Sony Year-end/4Q Financials

[deepbrown]

Last 6 months?

Anybody say they were talking about the last 6 months? I believe people were saying that the company was able to sell 9.6 million PS3s in 6 months - which they did.

Sony Ericsson is definitely a mess, but I don't recall the damage being four years in length; in fact up until recent years they were a decent contributor to the bottom line. And obviously, the multiple billions PS3 has cost Sony dwarf the losses SE is presently incurring.

PS3 losses are at around $4 billion USD.

well

u can presume that SONY is making even MORE profit with the 40nm RSX based PS3s which have lately been shipped to stores, as confirmed by IGN. They were making profits from the 65nm version and also because the price of Blu-ray diodes fell back in March. But with the 45nm version , i am sure they are making even MORE profit that what they were making in march

They began manufacturing and shipping the 40nm PS3 to Japan in March....so when they say it was profitable in March, I believe that's them referring to the creation and manufacture of the 40nm RSX PS3.

 

[Rangers]

I'm not sure if they gave a specific figure for the game business, but they did explicitly say in both their Japanese and Overseas conference calls that the game business was profitable in Q4 (and Q3 also).

http://www.sony.net/SonyInfo/IR/info/presen/index.html

Also, regarding Vaio queries earlier in the thread, in one of those calls they revealed that Vaio reported a loss over the FY.

Other segments in NPS are also loss-making, including 'new businesses' like their network services stuff (which is I think ex-PSN, which is under Game, but not sure).



NPS lost 7bn yen ($75m) in Q4.

Again, the game segment reported profit in this same period.

The other segments of NPS are certainly large enough in concert to significantly skew any picture one might try to dissect re. game (positively or negatively. In Q4, a quiet quarter relatively, results were skewed by $75m+ vs Game alone). I don't think NPS results should be remotely taken as 'Game' results. In revenue terms, SCE/Game is only half of NPS.

Right, it's the same problem as X360 vs Embedded Devices. Embedded Devices is usually accepted as a proxy for X360 results, and I dont see why now NPS has to be treated differently, and we say "Oh well Sony game really did way better than that because of X Y and Z". Lets be consistent.

Also when they say "game business" I wonder if they include PSN losses? I suspect they dont. As that is classified under "Network"?

 

[Rangers]

Anybody say they were talking about the last 6 months? I believe people were saying that the company was able to sell 9.6 million PS3s in 6 months - which they did.


PS3 losses are at around $4 billion USD.

You dont know PS3 losses. Only Sony does.

If we were to look at "game" results, before they even switched to NPS, I think you'd come up with a higher figure, because whatever game results are, recall that PSP and PS2 are highly profitable, and must be added to nominal total losses.

Eh, it's shame they dont break out game anymore in either company. Now we'll never know.

 

[deepbrown]

Right, it's the same problem as X360 vs Embedded Devices. Embedded Devices is usually accepted as a proxy for X360 results, and I dont see why now NPS has to be treated differently, and we say "Oh well Sony game really did way better than that because of X Y and Z". Lets be consistent.

Also when they say "game business" I wonder if they include PSN losses? I suspect they dont. As that is classified under "Network"?

I searched and included all the data in my post for you referencing game's business profits for the last two quarters - and every other question you asked.

You dont know PS3 losses. Only Sony does.

If we were to look at "game" results, before they even switched to NPS, I think you'd come up with a higher figure, because whatever game results are, recall that PSP and PS2 are highly profitable, and must be added to nominal total losses.

Eh, it's shame they dont break out game anymore in either company. Now we'll never know.

When I say PS3 losses I am referring to the Games business during the PS3's years, which is the best we are going to get.

