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 GI.biz:

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?


About the Author

Michael Anderson
I have loved technology for as long as I can remember - and have been a computer gamer since the PDP-10! Mobile Technology has played a major role in my life - I have used an electronic companion since the HP95LX more than 20 years ago, and have been a 'Laptop First' person since my Compaq LTE Lite 3/20 and Powerbook 170 back in 1991! As an avid gamer and gadget-junkie I was constantly asked for my opinions on new technology, which led to writing small blurbs ... and eventually becoming a reviewer many years ago. My family is my biggest priority in life, and they alternate between loving and tolerating my gaming and gadget hobbies ... but ultimately benefits from the addition of technology to our lives!