Sony has turned in four annual losses in the last five years

[drahkon]

Sorry that I quote a video gaming news site, but The Wall Street journal webpage has their article locked for non-registered people.

 

Sony has added $200 million to its projected losses, bringing the total to $1.2 billion.

 

GI.Biz reports that for the fiscal year ended March 31, 2014, Sony has projected a net loss of ¥130 billion / $1.27 billion. It previously predicted a loss of ¥110 billion / $1.07 billion.

 

It comes after Sony initially predicted profits of 50 billion / $489 million at the end of the last fiscal year.

 

VG247.com

 

Although from a gaming perspective Sony is doing pretty well, with the SCE division a highlight of its financial reports, its TV, camera and other consumer electronic businesses have floundered for several years now. In the last five years, it has turned in four annual losses.

 

VG247.com

 

 

What exactly does this mean? To me as a layman it sounds like they are in deep shit and will go down the toilet soon, but I assume this is wrong.

 

As I'm not that good with businesses and I can't even comprehend figures like "$1.2 billion", could someone here help me with a little explanation on what all this means?

 

Sonny are cutting down/selling several of their departments, meaning they do not diversify much anymore.

Their gaming division is doing well, but will the poor performance of their other divisions impact it in any way?

 

I think @Daft and @Goron_3 have a thorough understanding of the industry and businesses. Care to chime in with anything? :p

[Daft]

I don't keep track as Sony as a whole. I only really care about their gaming division and maybe their film studios slightly.

 

Worst comes to worst, Sony keeps selling up the divisions it can't get in order and keeps the ones it can; gaming and insurance being the two I know of. Their movie studios are also a pretty good bet since it looks like there'll be a trend in actual good video game movies started soon and Sony are in a better position to capitalise on this more than any other company. I think they've also seen much better reception to their Xperia phones so they might be a good bet.

 

TL;DR - I don't know and I don't care. If they went under I'd invest in a gaming PC. In Gabe we trust.

[The Bard]

Sony won't go under, they're a national staple and one of the most recognised electronics brands in the world. The problem is that they have a tendancy to focus almost exclusively on the high-end high price market for their consumer electronics, especially when they're a pioneer in that particular sphere. It's a sort of old hat business practice that favours charging premiums for high end devices, and non standard features that raise the expense bar exponentially and then are either dropped completely from subsequent models, or decrease substantially in price. I'm talking specifically their 3D televisions, blurays and the forthcoming 4k displays. All of which are or were prohibitively priced for the general consumer, and feature very few decent quality, low price variants, the sort that any average consumer is going to want in their home. They have a chance to get in on a level playing field by aggressively pricing their 4K displays, but I doubt they will, just because they insist on throwing every random gadget they can think of into devices that don't need them.

 

PS4 and Xperia are doing well though. Sony'll be fine, they might just have to give up their fief on such a broad swathe of electronics.

[Falcon_BlizZACK]

Just how sustainable is its gaming division? ie Are both the PS4 and Vita operating at a loss?

 

Sad news.

[Shorty]

I hope they sell off Spider-Man movie rights to Disney :p win all round.

[Goron_3]

Put simply:

 

-They over expanded into many electronic areas whilst keeping a high premium on their brand.

-They are competing against companies like Samsung, who have very low margins but it allows them to get market share.

-There are too many departments in Sony which are just doing 'okay' but not great. Take their VAIO laptops for instance, which they've recently decided to drop. Fantastic product but it has the high premium on it; at that price most people will just buy apple.

 

Sony will be fine in the long run, they are a fantastic company which design great products. They are also very customer focused and understand western trends very well. The best thing they can do is severely cut back on the products they specialise in and focus on doing what they well even better.

 

Playstation will make them a lot of money this gen, which is great news. And besides, Kaz is a fantastic CEO.

[Daft]

Just how sustainable is its gaming division? ie Are both the PS4 and Vita operating at a loss?

 

Sad news.

 

I'm pretty sure the gaming division is one of their best performing divisions.

 

I never want to bring this up because I know it's going to be twisted into a different argument and used completely out of context - but the Vita has a very dedicated user base.

 

Vita already totes an exceptional attach rate for a platform so young – Vita owners are feverishly dedicated to the handheld and they buy lots and lots of games – but the pool of ownership must grow if Vita is to attract third party publishers, developers outside of the incredibly valuable indie realm, and even Sony’s own studios.