 

[liolio]

Sony is between a rock and a hard place. Every effort they do to reach profitability with the PS3 is offset by currencies rates... The prospect are bad in this regard. The Europe is huge for Sony and sadly for them the euro is set to go down by a fair amount in the upcoming months. In the mean time Yen...
Shortly tough. I think we can pretty much discard price cut, imho price cut + exchange rates would have too bad of an effect on profitability, the PS3 is already the biggest financial disaster in the video game history.
On the bright side MS isn't as aggressive as it could. They are no longer fighting on the "core gaming segment" they hope for Natal to extend their reach and profits but it's clearly profitability first.
It clearly makes sense but it could prove short sighted, MS ED division did almost as much profit as Sony has a whole, Ms has a whole could have supported some more years of loss (I'm not speaking billions) in the ED division. Crap the 360 is five year old and still too expansive, there are rumours about a slim model and Natal launching as high as 299$.
Honestly it doesn't look like Ms since when Ms waste a chance to get rid of a competitor when they have the opportunity to do so? Clearly MS has the accounting and Sony is pretty much helpless if Ms started a price war, history will tell, I think it's a miss opportunity.

 

[Titanio]

Right, it's the same problem as X360 vs Embedded Devices. Embedded Devices is usually accepted as a proxy for X360 results, and I dont see why now NPS has to be treated differently, and we say "Oh well Sony game really did way better than that because of X Y and Z". Lets be consistent.

We can be consistent in ignorance if you wish

I don't think simplicity should trump accuracy, if accuracy is so significantly skewed. I've no idea what the situation is at MS, but ditto for its numbers.

I know forum-goers ABSOLUTELY MUST HAVE their numbers and their comparison tables, but I don't know if I'd overlook deviations that could be in the range of hundreds of millions of dollars for the sake of just having some simplistic 'agreed' set of numbers.

Also when they say "game business" I wonder if they include PSN losses? I suspect they dont. As that is classified under "Network"?

I'm not sure, it could be either. It may also be the case that PSN software is under game while video is under network services. In their conference call when parsing out the differents parts of NPS they did seem to deal with 'network services' and PSN software separately, if its any indication. FWIW they seemed to pin network services as a 'new business' (and as such, a loss-making one), while with PSN software they say they fell slightly short of their sales target for the fiscal year (50bn yen), and they'd have preferred to see better profitability too.

 

[Rangers]

OK some information:

"The company stopped losing money from PS3 consoles in March and will likely post an annual profit of at least 1 billion yen this year from PS3," Oneda.

On a forecast of 15 million PS3's, that's 72 cents per console. This looks like there's going to be another PS3 price cut in this fiscal year - probably end of the year and probably $50 (with Move bundled at current price point)

"The game business achieved a profit in the fourth quarter due to strong sales of first-party software and the elimination of negative margins on the PS3," said Nobuyuki Oneda, chief financial officer of Sony, at a Tokyo news conference.

The turnaround came too late in the year to reverse losses at the game business, which lost around ¥50 billion (US$540 million), but Sony anticipates it will be able to report much rosier results this time next year.

http://www.goodgearguide.com.au/article/346492/sony_playstation_3_turns_profitable/

As for Q1, Q2 and Q3: Q1 -$413,541,667, Q2 -$653,333,333, Q3 +$210,629,750

http://neogaf.net/forum/showpost.php?p=19625436&postcount=90

As for Q4 - the Networks division (which quarter were they combined?) it lost 7 billion yen in the quarter - or around $76 million USD. Not very much in comparison to Q1 and Q2 - and points strongly to the Games division's second quarter of profit (which was revealed by Sony in the call)

http://i43.tinypic.com/110vl2r.png

Posted all sources, so I hope that helps.

Yes, the sources are helping clear up a lot of things for me. I did not know NPS loss was so small in the 4Q. But there's still some points of contention.

"The company stopped losing money from PS3 consoles in March and will likely post an annual profit of at least 1 billion yen this year from PS3," Oneda.

I imagine he's speaking more of the PS3+software as a total package, not just PS3 hardware. Or at least he could be. So working out some figure of 72 cents a console is dicey imo. Dont forget throughout that PSP and PS2 are highly profitable in all aspects (in fact, Sony blamed game losses on lower PSP+PS2 sales), so PS3 can be dragging things down and game still report profits.

