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August 4, 2012 • Editorials, Gaming

Failure of Playstation Vita is Lowlight of Dismal Sony Earnings Report

Sony was another business to report quarterly earnings, and once again the results were pretty dismal for the Playstation division. Here are the basics as noted at

Sony’s Game division posted an operating loss of $45 million as sales of its PlayStation hardware line continue to fall.

In the first fiscal quarter – ending June 30 2012 – the company’s Game segment posted revenues of ¥118 billion ($1.49b/£967m), down 14.5 per cent year-on-year. The decline was partially aggravated by the strength of the Yen, but overall sales were still down 10 per cent on a constant currency basis.

The segment posted an operating loss of ¥3.5 billion ($45m/£28m), versus an operating profit of ¥4.1 billion in the same quarter last year. The company claims that further losses due to the ailing fortunes of its PlayStation 3 and PSP hardware were “partially offset” by revenue from the PlayStation Vita.

It is certainly bad news across the board – with a curious note about the Vita I will address in a bit. But for me, the absolute worst part was the results for the handheld division:

The Vita and the PSP sold a combined total of 1.4 million, a significant drop from the prior year quarter’s 1.8 million units given that the Vita had not been launched at that point.

Think about it – a new handheld with near-PS3 level graphics, dual control sticks, touch screens and on and on launches … and it fails to sell more than 75% as many units as the end-of-life PSP and already abandoned PSP Go over a three-month period. As another editorial at GameIndustry states:

Vita, however, is an utter flop – a label I didn’t want to apply hastily, but can it really be denied at this stage, even by the console’s most dedicated fans? It’s clear that if Sony wants to reverse that situation, it’s going to have to accept deeper losses through a steep price cut, as well as significantly ramping up its software efforts.

So how does that reconcile with the Sony statement that the “ailing fortunes of its PlayStation 3 and PSP hardware were ‘partially offset’ by revenue from the PlayStation Vita.”? Well, the software numbers might tell some of that story, with 5.8 million units sold across Vita and PSP (down from 6.6m).

How does falling software and hardware sales account for better revenue? Well, the Vita sells for $250-300, whereas the PSP is the same as a year ago – $130 and the PSP Go is $199 (yes, STILL!). So by having the mean price per unit increase significantly (since the PSP was vastly outselling the PSP Go, which only sold to fools like me), Sony can make more revenue from fewer sales.

The same is true with software. PSP games started out in 2005 mostly at $50, but dropped over time to the point where a year ago most games were $30. PS Vita games are sold for $40-50, with the most popular games at $50. So again, fewer units producing more revenue.

But Sony has lowered guidance for future revenue, meaning that they ‘get it’ – what I mean is that while it is nice to get more revenue this way, numbers MATTER. Apple and Samsung sneeze out more smartphone sales on an average weekend than Sony sold PSP and Vita units over THREE MONTHS. And guess what – while Sony’s raw numbers are down, smartphone and tablet numbers are UP. The Nexus 7 is a hot property that is great for gaming on-the-go, and sells for LESS than the Vita!

And while comparisons to smartphones and tablets are relevant, the biggest problem is the success Nintendo is seeing with the 3DS. Even though Nintendo just announced a first-ever loss, they have now sold 20 million of the 3DS, and the new 3DS XL launch is off to a fast start even at a higher price.

Let me echo what I said a while ago – if Sony doesn’t drop the Vita price by at least $50 before the holidays AND come up with a new PS3 configuration/price to lure gamers, the Sony gaming division is doomed.

What do you think?

8 Responses to " Failure of Playstation Vita is Lowlight of Dismal Sony Earnings Report "

  1. Sony’s long had a weird attitude towards their pricing. They’re first couple of Reader devices came out before the Kindle, but didn’t sell well. Why? *I* think it was partly the high price. And then when the Kindle came out, did Sony respond by lowering their price? No! They’re approach simply baffles me.

    And on game prices: when you can get, say, Dark Meadow for iOS for less than $5 (And new high-end HD games for less than $10), why would anyone want to spend $40 or more for a Vita game? Why Sony doesn’t recognize that is beyond me.

    • haesslich says:

      I think Sony approaches pricing the way EA does – they seem to think premium pricing is required, lest you “devalue the property”. Which is fine and dandy if you have the sales clout to manage it and consistently good quality (hello, Apple)… but doesn’t work if your brand name is now known for being overpriced for the performance you get, as well as QC and removed feature issues in some of the later PS2/PS3 units.

