Sections

Sony financials: game profits down 86.4% in Q3

Thursday, 7th February 2013 08:52 GMT By Dave Cook

Sony’s Q3 financials are in and make for grim reading. The company’s game arm has seen a sharp decrease with a 15.1% drop in sales, accounting for an 86.4% income drop.

Sony Financials

Game department sales decreased year-on-year from ¥316.1 billion to ¥268.5 billion – a drop of 15.1%

The decrease equates to a year-on-year dip in profit from ¥33.8 billion to ¥4.6 billion – a drop of 86.4%

The game department saw a 29.2 billion yen year-on-year decrease in operating cost to ¥4.6 billion / $53 million.

Sony has cited its purchase of Gaikai as a driving factor in what it hopes will be solid financials going into the next fiscal year.

The company cut its game department’s year-end projects to an undisclosed figure, thanks to low sales of PS3 and PSP.

The company’s financial report is broken down into sections of the business, incorporating mobile, televisions and other products, but gaming is our focus here, and the results are’t good.

For the quarter ended December 31st, sales decreased year-on-year from ¥316.1 billion to ¥268.5 billion – a drop of 15.1%.

The decrease equates to a year-on-year dip in profit from ¥33.8 billion to ¥4.6 billion – a drop of 86.4%.

Sony’s report adds that the problem stems from “lower sales of hardware and software
of the PlayStation 3 and PSP”, but that the dip was, “partially offset by the sales of the
PlayStation Vita since it launched in Japan December 2011.”

However, Sony’s game department saw an operating cost decrease due to the, “decrease in sales of PS3 software and PSP hardware.” The department saw a 29.2 billion yen year-on-year decrease in operating cost to ¥4.6 billion / $53 million.

The game department’s sales forecast is low for end-of-year. The report continued, “Primarily due to the lowering of the annual unit sales forecast for portable hardware, sales and operating income are expected to be lower than the November forecast. Sales and operating income are expected to decrease significantly year-on-year.”

However Sony’s consolidated sales forecast across the brand remains unchanged, “due to the favorable impact of depreciation of the yen as well as higher than expected financial services revenue in the third quarter compared to the November forecast.”

Part of this static forecast comes from Sony preparing to sell off some of its assets, the report confirms, “Although the severe operating environment is expected to continue in the fourth quarter, the operating income forecast for the fiscal year remains unchanged because operating income in the Financial Services segment in the third quarter was higher than expected and Sony has been planning to engage in activities such as asset sales.”

It is unclear what assets Sony will sell off, but we should expect to hear more come the company’s Q4 report.

Turnaround?

Sony is expected to announce PS4 on February 20th at its PlayStation Meeting event, in a big to reverse its fortunes as of late.

Many say new hardware is the shot in the arm Sony – and many companies in the console sector – sorely need to get back into the black.

Sony has painted a positive picture for the future of its game department at the end of the report, “In the game business, Sony is working to expand sales and operating income through the introduction of an attractive software lineup and through offering game software on mobile devices, including smartphones and tablets.”

The report also makes mention of Sony’s acquisition of cloud streaming service Gaikai, “In addition, Sony acquired U.S.-based Gaikai Inc. in August 2012, with the aim of strengthening the game business.” It is rumoured that PS4 will use the technology out of the box.

The financial report comes as Sony let go of PS All-Stars: Battle Royale developer SuperBot Entertainment, following poor sales of the fighter. It can be assumed that Sony spent big on the game and lost out.

What do you make of the above?

Latest

42 Comments

  1. Dannybuoy

    I for one will be buying a PS4 at launch. My money is waiting.

    #1 1 year ago
  2. CyberMarco

    I’m no expert in economics but I always had a doubt about how things work around the industry.

    Let’s say SONY invests $1 million every year in the industry and to break even from it’s investments and cover it’s costs SONY should at least gain $1 million in revenue. Let’s suppose that in 2011 SONY made $5 million in profit, that’s 500%(?) of profit, things go well. In 2012 Sony invests $1 million again but this time SONY makes $3 million in profit.

    Does this count as a loss if compared with 2011′s earnings? I mean, in 2011 they got 5 times their investment, but in 2012 they got 3 times, still makes their business “healthy” and able to continue, or not?

    Sorry if I’m confusing some terms etc, not my cup of tea! :p

    #2 1 year ago
  3. Beta

    Buying a PS4 immediately. Primarily for the amazing Naughty Dog games I know will be released in the future :’)

    #3 1 year ago
  4. woe

    Sony sold a building recently so expect that to be included in the next quarter, but still overall things are not looking good.

    #4 1 year ago
  5. gomersoul

    these figures are not as bad as it looks. the title is misleading. bring on ps4.