The other thing to note is that literally every year since Ps3's inception, Sony has predicted game profitability the next year, only to fail time after time. So maybe we should wait for the proof. It does look like game+PS3 is doing well. However I can still see declining PSP/PS2 sales, Move expenses, a possible price cut, yet again ending in another year of losses. But we shall see. It certainly looks like this time they are poised to profit.

 

[Shifty Geezer]

As for Q1, Q2 and Q3: Q1 -$413,541,667, Q2 -$653,333,333, Q3 +$210,629,750

These are the numbers that highlight my concern. The hardware was loss leading. We know that, but that's a model common to consoles. The idea being you lose money on the hardware but make it back on the software. Thus (Hardware_losses + Software_gains) = -$400M for Q1, -$600M for Q2. That is, even with the software sales and revenue, they couldn't get close to $0. How many consoles were sold in that time? Let's say half 12 million, near the 13 million reported, and probably a lot less as those first two quarters . At $100 a loss per console, that'd be -$600M for Q1 and Q2 combined on the hardware. But Q2 alone lost $600M, and that was without accounting for software sales. Just how much money was lost on the hardware?! How much was lost on anything else?

After the intial heavy losses of the division, I'd expect them to get to around break-even when the hardware is a little lossy, and profitability when the hardware is profitable. I wouldn't expect a billion dollar loss on two quarters unless they were either selling lossy hardware at gangbuster rates, or selling with huge negative margins.

Look at that history of Sony financial thread you linked too. The gaming division was a loss only in 2001, presumably because PS2 was selling lots as a loss-making price. The rest fo the time any losses of the hardware were being ameliorated by software revenues and revenues from older profitable platforms. The past three years Sony ahve had income from PS2, PSP, software for PS2, PSP and PS3, a smattering of PSN content sales, and they've turned in three loss-making years. Even in Q3, Christmas sales of break-even PS3 hardware and games for all systems, they made just £200 million.

That the gaming division will become profitable is in no doubt, but will it ever get to decent profitability to make it worthwhile? I don't just mean offsetting the huge investments, which ties in BRDs fate etc., but will the platform show decent revenues in the $600+ million that was average according to that NeoGAF post, and will it ever show more revenue than PS1 or PS2 years when PS3 has more opportunities for taking users' money?

 

[Rangers]

We can be consistent in ignorance if you wish

I don't think simplicity should trump accuracy, if accuracy is so significantly skewed. I've no idea what the situation is at MS, but ditto for its numbers.

I know forum-goers ABSOLUTELY MUST HAVE their numbers and their comparison tables, but I don't know if I'd overlook deviations that could be in the range of hundreds of millions of dollars for the sake of just having some simplistic 'agreed' set of numbers.




I'm not sure, it could be either. It may also be the case that PSN software is under game while video is under network services. In their conference call when parsing out the differents parts of NPS they did seem to deal with 'network services' and PSN software separately, if its any indication. FWIW they seemed to pin network services as a 'new business' (and as such, a loss-making one), while with PSN software they say they fell slightly short of their sales target for the fiscal year (50bn yen), and they'd have preferred to see better profitability too.

Well, now that sources have been posted, I accept those numbers. Still, I find it a bit troubling operating on this double standard. Does MS not give separate comments on it's game division in conference calls? Or do people just not bother to track those down and publicize them like we are doing for Sony? Either way it's a slight case of Apples to Oranges. And we should note that.

 

[Carl B]

PS3 losses are at around $4 billion USD.

I'd say they are definitely much greater than $4B - we've run the estimates around here before, and I think we are looking at at least $6B if we try to isolate PS3 from the platforms that were profitable during that time. I don't have time at the moment to rehash it all, but there are several threads around that go through exactly those calculations if you search.