 

http://uk.ign.com/articles/2013/12/17/playstation-vita-two-years-later

 

It's got one of the best software attach rates of any console in recent history - so while the machine lacks market penetration (and the knock on reason as to why it doesn't draw big AAA games), I would be surprised if it didn't make money. Ironically, the Vita gets away with this because Sony's portable have always been a bit of a side-show - they've never proven themselves (unlike Nintendo which Once Upon A Time made a home console that could actually compete with IPs that you'd never predict).

 

 

It took Sony about 7 years to turn their gaming division around. Kaz has been CEO of the whole of Sony for only about 2 years. It's going to take time. BUT, the signs of improvement are there, I've listed them above - they've turned the gaming division around, their mobiles are being received much much better (and it's also benefiting from the prevalence of Android) and the movie industry is about to start seriously mining gaming IPs (Need for Speed recently happened, Assassin's Creed has Fassbender attached, I think) like it has comic books recently (And Sony own some of the most famous gaming IPs in the world - and a shit load of them - there is already a Ratchet & Clank film being made, a The Last of Us film in production) - if something like The avenger and The Dark Knight can break the billion dollar mark, there's no reason why some gaming IPs can't get close to that - and when you consider that Sony lost $1 Billion, that movie trend is going to help a lot.

Edited May 13, 2014 by Daft

[dwarf]

You have to look at the revenues as well. As long as the loss is controllable and their investors are confident of making an eventual return, then it might not be curtains for many of the divisions that seem to be flagging. Mass lay-offs are more telling, 'cause then the shit hits the fan.

 

The Vita is a drop in the ocean for Sony, but as long as the gaming tentacle remains profitable as a whole there is no threat for us legends here at the N-E massive who want to play that lovely next level shit. (That isn't true, because it might have to be sold off, but yeah. Don't listen to me)

[Charlie]

Regardless of how high the number seems, a $1bn loss isn't that big a deal for Sony.

 

They make an incredible amount of money from their insurance business (net income $40bn) and it's pretty much only the television side of the business that is making a significant loss (and has been for 10 years now). It seems like this is a long term thing for Sony as it makes a large loss on it but is the 3rd largest manufacturer of TVs worldwide. They're in the process of splitting TVs into a different company so it is possible that they might think about selling it in the future (as they recently did with their PC business).

 

What does this mean for Sony? Not a lot, they expected this loss and you can be assured that the CEO will have plans to reduce the loss next year. Selling Vaio was one part of this plan. As someone else said the movie studio will make huge profits over the coming years and the PS4 is just kicking off and you can expect that to make a large amount of money too (although perhaps a drop in the ocean compared to a movie studio - I don't know know much about the financials of the gaming industry).

 

Source: Business Week

[Jimbob]

I remember having a discussion with some friends about this on Twitter, and it's been covered already. In which Sony over expanded across many divisions, and now need to make a few cut backs to level the costs back to a profit. Nothing i'm too worried about, Sony will get through this without a doubt.

[Cookyman]

Sony has turned in four annual losses in the last five years

 

Nintendo has turned in three annual losses in the last four years.

 

We're doomed!

 

[The Bard]

There was also a global recession the last five years; shit happens.

[drahkon]

Thanks guys. Now I understand the situation a bit more. : peace:

[liger05]

There was also a global recession the last five years; shit happens.

 

Samsung & Apple seemed to of done just fine.

[dwarf]

Where to start?

[Choze]

Samsung & Apple seemed to of done just fine.

 

Samsung is an odd example they make more from military and government contracts in South Korea than they do from selling worldwide electronics which are now mostly just commodities. Samsung and LG just happen to be the lowest price producers undercutting everyone else but also lowering margins. Even Samsung's electronics are not doing 'great'.

 

Apple have just been really successful but again not really a good example as they are exceptional. Few companies can ever match them in our life times.

[liger05]

Samsung is an odd example they make more from military and government contracts in South Korea than they do from selling worldwide electronics which are now mostly just commodities. Samsung and LG just happen to be the lowest price producers undercutting everyone else but also lowering margins. Even Samsung's electronics are not doing 'great'.

 

Apple have just been really successful but again not really a good example as they are exceptional. Few companies can ever match them in our life times.

 

even so, putting it on a recession is a cop out.