    #5 1 year ago
  6. DrDamn

    @Dave
    “The company has seen a decrease of income across most of its departments”

    http://www.sony.net/SonyInfo/IR/financial/fr/12q3_sony.pdf

    Sales and operating revenue Q3 2011 ¥1,822.9
    Sales and operating revenue Q4 2012 ¥1,948.0

    The overall results in comparison to previous form are actually seen as pretty positive. Stock up. Losses down.

    Games division is making less yes, but overall picture is seen as quite good.

    #6 1 year ago
  7. CyberMarco

    ^ So in other words, Sony is making less compared to previous years, but still able to maintain a healthy business, right?

    Also what does “year-on-year” mean, is it a comparison of consecutive years in the business?

    #7 1 year ago
  8. viralshag

    @7, Exactly. Year on year is the comparison to the previous year.

    Just because a YoY isn’t positive, doesn’t mean that a company is doing “badly” as such, it just means they haven’t had a good year in comparison to last.

    Obviously, if it’s continual YoY decline you would take action to correct that.

    #8 1 year ago
  9. Beta

    So I’m completely useless with financials but even though it’s lower than previous years they still made a profit yes?

    #9 1 year ago
  10. Dave Cook

    @6 We’re a game site though so the overall picture isn’t the main focus, but I’ve softened that line. Thanks mate.

    #10 1 year ago
  11. Fin

    Yer this actually doesn’t look too bad – and the games department is making money, not losing it!

    #11 1 year ago
  12. Dave Cook

    @11 What? The game department’s profits are down 84%

    That’s not good. At all.

    #12 1 year ago
  13. DrDamn

    @10
    Oh that’s fine, Games focus is what you should have and that is down. Previous wording implied overall was down though. Thanks for updating.

    @CyberMarco
    Year on year is for comparison purposes. For example here we are talking about the third quarter of the financial year – i.e. Oct/Nov/Dec. Year on Year compares Q3 2012 to Q3 2011. So you are comparing like with like.

    #13 1 year ago
  14. Myth

    @7 yep, you could substitute “compared to last year” for year-on-year.

    This is bad for SONY, as the launch of a new console is hugely expensive and will result in reduced earnings for a while. I’d be curious to see a serious study of how much of a buffer they have for the launch, and on what timetable the expect the PS4-console to be profitable.

    They should be making tons on the PS3 at the end of its cycle…

    #14 1 year ago
  15. stevenhiggster

    @Dave profits are down, but its still a profit innit. Look on the brightside matey. Oh that’s right you’re a game journo, you’re not allowed to look on the brightside. :P

    #15 1 year ago
  16. Beta

    It’s not very good, but they still made money at least. And I’m not surprised it’s lower. PSA was a bit of flop and it was their only big exclusive in the Christmas period as far as I’m aware.

    #16 1 year ago
  17. Dave Cook

    @16 Agreed, but that’s a huge, worrying drop. They also said they will be selling off assets to make up for the loss. That is even worse.

    Am I the only one who is worried for them here? :P

    Because this really is worrying news. If PS4 is handled wrong it could put a bullet in Sony’s head.

    #17 1 year ago
  18. Myth

    @11 You’re taking it out of context. That the revenue from the games department is dropping at that point in the lifecycle of the PS3 is not a good sign at all.

    With any console launch you start out deeply in the red, and slowly work your way back to making money.

    #18 1 year ago
  19. Fin

    @12 @18

    I consider anything that isn’t a loss a success!

    #19 1 year ago
  20. Beta

    Well yeah it all hinges on how they handle the PS4. If it goes really well with a nice price point (not like the absurd PS3 launch price) and a good launch line up and some effective marketing we could have a success on our hands :P

    If it goes the way of the PS3 launch (poor marketing, far too expensive, difficult to develop for) then I think Sony may have thoughts about leaving the gaming business.

    Edit* And hopefully TLOU and GOW: Ascension do well and boost the profits a bit.

    #20 1 year ago
  21. DrDamn

    @17
    “If PS4 is handled wrong it could put a bullet in Sony’s head.”

    Yep I agree with this. I think it should have tempered how they approach the coming generation though. The big loss on hardware isn’t a sustainable model in their current situation and MS and Sony are being more conservative and clever in their designs this time around. They will both be aiming to head into profits from the new hardware sooner than last time.

    #21 1 year ago
  22. Dave Cook

    @19 I’m optimistic most of the time like you, I think it’s a good quality, but with this I can’t help but be worried. Imagine a console industry without Sony. It almost sounds alien to say, but it could happen.

    It’s troubling.

    #22 1 year ago
  23. DeyDoDoughDontDeyDough

    I’ll be buying a PS4. Any self-respecting gamer should. And a NexBox. And a Wii U. So there.

    #23 1 year ago
  24. PC_PlayBoy

    Sony suck!

    #24 1 year ago
  25. G1GAHURTZ

    Don’t buy a PS4!! They’re so rubbish.

    Get a 720 instead!! They’re much better.

