Sony is bleeding money - business strategy discussion

[dobwal]

Essentially there is only going to be Consumer and Professional. Nintendo with the massive forecast cut was eye-opening.

Slide 15 in the pdf shows the re-alignment

Sony TV forecasts...less than last year, really? 2010 ACT 22.4 they originally forecast 27M for FY2011 and have revised down to 22M.

They note revenue generated by GAME itself but they don't seem to include operating income for GAME, which is odd because usually those two figures go hand and hand in an earnings report.

Also, it seems that they are forecasting 15 million PS3s this year but they are already off to a bad start as they only shipped 1.8 million PS3s last quarter. Last year they started off the fiscal year by shipping 2.4 million PS3s. I think PS3 sales in Japan are being affected significantly by the earthquake. They still managed to ship 1.8 million PSPs and 1.4 million PS2s during the quarter. In comparison the PSPs and PS2s shipped 1.2 and 1.6 million units during the first quarter of the previous fiscal year.

I think a major price cut has to come to the PS3 as its the only way to they going to to hit 15 million units this year.

 

[DuckThor Evil]

This might have been the first quarter that the 360 outshipped the PS2....that is a LONG life.

What do you mean? Sony shipped 6.4M PS2s in FY 2010 and 7.3M the year before.

 

[boommoob1]

Essentially there is only going to be Consumer and Professional. Nintendo with the massive forecast cut was eye-opening.

Slide 15 in the pdf shows the re-alignment

Sony TV forecasts...less than last year, really? 2010 ACT 22.4 they originally forecast 27M for FY2011 and have revised down to 22M.

1.TV's=industry wide 2. Japan exporters battered for years, Nintendo=returning to normality 3. Yen SUDDENLY a gaming buzzword.

 

[bkilian]

Had Blu-Ray lost i would of course have gone with HD-DVD, but i fell 100% vindicated when i preached for "there is not enough space ever". 50GB vs 30GB was my main drive for HD-DVD to die. And behold, we now have 3D movies that just love the extra space, and most Blu-Rays come with a plentitude of audio options.

Screw compromises, give me the best possible medium i can get, and yes, screw bad transfers as well

When i think about it now old hatred for Microsoft boils up, they should have stayed out of the war instead of using it as a way to get to Sony in the Console war. I hope they lost money (which i am paying for with OS and office licenses anyway )

The only issue I have with the BDs is that they are _sooo slooow_ to load and navigate. I was spoiled with my HD DVDs. (And we didn't really lose money, we did pretty well, since our team owned the codec licensing business related to BD/HD DVD too)

As to the numbers, looks like 1.7MM xbox, 1.8MM PS3. PS3 still gaining on xbox, but now at a rate that would take it many years to make up the difference. Price drop could change the landscape, unless XBox price drops at the same time.

Also, price dropping the PS3 is going to strain the already strained Sony financials. They have fixed costs associated with shipping and storage that scale linearly with numbers sold, so selling more consoles doesn't always translate to complete goodness. (In contrast to development costs, and in some ways, manufacturing - since those costs go down with more consoles)

 

[-tkf-]

The only issue I have with the BDs is that they are _sooo slooow_ to load and navigate. I was spoiled with my HD DVDs. (And we didn't really lose money, we did pretty well, since our team owned the codec licensing business related to BD/HD DVD too)

As to the numbers, looks like 1.7MM xbox, 1.8MM PS3. PS3 still gaining on xbox, but now at a rate that would take it many years to make up the difference. Price drop could change the landscape, unless XBox price drops at the same time.

Also, price dropping the PS3 is going to strain the already strained Sony financials. They have fixed costs associated with shipping and storage that scale linearly with numbers sold, so selling more consoles doesn't always translate to complete goodness. (In contrast to development costs, and in some ways, manufacturing - since those costs go down with more consoles)

While the VC-1 codec was a good way to push competition, it was also another license sink since BD was forced to take on that codec when HD-DVD did it. Just putting more cost on the consumer that could have lived happily with AVC and MPEG2, unless i am mistaken here? But maybe that was the plan all along, invest in HD-DVD to push a codec, and if it didn´t work out you would always have the license fee afterwards.

I learned alot from the tech discussion on avs forum about the VC-1 codec, on that part it was a very satisfying part of the war

 

[RobertR1]

While the VC-1 codec was a good way to push competition, it was also another license sink since BD was forced to take on that codec when HD-DVD did it. Just putting more cost on the consumer that could have lived happily with AVC and MPEG2, unless i am mistaken here? But maybe that was the plan all along, invest in HD-DVD to push a codec, and if it didn´t work out you would always have the license fee afterwards.