[The Bard]

Why? If there's less consumer spending, it follows that consumer electronics brands are going to suffer? Apple are different because the variety of services they provide (iTunes, Apple TV etc) are palatable to a huge range of people, and they've been building that cachet since before the recession hit. Are you going to buy a device that's made to run with the ecosystem of services that you've grown accustomed to over the last few years, or are you going to say "fuck it, I have no cash, but I'm going to take a gamble on a windows phone"? Apple products tend to be reliable, and in an austere economic environment, what better incentive do people have to buy their stuff?

 

And I wasn't pegging everything on the recession, I meant that it was a factor that had to be taken into consideration. People were just spending less money because they had less money to spend.

[pratty]

And yet everyone obsesses over Nintendo, and their supposed iminent demise. It's like some people just can't wait until Nintendo go under or go 3rd party, so they can play Mario without the expense, inconvenience and apparently shame of actually buying a Nintendo console, and like the second coming of Jesus they hope that constantly talking about it will make it happen sooner.

 

Last time I checked Playstation and X-Box divisions were still overall in the red, i.e. since they began they have lost more money than they have made, so while they may have made some yearly profits, overall both brands have yet to actually make any money! Yet when gamers and developers alike hold up these two brands and their hardware as shining examples to Nintendo, nobody thinks to mention the fact that unlike Nintendo they have had the luxury of having their losses absorbed by larger corporations.

[liger05]

Last time I checked Playstation and X-Box divisions were still overall in the red, i.e. since they began they have lost more money than they have made, so while they may have made some yearly profits, overall both brands have yet to actually make any money!

 

You got a source for that?

[pratty]

You got a source for that?

 

Like I said, last time I checked, it's been a while since I looked into it. I'm happy to be shown wrong if I am.

 

But with a quick search just now I found a couple of graphs pertaining to Xbox, that show Xbox crawling out of a hole, but still being in one.

 

 

 

I recall the first graph from the aforementioned time I looked into this. It only begins with 2003 though, I'm assuming 2002 and 2001 (and possibly 2000 during the Xbox's R&D phase) resulted losses aswell with Xbox only getting of the ground.

 

Even though Xbox has been showing annual profits for the last several years it would appear it's still 'paying off' it's intitial losses. And as the second graph mentions, the losses refer only to the individual divisions. However when we talk about Nintendo's losses in comparision we don't just mean losses from it's hardware and software, we're talking everything.

 

A really good 2014 might put XBox in the black, but that's assuming there weren't considerable losses in '02 and '01 etc. And there's no guarantee it will do this, which is probably why some Microsoft investors have sugested Microsoft sell off the XBox division to focus on more reliable areas.

Edited May 14, 2014 by pratty

[Daft]

There was also a global recession the last five years; shit happens.

 

Sony and Nintendo have made a load of shitty decisions. The chickens came home to roost. What's important is that it looks like Sony have learned from their mistakes (but only time will tell).

[liger05]

Like I said, last time I checked, it's been a while since I looked into it. I'm happy to be shown wrong if I am.

 

But with a quick search just now I found a couple of graphs pertaining to Xbox, that show Xbox crawling out of a hole, but still being in one.

 

 

 

I recall the first graph from the aforementioned time I looked into this. It only begins with 2003 though, I'm assuming 2002 and 2001 (and possibly 2000 during the Xbox's R&D phase) resulted losses aswell with Xbox only getting of the ground.

 

Even though Xbox has been showing annual profits for the last several years it would appear it's still 'paying off' it's intitial losses.

 

A really good 2014 might put XBox in the black, but that's assuming there weren't considerable losses in '02 and '01 etc. And there's no guarantee it will do this, which is probably why some Microsoft investors have sugested Microsoft sell off the XBox division to focus on more reliable areas.

 

The did lose an absolute fortune with Xbox but there was no other way. It was always going to be cost them to get a foothold into the market and gain marketshare.

 

From what I remember from seeing MS financials the 360 was was making money pretty early on its life.

[pratty]

The did lose an absolute fortune with Xbox but there was no other way. It was always going to be cost them to get a foothold into the market and gain marketshare.

 

From what I remember from seeing MS financials the 360 was was making money pretty early on its life.

 

Well there you go. They're still in the process of making the whole videogame hardware market venture financially worthwhile, and they may well do so. But as it stands it appears they're still yet to turn an overall profit from it. Even the eventual success of the 360 wasn't enough to cover the earlier losses.

[Daft]

But the 360 is a drop in the ocean for Microsoft. I'm sure they happily write off a lot of the Xbox division's cost simply because it keep Microsoft much more relevant to people - it helps their image so much.