits was a weakening yen, which boosted the value of overseas sales. Investors shouldn't discount the currency effect, but they do have some other reasons to be upbeat: the company's movie unit is doing well, and its Sony Ericsson mobile phone joint venture continues to grow its market share. While the electronic business overall is looking healthier, Sony's TV unit is still underperforming, and the gaming business is still in the can. Sony's video-game unit boosted its sales by 60 percent over the same quarter last year, which is great, except that its losses grew as well, partly because it's still selling the PS3 for less than it costs to build. The game unit got a new boss a little while ago, but it doesn't yet look like he's making a lot of progress. Sony announced a price cut for the US on one PS3 model, and also said it will deliver a new high-end version and a load of new games. But it's hard to see those small changes making a big difference in terms of getting the mass market to buy into the PS3, particularly when you contrast Sony's strategy to that of Nintendo, whose business is booming. Still, Sony's problems are far from solved -- but it is showing some signs of life.

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Filed Under: electronics, japan, ps3, video games
Companies: sony

14 Comments

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Bill, 27 Jul 2007 @ 4:20pm

And Sony still sucks...
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Dan, 27 Jul 2007 @ 4:30pm

PS3 Price Cuts
The PS3 price cut is a shambles, they are only cutting the price of the 60GB model to clear that SKU off of the shelves. They have stopped making it, but have enough stock for the next couple of months, and when the SKU sells out the 80GB will replace it back at the $599 price tag.

So the PS3 won't be sticking around at the lower price for long.
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Eric, 27 Jul 2007 @ 4:39pm

Sony's gaming division
While it's completely legit to claim that Sony's gaming division is hemorrhaging, it's somewhat unfair to claim it's because they sell the PS3 for less than cost. The X-Box 360 also sold for less than cost. It seems to me it's really a matter of getting out to the market, getting a good cut of the market share, and then trying to make up for the loss (and, I presume, exceed it) by aligning oneself with game developers.

Sony's problem isn't that they put their system out for a loss, it's that they didn't build off of that. It's like how music is always thought of on this site. You're not necessarily selling the music, you're using the music to promote other (hopefully) lucrative ventures. Same with a game system in the modern economy. Once you get your system out there (at a loss to make it affordable) you need to have some good games to back it up. Think of how hard it was to get a PS3 for the first week if launch, and then think of how many times a retailer said they had some in stock... it wasn't that the system was bad, it was that Sony failed to go the one step further that was necessary to *truly* market themselves in the gaming economy.

Of course, one could always try the Nintendo method. Make a profit from the start and realize that you're selling innovation and fun. But, I think we all know how well corporations tend to do with the innovation angle.
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- Anonymous Coward, 27 Jul 2007 @ 5:21pm
  
  Re: Sony's gaming division
  The X-Box 360 also sold for less than cost.
  Uhh, you're using that for a counter-example? How's that going for Microsoft?
  
  It seems to me it's really a matter of getting out to the market, getting a good cut of the market share, and then trying to make up for the loss...
  That reminds me of an old joke: "Sure, we lose money on every one we sell but we make up for it in quantity."
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- Anonymous Coward, 27 Jul 2007 @ 7:24pm
  
  Re: Sony's gaming division
  "The X-Box 360 also sold for less than cost"
  
  Ok you make a widget for $900 and sell if for %600, I'll make a similar widget for $500 and sell it for $300. I will have to sell far less accessories for my widget to make up the cost.
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Jeremy, 27 Jul 2007 @ 4:50pm

Sony TV's
Are some of the best on the market, my high def CRT blows away everything short of a Christie DLP Movie Projector. Sony's current flat screens (sxrd) are far superior to both LCD and Plasma when looked at side by side. America's stubborn cheapness is what hurts quality brands, we continually buy the cheapest crap we can find despite the poor quality and loss of American jobs. (not that sony is American, but they do have better business practices (ethically speaking) than other Asian companies.