I learned alot from the tech discussion on avs forum about the VC-1 codec, on that part it was a very satisfying part of the war

AVC HP wasn't brought into the mix until VC-1 won codec shootouts. BR was going to be a Mpeg2 format only. Thus you have AVC HP now because of VC-1.

MS' decision to go with HD DVD was due to the BDA rejecting the MS' software layer and going with BD-J.

As with many such decisions, it became political thus we had a war.

 

[NavNucST3]

The only issue I have with the BDs is that they are _sooo slooow_ to load and navigate. I was spoiled with my HD DVDs. (And we didn't really lose money, we did pretty well, since our team owned the codec licensing business related to BD/HD DVD too)

As to the numbers, looks like 1.7MM xbox, 1.8MM PS3. PS3 still gaining on xbox, but now at a rate that would take it many years to make up the difference. Price drop could change the landscape, unless XBox price drops at the same time.

Also, price dropping the PS3 is going to strain the already strained Sony financials. They have fixed costs associated with shipping and storage that scale linearly with numbers sold, so selling more consoles doesn't always translate to complete goodness. (In contrast to development costs, and in some ways, manufacturing - since those costs go down with more consoles)

What I bolded needs clarification. YES, for the quarter they did but for the last 12 Months that's incorrect, over the last 12 months the PS3 and 360 have shipped identical amounts. For the current calendar year 360 is ahead (sell-in). BDs are slow as hell even with BD Live off but the front loading of the HD DVD on the 360 which made the 360 launch so much slower drove me crazy as well.

I think a major price cut has to come to the PS3 as its the only way to they going to to hit 15 million units this year.

I'm firmly in the "$100 price cut" camp

1.TV's=industry wide 2. Japan exporters battered for years, Nintendo=returning to normality 3. Yen SUDDENLY a gaming buzzword.

Could you elaborate, I'm unclear as to the point you're attempting to drive home.

"TVs=industry wide" ok, did every TV mfr give guidance two months ago and then revise down by 5M? "Yen is suddenly a gaming buzzword" I don't even know where you are attempting to go with that one but I'm assuming you mean exchange rates more than simply Yen is a gaming buzzword.

 

[Teasy]

Anyone could see the 3DS was overpriced. Sony's in a far better position to know what it would cost to build and how much Room Nintendo had to change the price if needed. I'm sure when they announced the Vita at the same price as the 3DS was going for, they probably anticipated a price change in the 3DS's future.

Besides, it's not like the $250 price point is inherently problematic. The problem was that price was a terrible value for what you got in a 3DS. It's a damn good value for what you get in a Vita.

Was the PSP also damn good value at $250? It was just as state of the art for its time as Vita will be, more so perhaps.

 

[Silent_Buddha]

Ouch, so the losses incurred in Q4 2010 continue into Q1 2011. 119% effective tax rate on their operating income. Ouch.

Here's hoping they do better in Q2 2011. I still like Sony products overall even if their build quality has gone down. Love the sound quality of the STR-DH820 I just got but the build quality is absolutely horrible compared to Sony from 10-20 years ago. /sigh.

Regards,
SB

 

[boommoob1]

The only issue I have with the BDs is that they are _sooo slooow_ to load and navigate. I was spoiled with my HD DVDs. (And we didn't really lose money, we did pretty well, since our team owned the codec licensing business related to BD/HD DVD too)

As to the numbers, looks like 1.7MM xbox, 1.8MM PS3. PS3 still gaining on xbox, but now at a rate that would take it many years to make up the difference. Price drop could change the landscape, unless XBox price drops at the same time.

Also, price dropping the PS3 is going to strain the already strained Sony financials. They have fixed costs associated with shipping and storage that scale linearly with numbers sold, so selling more consoles doesn't always translate to complete goodness. (In contrast to development costs, and in some ways, manufacturing - since those costs go down with more consoles)

$2,5billion op. profit. Losses earthquake. $199 PS3. Sony restructuring of last 4 YEARS = 120Yen/Dollar to 78Yen/Dollar. Eyewatering.

 

[boommoob1]

Ouch, so the losses incurred in Q4 2010 continue into Q1 2011. 119% effective tax rate on their operating income. Ouch.

Here's hoping they do better in Q2 2011. I still like Sony products overall even if their build quality has gone down. Love the sound quality of the STR-DH820 I just got but the build quality is absolutely horrible compared to Sony from 10-20 years ago. /sigh.

