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"Slowing PS2 Sales Hit Sony profits"

Slow sales of the Playstation 2 games console have produced a 25% drop in profits at Japanese electronics giant Sony.
The firm cut its full-year operating profit forecast by almost one-quarter to 100bn yen (£542m; $918m), after reporting net earnings of 32.9bn yen for the the third quarter of this year.

While Sony's results appear respectable in isolation, they come at a time when its rivals - notably Japan's Matsushita and Sharp - are performing particularly strongly.

And investors in Sony are nervous about an impending announcement of an overhaul of its electronics business, which suffered a 6.5% sales drop in the year to end-March.

Fears over Sony - which reported results after the Tokyo markets closed - helped spark a 5% drop in the Nikkei share index.

Bad at games

Sony's electronics business has been a relative underperformer in recent years.


Feeble sales in many products - most notably games hardware - have weighed on Sony's shares, causing the firm to miss out on a surging Nikkei this year.

Sony's Game division, which produces both hardware and software for games, saw its sales fall to 161bn yen in the third quarter, from 250bn yen a year earlier.

Sony blamed the sharp decline on weak Playstation sales, which were dented by a dock workers' strike in the US, and which compared unfavourably with a very strong quarterly performance in the same period of 2002.

Only in Europe are Playstation 2 unit sales still on the rise, Sony said.

Money worries

Sony is the most closely-watched company in Japan, and its performance is seen as a key indicator of any possible revival in the country's stagnant economy.

Being heavily geared towards exporting, Sony is particularly vulnerable to the strong yen, which has made Japanese firms less competitive on international markets.

Currency effects meant that, although Sony recorded an increase in its overall international sales, revenues in yen terms were flat.

Japanese policy makers are increasingly concerned over the effects of the yen, and have repeatedly intervened to push the currency down - although with little lasting effect.

Jeez, more syntactical errors in my last post than I've managed in a year of posting, sorry about that.

Cool, good points there. One major factor in Sony's favour though it the N-Gage. Hopefully they'll look at the N-Gage launch price and get the major hint that it's a little on the steep side.

Personally I don't think the market is ready for the PSP. It's too hi-tech and will only appeal to the sort of people who go for the PSX as a home entertainment people i.e. those with money to burn. PS2 gamers are mostly happy with the PS2, and to be honest most PS2 gamers are also happy with their Gameboys/GBAs as well, so I'm struggling to see how Sony hope to shift considerable numbers of PSPs.

A 25% drop in profits is alarming or any company, but I don't think Sony should be too worried. Lets face it they haven't been trying too hard when it comes to making PS2 A success. A few ads here and there and key third party exclusives have ensured dominance despite their outdated technology. Sony do make key mistakes though, as the past has shown. I believe their first mistake in terms of the games industry is looming. I am talking about the PSP, the idea to claim a share of the handheld market is fine but they are being overly ambitious. They intend the UMD format to become a new audio and video format outside of its use as a games media. To me this shows that Sony have learned nothing from their failures with Mini Disc. 10 years ago they launched that audio format with the latest technology as an intended replacement for the audio cassette. It flopped badly for 2 reasons, the first was timing. In 1993 the world had only just embraced Compact Disc, it wasn't ready for a new audio format. The second was their attempt to make MD a new medium for pre-recorded music. As the years went by the format became more popular but the pre-recorded angle was a complete failure (although it had more success in the UK than anywhere else in the world), in 2002 Sony finally accepted that pre-recorded MD was not going to work. Sony MUST focus on the games section of PSP, if they try to use it as a new audio/video format then it will be seen as a challenge to CD and DVD, and if they go head to head with the 2 biggest entertainment formats in the world then they face an up hill struggle that even a giant like Sony can't win

And the PSX will no doubt give everything a kick up the arssssee

Ah, I see - apologies, I thought you meant rivals in the console market.

And I'm not suggesting you're making any of it up! :-)

I still don't see them pulling out of games, though. Over-all, it's been their biggest source of income since the launch of the original PlayStation, and I *think* they had a similar situation towards the end of that machine's reign, before PS2 came along.

Sales will obviously be slowing now for the PS2 as so many people already have them, but when PS3 comes along they'll be on the up again - I'm fairly certain of that.

I mean competitors in terms of electronics, not games consoles. The likes of Sharp, and some of the more difficult to pronounce Japanese firms are outperforming Sony on their own turf, and this is due to the poor performance of the games division, which has been underperforming for the last year if you believe the financials.

I'm not making this up, you can have a look on the BBC webby if you like.

Bane wrote:
> Anyway, yes, as I pointed out in FOG, this could mean Sony may
> seriously consider doing a "Core Competency" move, and
> backing out of the games market, as their competitors are performing
> admirably by comparison.

Pull out? Somehow I don't see that happening.

Not surprising that their competitors are "performing admirably" really, is it? Everyone and his dog already owns a PlayStation 2, so sales are bound to slow at some point - while the competitors play catch-up.

As we all know, though, the majority of the money in the console industry is made on games sales, not hardware. And it's been a very slow few months for decent games generally.

Next week -

"Sony encourage mass breeding programme in Tokyo".

I think all this shows is that Sony have saturated the market in Japan.

Oops, sorry, not 3 billion, 1.3 trillion :)