Posted by John on February 3, 2012

Sony and Nintendo’s poor financials: Apocalypse? Not just yet

Another week, another opportunity to wallow deliciously in gloom: Sony’s quarterly results have rolled in, and they don’t make pretty reading. Nintendo, meanwhile, remains on course to make its first full-year loss in living memory.

Cue another chance for analysts and financial journalists gleefully to predict the demise of the games industry. If only Nostradamus were still around to join in the fun.

Doom and gloom for Sony

Look a bit closer at the figures, though, and you might feel a bit less inclined to call in a priest to intone the last rites for videogames. Sony’s Andrew House described at length in a CVG interview how 2011 was Sony’s annus horribilis, with the Japanese tsunami and earthquake, the PSN hack, the floods in Thailand and even the looting in London hitting its manufacturing hard. Frankly, after all that, it would have been a miracle if the company as a whole had made a profit.

Click to view larger image Indeed, Sony Computer Entertainment - the company’s games wing - made a profit last year, for the first time in ages. And while the company acknowledged that the PS3’s price-cut had an adverse effect on revenues in the offending period, those seemingly dire financials reveal that both PS3 sales (up from 6.3 million to 6.5 million) and PS3 game unit sales (up from 57.6 million to 66.2 million) rose year-on-year. There’s something to get the doom-mongers frowning.

Sure, SCE has issues. There’s the imminent launch of the PS Vita, a fine machine which may prove to be hamstrung, at least in its initial stages, by an RRP which is too high. And at this precise moment, SCE is undoubtedly chucking vast amounts of RD money at the PlayStation 3’s successor - although, one hopes, significantly less than it lavished on the PS3.

Designing the PS3 cost so much that it led to the demise of Ken Kutaragi, don’t forget - the company reputedly lavished in the region of $1 billion on designing the Cell processor alone, an exercise it won’t be in any hurry to repeat.

Slightly more worryingly, Sony cited: “Higher marketing costs to promote network service platforms,” as another factor underlying the poor results. Which rather emphasises that consoles need to remember that, primarily, they are about games.

Although that bland slab of corporate-speak surely alludes to the PSN hack, and anyway, Sony will be able to carry over those “network services” to its next console. Or, if they require that much marketing cash - in other words, nobody is interested in them - quietly give them the boot.

Anybody visited PlayStation Home lately? Does it still have metaphorical tumbleweed blowing through it?

Doom and gloom for Nintendo

Recently, Nintendo posted results that were, if anything, even worse than Sony’s: it is squarely on target to make its first full-year loss for heaven knows how long.

Click to view larger image The financial press and analysts promptly leapt on the figures as evidence that the rise of mobile phone games is about to kill the traditional games industry. Such statements merely acted as evidence that the only games financial journalists are likely to have come into contact with are Snake or Bejewelled, or perhaps Angry Birds at a pinch.

Sure, Nintendo is a big player in the portable gaming space and sure, the 3DS was a flop. Note that ‘was’. More than 15 million of the buggers have now been sold, so we really can’t describe it as a flop any more.

It doesn’t require half a brain to be able to see that, when it first came onto the market, the 3DS didn’t sell because it was too expensive. So Nintendo dropped the price - and since then, it has sold well. More sensible advertising, concentrating less heavily on the stereoscopic 3D, helped, too.

So, if the failure of the 3DS means that mobile phones are killing games, does the success of the 3DS mean the opposite? There’s a question to pose to the next analyst or financial journalist you meet.

Apocalypse? You’ll have to wait

It would be ridiculous to deny that there are issues: for example, given the complexity of the Wii U’s controller and the fact that its technical specifications, for once, don’t read like something from the Steam Age, Nintendo may have to swallow its pride and abandon its previous policy of selling hardware at a profit from day one. Presumably, mind you, it already did that when it dropped the price of the 3DS.

And no matter what happens in 2012 (unless those Mayan predictions come true), Sony can’t fail but to have a better year than 2011.

Even if mobile phones do kill the games industry, it’s a major player in that market, having purchased Ericsson’s share of Sony Ericsson last year. Although - analysts and financial journalists please note - Sony Ericsson made a pretty sizeable loss last year. Let’s hope, though, that 2012 turns out to be the worst year in living memory for one specific group of people: the doom-mongers predicting the demise of the games industry.

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