PlayStation Losses Nearing $5 Billion
Big numbers for Sony, but in the wrong direction.Published 02/11/2009 at 9:00 by nofi
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According to figures on Sony’s investor relations page, the Japanese giant is now totaling losses of over $4.5 billion, although the figures do appear to be reducing year on year. The figures for 2007-2009 are pure losses on the gaming division, whereas the current half year figures include Sony’s Vaio business too, as the department previously called “game” is now “Networked Products and Services”.
- FY 2007: -$1,970,923,859
- FY 2008: -$1,079,994,103
- FY 2009: -$577,207,240
- FY 10Q1: -$413,541,667
- FY 10Q2: -$653,333,333
Consoles normally release at some kind of a loss, and recent talk of the new slimline PS3 actually losing Sony more money is an interesting one. Naturally, the company strives to claw back some of the research and development and manufacturing costs with every game sold, so if you want to try to reverse this current flow of cash pouring away, get out there and buy five copies of LittleBigPlanet.
There’s more here, if you’re that way inclined.
Comments
Please note that all comments are the opinion of the individual author and not TheSixthAxis.
Shlomi1995 | 02/11/2009 09:19
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Might wanna short SONY then…
The recent surge in stock price really shouldn’t have taken place, with SONY reporting significant losses all over again, a big debt load relative to their available cash, short-term investments and receivables.
That’s my assessment in a nutshell.
TctclMvPhase | 02/11/2009 22:40
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Sony is not actually that bad off financially. You are correct about debt load relative to cash, but the fact that they are able to have such a ratio and still maintain a decent stock price would suggest that investors are happy with the long term outlook. Sony also has a decent current ratio, which means that their creditors shouldnt get antsy anytime soon. Finally, Sony isnt heavily funded by equity so they have a lot of room to expand there if they need the additional cash.
I think that one thing that would be greatly beneficial to both Sony and Nintendo would be a turn around for the Yen as that took a substantial chunk out of both their earnings this year.
cc_star | 02/11/2009 23:15
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Wonder what they’re hoping to get out of the long term though? Will lifetime sales of the PS3 ever deliver profitability to the gaming division.
If there is 140m PS2’s in the wild, and there was 25m Xbox’s and 22m GameCubes’s meaning that Sony’s unit sold 3 times the amount of its competitors combined, even a Sony fanboy would think a 50% slice of that pie is hopeful, and far from a certainty.
So given that PS3 lifetime sales may fall well short of the PS2, would it be fair to ask if they’ll ever recoup the gaming divisions losses over its life, giving that in the PS2’s first 5 years on sale it delivered far less than $5bn of profit? and since then the waters have been muddied by the PS3’s development and losses. Can the investors really be happy with the gaming division, or is it just essential because without it the Sony brand would be seen as lacking in the important demograhpic that a console delivers.
bunimomike | 02/11/2009 23:35
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Totally agree with the sentiment, cc.
You can’t help think that if they turnover $10billion in ten years that they might make only a handful of percent profit. Most of the time they’re appeasing their shareholders and reassuring the gaming world that things are still within any given forecast but seriously… all this stupendous effort for such little return. My god, I just couldn’t do it.
cc_star | 02/11/2009 23:43
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If (and it looks a big if at the moment) they make a billion dollars a year out of the second half of the PS3’s lifespan, then they’ll have broken even, which means they’d have made more money simply by investing it in some random low yield investment, maybe even a bank account) Not a great business plan. Obviously if the Yen takes a turn for the better that will help them out, but seriously I think things are pretty far from rosey, still, at least they’re supporting the PlayStation meaning I can carry on playing it.
bunimomike | 03/11/2009 00:33
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True, true. I don’t want just MS (or for that matter, just Sony) controlling the HD world of gaming on consoles. We need at least a couple of companies to bounce things off of each other. The biggest worry is that I see Sony simply not learning from past experiences. However, Stringer is a Welshman/Brit so may well not have the stubborn quietness that usually accompanies a Japanese company of this magnitude.