    (Just warming up for how the next 5-8 years may well turn out…)

    #25 1 year ago
  26. Mike W

    I’m so confuse, the news say Sony as a whole posted a profit and there’s also an article Reuters saying the company is back in the black….

    Am I missing something here?

    #26 1 year ago
  27. Dave Cook

    @26 Black means in profit.

    #27 1 year ago
  28. woe

    Sony cuts Vita sales target again due to ‘slow market penetration’

    http://www.computerandvideogames.com/389717/sony-cuts-vita-sales-target-again-due-to-slow-market-penetration/

    #28 1 year ago
  29. Mike W

    @27

    Meaning that’s good right?

    Excuse my ignorance.

    #29 1 year ago
  30. DrDamn

    @26
    It was a bit confusing. I think they made a profit but for some reason were paying higher tax rates this period. Something like that.

    #30 1 year ago
  31. manamana

    I don’t want Sony leaving the ballroom – PS4, Vita and more Software is on my checklist for this year.

    #31 1 year ago
  32. Psychotext

    Numbers without the headline spin for the Game division…

    Income (Sales)
    Q3 2011: 316.1 billion yen
    Q3 2012: 268.5 billion yen (-15%)

    Net Income (Profit essentially)
    Q3 2011: 33.8 billion yen
    Q3 2012: 4.6 billion yen (-86%)

    Hardware Sales (Units)
    Q3 2011: 9.8m
    Q3 2012: 9.5m (-3%)

    Handheld Sales (Units)
    Q3 2011: 2.4m
    Q3 2012: 2.7m (+13%)

    Home Console Sales (Units)
    Q3 2011: 7.4m
    Q3 2012: 6.8m (-8%)

    Obviously all of the Q3 2012 numbers include Vita sales, which weren’t present in the Q3 2011 numbers.

    #32 1 year ago
  33. Dave Cook

    @30 I think it has something to do with the Yen conversion rate at present.

    #33 1 year ago
  34. manamana

    Wait, what’s that?! “… offering game software on mobile devices, including smartphones and tablets” Sony pushing their IPs to iOS or what?

    #34 1 year ago
  35. Mike W

    So the company post a profit and show signs of recovery, but they’re still doomed?

    The game media is really a fucking joke when it comes to talking about these companie’s finances.

    #35 1 year ago
  36. OlderGamer

    “This is bad for SONY, as the launch of a new console is hugely expensive and will result in reduced earnings for a while. I’d be curious to see a serious study of how much of a buffer they have for the launch, and on what timetable the expect the PS4-console to be profitable.

    They should be making tons on the PS3 at the end of its cycle…”

    —Myth

    There is alot of truth in that. This generational console cycle as a whole has not been kind to a lot of companies the last few years. So that prolly dampens what should be Golden Years for a lot of brands. In a day and age where Apple and other companies put out new Tablets yearly, such a long and extended console life cycles was just a bad idea.

    #36 1 year ago
  37. DrDamn

    @OG
    That last point about long cycles is an interesting one. Wasn’t there something about modular design for the NextBox a couple of years ago?

    #37 1 year ago
  38. Clupula

    Well, if you don’t release anything people want to play, you’re not going to sell as much. Have Sony had a single Triple A title this whole year? It’s been mostly collections and the disaster that was Playstation All Stars, to my knowledge. Now, if the same can be said next year, when they release Last of Us, GOW: Ascension, and Beyond: Two Souls, all of which are getting heavy levels of hype (I’m actually surprised to see how many 360 owners I know want to buy a PS3 for Last of Us), then we can safely say they are in trouble.

    But we all know the Vita is on life support until they lower the price and they haven’t released anything big for PS3 all 2012.

    #38 1 year ago
  39. OlderGamer

    Hard to say Doc, but I think I recall reading something like that. But with all of the information and noninformation floating around it is tuff to get a firm grasp on anything. Everytime we turn around someone, somewhere claims they have the real this or that pined down.

    Thats why I say best to wait and see what the companies themself say. And that I am losing interest in the hype/build up to launch. There is nothing to go on except thin air.

    #39 1 year ago
  40. Mike W

    @38

    Very true, but the company still as a whole made a profit. Last year for for Sony sucked ass, there were no game big hitters at all. It was the lackluster PS:AB and that stupid ass Wonderbook crap.

    This year is a different story, but we will have to wait and see. Staying on topic, the company is showing good signs of recovery.

    #40 1 year ago
  41. theevilaires

    Numbers mean shit at this point. Just release the PS4 with better social gaming at an affordable price, get PS3 to its 10 year life cycle and cut it off production, and keep making killer games. Thats all that matters and PlayStation will continue to live.

    Oh and make the Vita slimmer and improve the OS, put at least 8mp camera in the back too.

    #41 1 year ago
  42. daytripper

    if they have a good show on 20th it could be the start of better things to come, bring it on

    http://i.imgur.com/DIsn8dC.png (credit neogaf)

    #42 1 year ago

Comments are now closed on this article.