Regards,
SB

Build quality is by necessity. The Yen is a safe haven currency in these times of trouble. Which means Sony cant compete in many markets basically. Case of strategic priorities for Sony.

 

[RudeCurve]

Love the sound quality of the STR-DH820 I just got but the build quality is absolutely horrible compared to Sony from 10-20 years ago. /sigh.

What kind of build quality are you looking for in a $270 receiver?

 

[AlphaWolf]

$2,5billion op. profit. Losses earthquake. $199 PS3. Sony restructuring of last 4 YEARS = 120Yen/Dollar to 78Yen/Dollar. Eyewatering.

The yen is actually fairly flat to currencies excepting the US dollar.

 

[Brad Grenz]

Was the PSP also damn good value at $250? It was just as state of the art for its time as Vita will be, more so perhaps.

The maturation of portable connectivity alone makes the Vita a better value. It will have a usable, familiar web browser, supports music and video services in addition to being the most powerful handheld gaming platform at release. PSP was state of the art for gaming, but its video, music and browsing capabilities were barely more than novelties. And it still sold pretty well at launch.

 

[boommoob1]

Stringers a dead man walking. Is Hirai figurehead for Sony the engineer corp. is now the interesting question!. Sony are humiliated by Stringers failures. Tablets, Vita not under Stringers conservative grip? .

 

[patsu]

Was the PSP also damn good value at $250? It was just as state of the art for its time as Vita will be, more so perhaps.

Yes ! No other device packed so many features and a good screen like PSP at that time.

The main problem with PSP was Sony ignored it completely soon after launch. All the software are not updated. And when new software features were introduced, they were ill conceived. As Sony focus on Vita, PS3 is somewhat in danger of repeating this path right now.

The one analog stick on PSP also can't compete with a touch screen UI. Perhaps it was designed to compete with GBA. And then there's piracy and homebrew which took PSP to a different evolution path.


A few things are different today. Sony has more first party studios. Online and community features are more important. Mobile games are perceived to be cheaper or even free. While hit games are still important, consumers at large are more sensitive to the entire ecosystem and buzz. There are many entertainment alternatives (e.g., web surfing, streaming video, etc.)


EDIT:
I think Sony will have to design a Playstation ecosystem that can thrive in the face of:

* A cheaper iPad with dedicated entertainment features as technology matures. It won't be $499 and above forever.

* A free iPhone with free/cheap games and anywhere connectivity

* Everything else sandwiched in between (like 3DS, Mango, Android).

It's actually pretty interesting to work out a solution. ^_^
(In my view, Sony already has all the pieces but they are not laid out "correctly" at this point)

 

[RudeCurve]

The UMD drive in the PSP was also state of the art in optical disc technology. It's tiny yet can hold 2GB of data which means higher density than DVD ie a miniDVD can only hold 1.5GB and with a bigger physical size. Too bad they crippled the format by not releasing standalone rewritable discs and drives. Maybe they knew flash memory would get really cheap really fast?

 

[Shifty Geezer]

The UMD drive in the PSP was also state of the art in optical disc technology. It's tiny yet can hold 2GB of data which means higher density than DVD ie a miniDVD can only hold 1.5GB and with a bigger physical size. Too bad they crippled the format by not releasing standalone rewritable discs and drives. Maybe they knew flash memory would get really cheap really fast?

I think that was entirely an antipiracy measure. Didnt really work, did it!

 

[NavNucST3]

1.TV's=industry wide 2. Japan exporters battered for years, Nintendo=returning to normality 3. Yen SUDDENLY a gaming buzzword.

I'm not sure the entire industry is struggling like this.

Sony marketcap

...
Japan’s largest exporter of electronics slashed its profit forecast after saying last week its TV division will lose money for an eighth straight year. Once worth more than $100 billion, Sony has lost half its market capitalization since Stringer became its first non-Japanese chief executive officer in 2005. The Tokyo-based company is now valued at $25 billion, less than a quarter the size of South Korea’s Samsung Electronics Co.
...

 

[boommoob1]

I'm not sure the entire industry is struggling like this.

Sony marketcap

Japanese are, Panasonic, Sharp, Toshiba. Restructurings been done it's now strong Yen, price war that's made Bravia uncompetitive. Market cap devaluation is recession, tv losses, earthquake, strong Yen and earlier PS3 losses, TV strategically important, So i think Sony will go on a spending spree to make noisy shareholders excited. EMI looks like there first target. Will SCEI get a piece of the pie?.