Finally, it’ll be good to see that inside of 12 months Sony reckons the PS3 hardware will be sneaking into profit. About frikkin’ time!
TctclMvPhase | 03/11/2009 02:52
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CC you are assuming that the pie doesnt grow. A 50% piece of the pie this generation is likely to be a lot more than last gen.
Also, you are also talking about a company who is capable of pulling in 10+ billion a year. There are plenty of angles to look at a large corporation and simply looking at one year is far to short sighted, heck youd have to look at a five year timespan before beginning to get the picture. If you are not familiar with accounting you may also not realize that Sony may still be including R+D costs for the PS3 in their current accounting statements and can do so for up to five years after the money was spent. In the end as long as their stock price stays steady that means the people who matter, the investors who actually hand over their cash to let Sony spend it, are still confident in long term gains.
cc_star | 03/11/2009 16:00
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Of course the pie is growing, but it may be fair to assume that Ninty (at the moment at least, has seen most of that growth) But it’s also true that Sony are so far off 50% for that figure to may be unreasonable.
Now the company is pulling in all sorts of money all the time, and if they’re ever short they can always sell a manufacturing facility like the Blu-ray to Toshiba, but I’m talking gaming division, and trying to keep the focus on that alone which is difficult now networked products (Vaio etc) has been restructured into that division so we may never know if the PS3 ever makes Sony a single Yen.
Since the launch of the PS2, Sony’s gaming division biggest ever annual profit was just over a billion dollars but averaged around $800m, given the scale of the gaming divisions losses almost $5bn the past couple of years, and Sony’s much much smaller market share this time around, I think it is right to ask if they’ll ever see this $5bn back from the gaming division alone?
flatspikes | 02/11/2009 09:21
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How long can an organisation continue to trade at such a large loss for? Are the other divisions in Sony supporting this one?
cam the man | 02/11/2009 12:18
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Yes. I think I read somewhere that the movie & music divisions are doing quite well.
Joe | 02/11/2009 09:37
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ah… i hate these stories… please don’t die sony!
bunimomike | 02/11/2009 09:46
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I wonder how Playstation (as a stand alone company, let’s pretend) could ever stay afloat. There’s no ROI for god knows how many years. Genuinely sad article.
Shlomi1995 | 02/11/2009 10:48
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I know SONY didn’t make a lot of profit since the PS3’s development and launch, but do you mean Sony PLAYSTATION has had no ROI for many years? Where’d you get that information?
cc_star | 02/11/2009 10:52
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Sony are making losses across the board, and its too early for the restructuring to have an effect.
@Shlomi
From the graph above
As you can see the gaming division has made a big loss each year since the PS3 was released.
Bilbo_bobbins | 02/11/2009 10:06
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Anyone know their figures for the company as a whole?
Shlomi1995 | 02/11/2009 10:43
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You can take a look at SNE’s income statement (or more importantly for you, the net income stated at the bottom of the document) on this page. Noticed the $1B negative net income in the 03/2009 column?
http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=SNE
Person678 | 02/11/2009 10:12
BOOM! Headshot!
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Well considering how much they lost in 07 compared, this could be worse.
bajere | 02/11/2009 10:16
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Things cant be that bad, otherwise they would just shut down the PlayStation side of Sony.
These sorts of stories remind me of the premier league… Man Utd, Liverpool, Chelsea, Arsenal (well every club in the league come to think of it) is in MASSIVE debt, and have been for years, but every year they buy more players and continue to pay out huge wages and play the games!?!?!?
I have no idea how it works, but i still get to watch Man Utd and i still get to play Uncharted 2, so i’m happy
bunimomike | 02/11/2009 11:08
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Sony are such a massive player that Japan may well not let things go completely tits-up but it’s so thoroughly disconcerting to see them floundering year after year, only to claw themselves slowly out of the financial hole they’re in… then have it all start again with the next generation of consoles. I’m assuming the accounts department sees suicide attempts every other few days! (I joke but seriously… how demoralising!).