As far as PS is concerned...well duh. What good does it do you to under price the console if your customers can't afford the games.....and eat too.
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Anonymous Coward, 27 Jul 2007 @ 5:15pm

Sony Music?
How's Sony's music division doing?
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Eric, 28 Jul 2007 @ 6:29am

RE: RE: Sony's gaming division
I'm not sure you really understood my post. It's not that Microsoft is looking to make money on the 360 itself... it's looking to make money on the market that the 360 creates... Games, Peripherals, X-Box live marketplace, and the licensing game makers have to go through in order to have games certified on the system.

I'm not sure what the second reply is getting at as I already admitted it was selling for a loss and you just implied that the loss can be made up for. The first reply seems to think I was implying the quantity of *consoles* to make up for it, when it's really the quantity if everything else related to the console that Microsoft is making money on.

Again, it's like Techdirt keeps saying about the music industry, you make one part "affordable" in order to reap benefits with another aspect of the model. The console itself doesn't need to make money if you can make up for the costs in other areas (again, like game sales or accessories).

I'm beginning to think that when the reports are coming in about the 360 losing so much money for Microsoft, the reporters aren't considering the other aspects that *are* making money but aren't the console itself, but are related to it.
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Anonymous Coward, 28 Jul 2007 @ 3:25pm

I'm not sure you really understood my post. It's not that Microsoft is looking to make money on the 360 itself... it's looking to make money on the market that the 360 creates... Games, Peripherals, X-Box live marketplace, and the licensing game makers have to go through in order to have games certified on the system.
I understood what you were trying to say. But why then did you ignore my question about how well it was working for Microsoft? Did you not understand it?

I'm not sure what the second reply is getting at as I already admitted it was selling for a loss and you just implied that the loss can be made up for.
Like I said, it was an old joke. Sorry it went over you head, but if I have to explain it to you then it just wouldn't be funny.
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R3d Jack, 28 Jul 2007 @ 4:25pm

Selling Below Cost
M$ sells the xbox below cost for one reason: it doesn't own the gaming market. Chairman Bill created a culture of megalomania, and it has persisted even after his involvement diminished. M$ is trying to conquer the gaming market, and its deep pockets allow it to do it the easy way: under-selling the competition until they go broke. Fortunately, Nintendo is currently screwing up their scheme, and Sony isn't willing to just give in.
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:(, 29 Jul 2007 @ 7:54pm

Sometime back in 2004, a bunch of Japanese companies said that they would start charging premium prices for their products solely because they're Japanese in origin.
They claimed the country had gained so much clout in technology that people would willingly accept paying a premium for the same product.

So, when you see Sony big dicking it, just know that they're leading the charge for premium prices until Korea or China pulls the rug from under them.
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Daniel, 29 Jul 2007 @ 9:41pm

Do you want light bulbs with that?
"Sony's video-game unit boosted its sales by 60 percent over the same quarter last year, which is great, except that its losses grew as well, partly because it's still selling the PS3 for less than it costs to build. The game unit got a new boss a little while ago, but it doesn't yet look like he's making a lot of progress."

Well, yeah, you're right, but it's hard to progress on that because higher prices will put off more potential customers, and until the prices of the parts they use go down, they will be stuck with that price. Just like everything technological, any progress will take time. I believe this has already been mentioned, but they make all their money selling games and peripherals.

This is very common. For example, a store doesn't make any profit selling a light fixture - their profit comes from selling light bulbs. (Actually, in most stores if you buy a light fixture, the cashier is supposed to ask you if you want light bulbs with your purchase).

If a customer buys a 700$ PS3 (CDN), from what I understand Sony is losing approximately 300$. If a customer then buys 10 games while he owns a PS3, how much money is Sony losing now? Games are usually 70$ up here, so 70$x10=700$. Of course, it's not 700$ in profit, but Sony will definitely be making their money back, plus more. (And I didn't even mention extra controllers and other peripherals)
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- Anonymous Coward, 30 Jul 2007 @ 7:16am
  
  Re: Do you want light bulbs with that?
  which brings up the big issue that people have pointed to already. the ps3 itself isn't a failure. its the environment its in thats failing. there's no worthwhile games or peripherals out there yet. they gotta get on that to help turn the ps3 around.
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DataGuy, 30 Jul 2007 @ 5:41am

Sony will not get another dime of my money!
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