Business Approach Comparison Sony PS4 and Microsoft Xbox

[Shifty Geezer]

Why don't businesses talk actual English? I read this completely wrong...

Sony expects to record approximately 25 billion yen in impairment charges mainly related to its overseas disc manufacturing business. Primarily due to demand for physical media contracting faster than anticipated,...

...so, apparently, demand for physical media contracts are increasing faster than Sony can keep up and they are paying penalties because their production is impaired.

Demand declines, not contracts.

Actually, I know the answer to my question. Business screws around with English to make their world impenetrable to outsiders who haven't studied and know the magic, ever-changing key-words.

 

[Deleted member 11852]

...so, apparently, demand for physical media contracts are increasing faster than Sony can keep up and they are paying penalties because their production is impaired.

An impairment charge means the real value of the assets (manufacturing) has fallen below the accountancy value - this is because demand for Blu-ray media has declined (or "contracted" in Sony parlance).

If demand had increased then the asset value would be stable, or even have risen, and and the rest of the statement would make no sense. Why would Sony be charged because demand outstrips supply? That isn't their problem, they'd only have a problem if they can't supply what they contracted too.

The statement is badly written.

 

[MrFox]

The demand is contracting faster *head explodes*

Contracting means signing contracts.

... or it means reducing in size.

... or they mean "The demand is sick, it contracted bluray".

 

[Shifty Geezer]

Why would Sony be charged because demand outstrips supply?

My misinterpretation was because they oversold their abilities, had more contracts to press BRDs than they could honour, and had to pay penalty charges (the impairment charge, their ability to honour the contracts being impaired by their lack of manufacturing capability).

 

[dobwal]

Why don't businesses talk actual English? I read this completely wrong...
...so, apparently, demand for physical media contracts are increasing faster than Sony can keep up and they are paying penalties because their production is impaired.

Demand declines, not contracts.

Actually, I know the answer to my question. Business screws around with English to make their world impenetrable to outsiders who haven't studied and know the magic, ever-changing key-words.

In the law of demand there exists a distinction between "contract" and "decrease". Contraction and expansion refers to a movement along demand curve due to a price change. An increase or decrease refers to any non price factor.

 

[London Geezer]

Contraction is a completely valid and relevant term.

 

[Rangers]

So Sony's Blu Ray disc wars "victory" turned out to be rather phyric?

 

[wco81]

I would think Blu Ray still grosses more than most streaming services.

I'm not talking about all-you-can eat subscriptions like Netflix but the ones where you pay per movie.

Europe as well as the rest of the world is coming out of tepid economic growth. Some blockbuster movies have grossed well but home video as a whole is probably down the last 5-7 years.

 

[zed]

Actually, I know the answer to my question.

I assume in this case its cause they let a japanese person do the english translation. I see this all the time (even with european companies) and their manuals etc

 

[Deleted member 11852]

So Sony's Blu Ray disc wars "victory" turned out to be rather phyric?

Yes and no. It sounds as though Sony sunk a lot into R&D and if HD-DVD had prevailed as the preferred HD disc standard then Sony would have lost a whole more.

This doesn't mean that Sony's Blu-ray business will not, in real terms, break even or turn a profit in there long term, but based on decline in the demand for media, they want this possible future loss redressed now.

I assume the aim is to ensure future financial reports are profitable and healthy, after many years of restructuring. The next (August) quarter will show whether it worked.

 

[Blazkowicz]

How much money did that R&D cost?, that must be mind boggling. Wouldn't the dozens of millions consoles help pay for it. Now all three consoles use Blu Ray.

 

[Gubbi]

How much money did that R&D cost?, that must be mind boggling. Wouldn't the dozens of millions consoles help pay for it. Now all three consoles use Blu Ray.

It wasn't just R&D, it was the cost of initial manufacturing too. Sony had to sink a lot of money into expensive prototype production facilities for blue lasers to meet demand. It contributed a great deal to the PS3 being late and expensive, even though Sony lost money on every unit sold.

Cheers

 

[London Geezer]

Well I do hope Blu-ray doesn't die off. I love the quality you can only get from Blu-ray Discs right now. I do believe Sony has never really been very good with money. A bit like me.

 

[BoardBonobo]

Maybe they should check down the back of the sofa? That's where I always find my change!

 

[joker454]

Yes and no. It sounds as though Sony sunk a lot into R&D and if HD-DVD had prevailed as the preferred HD disc standard then Sony would have lost a whole more.

This doesn't mean that Sony's Blu-ray business will not, in real terms, break even or turn a profit in there long term, but based on decline in the demand for media, they want this possible future loss redressed now.

I assume the aim is to ensure future financial reports are profitable and healthy, after many years of restructuring. The next (August) quarter will show whether it worked.

I'm sometimes skeptical of such reports just because companies like to declare something a financial failure just to save themselves from taxes. So they shuffle numbers around to show how something can be written off as a loss as it suits them, kind of like how many Hollywood movies "never made a profit".

 

[Deleted member 11852]

I'm sometimes skeptical of such reports just because companies like to declare something a financial failure just to save themselves from taxes. So they shuffle numbers around to show how something can be written off as a loss as it suits them, kind of like how many Hollywood movies "never made a profit".

I agree with your sentiment but this isn't something being written off as a loss as a tax dodge, this is a long-term venture estimate write down which a) costs Sony money and b) costs Sony even more bad financial PR.

I don't see this as any kind of 'win', real or imagined.

But companies in general. Yeah. Accountants speak with forked tongue.

 

[wco81]

Blu-Ray helped sell a lot of PS3s, for watching movies if nothing else.

Helped PS3 close the gap.

 

[Rangers]

Blu-Ray helped sell a lot of PS3s, for watching movies if nothing else.

Helped PS3 close the gap.

PS3 likely would have closed the gap a WHOLE lot faster, or their would have been no gap at all quickly, if it launched at $399 with a DVD instead of $599. Remember at that point Sony was dominant, and the Ps3's very high price point was a key factor in losing that dominance over the first 2-3 years of the generation.

 

[wco81]

True the price would have been lower but not sure about $200 lower.

Sony promoted 1080p when they unveiled the PS3. There were a lot of skeptics because 1080p TVs had just started selling and there was doubt that 1080p would have a big installed base.

But even around 2007, I recall Best Buy ads would tout models which were 1080p. So once full HD TVs started selling well, there was going to be some interest in a high-def disc player of some kind.

 

[Shifty Geezer]

MS have ditched Kinect with a Kinect-free SKU. What's their strategy now? They're offering a less powerful console to PS4 with little distinguishing USP. Short of exclusive games (the bane of gamers IMO), what's the reason to pick XB1 over PS4? With the recent game sites reporting Game X better on PS4, is there really a major market for XB1?

I honestly can't read the outcome here. On the one hand it's a smart move to offer a cheaper console, but objectively I don't really see the point of XB1 now. It's another console that plays games worse. Is the hope to just to ride XB360's brand strength? MS are clearly unsure what to do themselves (constant denial of Kinect-free SKU) so is there actually any strategy here or is it reactionary tactics?