BadBoyBoogie | 02/11/2009 11:25
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Hopefully by the time the PS3 gets closer to the end of its projected 10 years lifecycle, Sony will have recouped their earlier losses. Obviously, as time passes, more PS3’s will be sold, which results in more software sales, which will help Sony’s bottom line.
bunimomike | 02/11/2009 11:57
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“recoup”? I know what you mean but seriously… that’s not a good business model. They need to be in a situation where they’re not tending to their own financial wounds for 80% of the time. I want Sony to be incredible but I can’t see how that’ll happen anytime soon. Not until something drastic happens. Then again, they’re restructuring (as cc_star mentions) so fingers crossed things will look very different in the next generation.
skibadee | 02/11/2009 12:14
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loss gain thats the way it goes
gazzagb | 02/11/2009 16:13
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f**k me! Thats alot of dosh!
Do the figures include music and films? i think theyre making quite a few bob with their films.
Timesh1993 | 02/11/2009 18:23
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all i have to say is ouch!
wedgehog | 02/11/2009 20:46
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As much as I love LittleBigPlanet (& i mean really love it … no really – best game on PS3); won’t Sony get more money from their first party game sales?
xdarkmagician | 03/11/2009 00:42
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While I’m not afraid of Sony closing it’s doors, I have to wonder can the gaming industry support 3 consoles? Especially when companies spend billions of dollars to develop and advertise their consoles that really only have a shelf-life of 5 yrs. I’m starting to think that the industry in general started a race that can’t be won. There’re people at MS that wish they never got into gaming, and it took Ken K alot to convince Sony to start. What happens if these loses continue and the shareholders become hostile to their game divisions. It’s obvious that this console generation has become a very expensive Beta test for what consumers want, but if it doesn’t pay off for the next generation and shareholders no longer tolerate the vast amount of capital I think we might have a de-evolution of the industry. Maybe the best thing for the industry would be if Sony built a console and MS programmed it. I know it’s the kind of love that we don’t speak of but if the PS3 and 360 had a love child it could bring world peace
cc_star | 03/11/2009 01:08
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Well the Wii has reached the end of its sales life (well, maybe not the end, but it needs a hefty pricecut to kickstart sales again, and really all their going to be doing is selling more stuff to their existing userbase, whilst most likely developing a HD console, which they’ll have the luxury of releasing as the world is well clear of recession.
The problem they’ll face though is I can’t see the them taking their core customer base with them, my parents won’t buy another one, and neither will the parents of all the kids who’ve currently got them, as they’ll be old enough to know they want an Xbox by then, or a PS3 if it’s below the magic £200 barrier.
What you say about Sony providing hardware for a MS gaming platform is interesting, but I think it is the competition between the two companies that is yielding the best results for gamers.
Microsoft have an amazing software platform, a simple games development process and an amazing online environment and eco system.
Sony have a complicated development process which means if companies have enough time, money & experience the rewards are probably greater, they have free online, and they are adding features with each passing year which close the gap on MS’s service. Competition has given us these benefits and without it we’d still have PS2’s and Xbox’s
xdarkmagician | 03/11/2009 03:33
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I view Nintendo differently from Sony and MS because they’re a game company from the ground up. They sell card games and market cartoons, and when their products lose demand they invent a new variation to market. And while older people might not buy a WiiHD, Nintendo’s true market is children, and it’s not like that market is shrinking.
I agree that consumers benifit from competition, but competition hurts the manufacturers from a cost point, unless their the victor. Sega competed with Nintendo for a decade, and then Sony delivered the final blow that knocked them out of the race. At that time there where 3 major consoles, but the market decided that there was only room for 2. Now almost a decade later we 3 major consoles again fighting for what appears to be the marketshare for 2, hardcore and casual. I think that this competition could be causing as much bad as good.