 

[deepbrown]

These are the numbers that highlight my concern. The hardware was loss leading. We know that, but that's a model common to consoles. The idea being you lose money on the hardware but make it back on the software. Thus (Hardware_losses + Software_gains) = -$400M for Q1, -$600M for Q2. That is, even with the software sales and revenue, they couldn't get close to $0. How many consoles were sold in that time? Let's say half 12 million, near the 13 million reported, and probably a lot less as those first two quarters . At $100 a loss per console, that'd be -$600M for Q1 and Q2 combined on the hardware. But Q2 alone lost $600M, and that was without accounting for software sales. Just how much money was lost on the hardware?! How much was lost on anything else?

After the intial heavy losses of the division, I'd expect them to get to around break-even when the hardware is a little lossy, and profitability when the hardware is profitable. I wouldn't expect a billion dollar loss on two quarters unless they were either selling lossy hardware at gangbuster rates, or selling with huge negative margins.

Look at that history of Sony financial thread you linked too. The gaming division was a loss only in 2001, presumably because PS2 was selling lots as a loss-making price. The rest fo the time any losses of the hardware were being ameliorated by software revenues and revenues from older profitable platforms. The past three years Sony ahve had income from PS2, PSP, software for PS2, PSP and PS3, a smattering of PSN content sales, and they've turned in three loss-making years. Even in Q3, Christmas sales of break-even PS3 hardware and games for all systems, they made just £200 million.

That the gaming division will become profitable is in no doubt, but will it ever get to decent profitability to make it worthwhile? I don't just mean offsetting the huge investments, which ties in BRDs fate etc., but will the platform show decent revenues in the $600+ million that was average according to that NeoGAF post, and will it ever show more revenue than PS1 or PS2 years when PS3 has more opportunities for taking users' money?

BTW Q1 PS3 sales were 1.1 million and Q2 3.2million - so 4.1 total for those loss months. Remember they dropped the price on all consoles before the Slim launched by $100 - on a console that was already losing around $100 per console, so that's $200 on that selection (however small the number was in the channel).

It's certainly possible for it to be extremely profitable - especially due to software sales (the attach rate is now 8.1) but it most likely won't whip out the losses coming in.

 

[larrylain]

Anybody say they were talking about the last 6 months? I believe people were saying that the company was able to sell 9.6 million PS3s in 6 months - which they did.


PS3 losses are at around $4 billion USD.



They began manufacturing and shipping the 40nm PS3 to Japan in March....so when they say it was profitable in March, I believe that's them referring to the creation and manufacture of the 40nm RSX PS3.

40nm RSX based ps3s started shipping at the end of March in 2010, 26th March to be exact, also in a very low number

How i know this?

on 26th march, 90% stores in singapore also received the shipment of those 40nm based versions. Those store owners told me that SONY started shipping these NEW models across singapore, hongkong and Japan concurrently. You can get both Japanese and singapore assembled ps3s in Singapore/Hong Kong

so no the ps3 made profit on the 65nm version because of the cot reduction of the BLU RAY diodes back in march

SONY will make further profits however on these 40nm based versions

 

[deepbrown]

Yes, the sources are helping clear up a lot of things for me. I did not know NPS loss was so small in the 4Q. But there's still some points of contention.



I imagine he's speaking more of the PS3+software as a total package, not just PS3 hardware. Or at least he could be. So working out some figure of 72 cents a console is dicey imo. Dont forget throughout that PSP and PS2 are highly profitable in all aspects (in fact, Sony blamed game losses on lower PSP+PS2 sales), so PS3 can be dragging things down and game still report profits.

The other thing to note is that literally every year since Ps3's inception, Sony has predicted game profitability the next year, only to fail time after time. So maybe we should wait for the proof. It does look like game+PS3 is doing well. However I can still see declining PSP/PS2 sales, Move expenses, a possible price cut, yet again ending in another year of losses. But we shall see. It certainly looks like this time they are poised to profit.

I'm glad they were of use =)

The consensus is, and from other quotations, that he's talking about hardware. At least in reference to the comments on the "PS3 console is now no longer loss leading." As far as the $1 billion profit - yes he is talking about hardware AND software - which is exactly why I said there would be a price cut.