      That’s why they’re trailing in the ebook reader market now, despite now having decent hardware (the T1). And why they may end up doing the same here, especially if they lose the exclusives which drew people to the PS2 to begin with.

      • Right. But what confuses me is that they’ve been making this mistake *for years*. You’d think by now they’d have figured it out.

        • haesslich says:

          This is SONY. They’ve let the tail wag the dog for decades, and aren’t the nimble, hungry company that first brought out the Walkman, the Discman, and the Trinitron displays which were the benchmark of their respective markets for years.

          It hasn’t even been until recently that they’ve been willing to leverage their media products across devices in a way which wasn’t completely onerous to use. Remember Sony Connect? If you don’t, you were lucky. This is the Sony who keeps trotting out proprietary memory and media formats, and the one which was part of the infamous rootkit scandal.

          This is the same company who said earlier this year that they were doing well… only to post a huge loss at the end of that quarter. Between that and the loss of exclusivity on a bunch of third party licenses (Square-Enix is wisely hedging its bets by spreading out older properties across multiple platforms, perhaps with an eye to moving the newer entries of their franchises across too)… well, they’re not dead yet, but they’re not looking too healthy.

          • dancohen says:

            And this is Sony who was early out of the gate with some nice eReaders from a hardware perspective but made them so limited, closed and hard to use that they were pretty much doomed from the start. And this from someone who owned a number of them early on.

            Sent from my iPad

            • haesslich says:

              I wasn’t impressed with the PRS-600: it froze up a lot while reading books, and I hated the LRF/LRX format. The PRS-500 was definitely ahead of the Kindle in terms of being able to use Memory Stick, but Sony Readers didn’t have wireless connectivity until the PRS-900 in 2009.. and didn’t deploy it widely until the T1 in 2011, some four years after the Kindle and other readers had been deploying such.

              The need to install the Sony Reader software on your PC to buy and load DRM’d books onto your device really hurt usability, especially when the Kindles had been doing it for ages. That may have helped effectively finish the Sony Reader Store’s ability to compete with the others, and the regional restrictions they had compared to Kobo or even Amazon were insane, especially when you could get books on the other two outside of the U.S. which Sony wouldn’t let you buy.

              As for the ‘limited, closed and hard to use’ part… remember what I said about how their ‘tail’ has been wagging the dog for ages. The tail, in this case, being their media division and the vertical silos with which they run the company. You’d have thought, when they began PSN, that advertising the ability watch the latest movies would have been a big thing to push when Netflix was starting to move into the online streaming area. Or that they’d be able to use their media properties to convince book publishers to get on board with them in spreading around material on the Sony Reader Store, or that they could’ve made the DiscMan and the MP3 market their own by using the artists they’ve got contracted through their other branches.

              Except that doing so might have gutted the DVD selling market, CD selling market, or whatever… which is why they didn’t, until Apple and Netflix, amongst others, had already gone in and eaten their lunch.

              • dancohen says:

                Right but the PRS-500 was pretty much the first (at least from a major company) and I bought it. I believe it was a full year before the Kindle appeared.
                I loved the idea of the eReader from the get-go but the entire experience… True it didn’t have wireless connectivity but that was, if I recall, about the same time Smartphone Life (or whatever the hell they were calling it at the time) :) had a cover story that read “Do We Really Need WiFi On Our Phones?”

                • haesslich says:

                  The Sony Librie came out in 2004, IIRC. And the problem was that Sony never seemed to want to make any changes to the hardware, much less the software, as time went on… which is why 2010 rolled around, and their mainline readers (PRS-650 and PRS-350) STILL didn’t do WiFi. Three years after the Kindle. They seemed to be going out of their way to make the experience as painful as possible, just to avoid the possibility someone might… y’know, steal a book they sell on the Reader Store.

                  My first eReader was a PDA. I’ve been reading eBooks for ages, from back when MobiPocket was a big player (until Amazon ate them). Their advantage, unlike Microsoft’s LIT format, was that it was easily crossplatform, and their DRM wasn’t incredibly inconvenient. I could download books from their site via a web browser, the program in question, or sideload from my PC – all I had to do was to make sure I’d downloaded the right one with my DeviceID from the site.

                  There were so many examples for Sony to take inspiration from… and instead, they went with the same type of pain-in-the-ass methods that they would later employ for the PSPGo and any Sony Connect-enabled music device.