This morning Sony published their financial results for Q1 of their 2009 financial year, which translates to their performance during April, May and June. The news is not good with Sony Corp making a ¥25.7 billion loss on ¥1,599.9 billion of revenue. Revenue that has fallen 19.2% from the same quarter last year. Sales were down across the globe with the largest fall being seen here in Europe where they fell 30%.
Of course we are primarily interested in how Sony’s game business performed. That is made slightly more difficult as Sony have combined it with their PC and other network businesses to form their Networked Products and Services (NPS) group.
Revenue and Losses
The NPS group made a loss of ¥39.7 billion with sales falling 37.4% from last year to ¥246.8 billion. Sony’s game business is responsible for the majority of that fall with sales almost halving from ¥214,991 billion to ¥110,514 billion ($1,151 million).
Their financial report points the finger of blame in the PSP’s direction, “in the game business, the deterioration in profitability was mainly due to a decrease in overall software unit sales and a decrease in PSP hardware unit sales”.
Looking at the sales figures Sony have sold 1.3 million PSPs in the first quarter this year compared to selling 3.7m in the same period last year, a massive fall of 2.4m or 65%. I told them PSP hardware sales would collapse if they announced the PSPgo so early and that, in addition to the general state of the economy, has got to be a key reason for the huge drop in unit sales.
Sales of everyone’s favourite black monolith have fallen half a million this quarter in comparison to last year with PS3 selling approximately 1.1m units compared to 1.6m. The PS2 however has managed to hold its own actually managing a small increase in sales from 1.5m to 1.6m.
Seems if you want to sell consoles in the current climate they’ve got to be cheap. We will see what Sony can do to address that particular issue at gamescom (yes, officially it is in lower case) and TGS over the next two months.
Any Other Business
Other unrelated little factoids from their financial report include Sony Pictures doing good business with their highlights being the performance of Angels & Demons and Terminator Salvation at the cinema and the Music division’s best selling albums of the quarter including Bob Dylan’s Together Through Life and Kings of Leon’s Only By The Night.
I will take a listen to Sony’s analysts’ conference call which takes place later this afternoon once they make the recording available and update this post with anything of interest from it.
Update: How the conference call went down…
While you have all been playing Fat Princess I have been listening to and transcribing the relevant bits of the conference call Sony held with analysts to discuss their Q1 FY09 financial report.
The Sony top brass on the call were Sam Levenson, Senior VP of Investor Relations at Sony Corp of America, Nobuyuki Oneda, Representative CEO EDP and CFO of Sony Corp, Robert Wiesenthal, Group Executive for Corporate Development Sony Corp and EVP and CFO of Sony Corp of America and finally G. Tsuchikawa, Senior General Manager of Investor Relations Sony Corp.
Right, with those excessively long job titles out of the way let’s get down to what information I was able to glean from the call. The majority of the call was just a presentation of the financial report with no new information over what I had read earlier. Fortunately things picked up when we got to the analyst Q&A section.
One of the analysts, Daniel Ernst of Hudson Square Research asked a couple of Playstation-related questions. His first was, “How [is] the profitability of [the PS3] tracking? How much have you reduced the cost to build since [release]? [What does the] slope of that curve look like for reducing the cost of the Playstation build?”
The Sony team had been very reluctant to talk figures in response to similar questions about the profitability of some of the their other products and it sounded like that would be the case again when Nobuyuki Oneda answered, “Cost reduction since we introduced the PS3 is very substantial and this is on schedule. We don’t disclose how much the PS3 [costs us], specifically the cost reduction that was achieved during the past two years, but that is on schedule.”
My ears perked up a little when Sam Levenson interjected to say, “We’ll just give you some rough numbers…”, after which Oneda added, “About 70%, roughly speaking.”
That’s a number that surprised me as it is considerably better than previous numbers. At launch manufacture of the PS3 was estimated to cost Sony around $840. About a year later they were believed to have cut costs to around $760. If they have now managed to reduce costs by 70% since launch, that puts the manufacturing cost of a PS3 at about $250.
Now that cost will not include the cost of the packaging, cables and controllers that make up the retail package, export, nor other costs such as marketing, but you can see that Sony are certainly getting to the point where they might have some wiggle room to do something about the retail price. Perhaps the significant drop in manufacturing cost might be down to a new, slimmer, SKU? But that’s enough speculation for now.
Daniel Ernst’s second relevant question was, “Your guidance for the fiscal year had included sales over the [PSN] of ¥50 billion. Can you give us some idea of how that segment tracked in the quarter.”
This time Robert Wiesenthal answered. “I think we are pleased. There seems to be an increasing mix of films, with respect to being downloaded and streamed, especially as compared to the games”. A reminder that it is just us poor Europeans who are missing out on the PSN Video Store.
He continued, “Obviously at the start of the PSN it was mostly just downloads of games. I think the breadth of the catalogue is improving both on the games side and the films side”. If you have bought Fat Princess, Shatter or WipEout Fury these last two weeks you will have no argument with that.
Moving on he added, “I think right now close to half of our users have opted to sign up to the network and it’s running on track and this year we’re expecting great things from it. So, so far so good.”
At this point Oneda-san chipped in with, “If you compare to last year the network sales is probably one third of this years forecast of fifty billion”. Which I took to mean that sales on the PSN in Sony’s last financial year amount to around ¥16-17 billion or £96-102 million at today’s exchange rate.
Finally Sam Levenson gave us a last little bit of numerical goodness when he revealed, “The [number of PSN accounts is] up to 26 million. Content download has reached 540 million”. Now I know many of those accounts will belong to users with multiple accounts, I have got five myself, but those of us who make up the gaming ‘hardcore’, willing to search two or more of the PSN Stores for content to download (and sometimes coming up empty) are still the minority. Even if you assume half of those 26 million accounts are due to people having set up multiple accounts the PSN community is looking pretty healthy.