Here's the reasoning (and others on Gaf have posted similar) if that $1 billion takes into consideration a profit on console's sold - if you ONLY take into consideration the hardware, that's only 72 cents per console. Nothing. So if you factor in all the software profits, it has to be taking into consideration a price cut on the hardware. I hope that makes sense.

 

[Carl B]

so no the ps3 made profit on the 65nm version because of the cot reduction of the BLU RAY diodes back in march

SONY will make further profits however on these 40nm based versions

I don't think we can do any more than gues sin this regard; Sony is judging the PS3 'profit' based on the costs - if the 40nm RSX was being fabbed in March, and the 65nm RSX was already ramping down, then that is how Sony would view profitability... much less to do with when units actually reach shelves.

 

[deepbrown]

40nm RSX based ps3s started shipping at the end of March in 2010, 26th March to be exact, also in a very low number

How i know this?

on 26th march, 90% stores in singapore also received the shipment of those 40nm based versions. Those store owners told me that SONY started shipping these NEW models across singapore, hongkong and Japan concurrently. You can get both Japanese and singapore assembled ps3s in Singapore/Hong Kong

so no the ps3 made profit on the 65nm version because of the cot reduction of the BLU RAY diodes back in march

SONY will make further profits however on these 40nm based versions

You just said Sony started shipping (meaning manufacturing was at least a month earlier) the 40nm in March and Sony announced they were profitable on hardware in March....so...the reason for profitability was the 40nm PS3 (or is very likely to be).

 

[larrylain]

You just said Sony started shipping (meaning manufacturing was at least a month earlier) the 40nm in March and Sony announced they were profitable on hardware in March....so...the reason for profitability was the 40nm PS3 (or is very likely to be).

They were profitable because of the reduction in cost of the BLU RAY diodes back in march

SONY counts SOLD as "units which are shipped to retailers On Arrival and not on transit

40nm PS3s never appeared anywhere in EU/US during march or even april , as far as i know

 

[larrylain]

I don't think we can do any more than gues sin this regard; Sony is judging the PS3 'profit' based on the costs - if the 40nm RSX was being fabbed in March, and the 65nm RSX was already ramping down, then that is how Sony would view profitability... much less to do with when units actually reach shelves.

chief actually SONY counts sold as units which are shipped to retail ON ARRIVAL and not on TRANSIT. also the thing that EVERYONE is ignoring is the fact the production cost of BLU RAY diodes fell in MARCH as well. So PP of ps3s went down anyway in march

 

[deepbrown]

chief actually SONY counts sold as units which are shipped to retail ON ARRIVAL and not on TRANSIT. also the thing that EVERYONE is ignoring is the fact the production cost of BLU RAY diodes fell in MARCH as well. So PP of ps3s went down anyway in march

I don't think we can know specifically - but the 40nm console includes a number of significant price reductions. Lets just say it's a combination =)

 

[Shifty Geezer]

BTW Q1 PS3 sales were 1.1 million and Q2 3.2million - so 4.1 total for those loss months...

Even better, actual numbers. 4 million consoles at -$200 each is -$800 million for the hardware sold in Q1 & Q2. Total recorded losses were $1 billion. Thus sales of software, PS2, PSP, etc. amounted to -$200 million!!

If losses on the hardware were 800M, the recorded losses for those quarters should have been much, much less. What are Sony spending their money on?

 

[deepbrown]

Even better, actual numbers. 4 million consoles at -$200 each is -$800 million for the hardware sold in Q1 & Q2. Total recorded losses were $1 billion. Thus sales of software, PS2, PSP, etc. amounted to -$200 million!!

If losses on the hardware were 800M, the recorded losses for those quarters should have been much, much less. What are Sony spending their money on?

I really don't think we can speculate on any of that - don't think you're getting any closer to understanding anything. When was the games division accepted into the Networks division?

The appreciation of the Yen against both the Euro and Dollar is a huge contributing factor - in this respect Sony and Nintendo are in a much worse position than Microsoft.