Can Sony drag itself into oblivion?

[Matthew Jabour]

So, aside from the PS4, Sony isn't doing so good. They had to sell off their computer division, their TVs and phones are losing money, and their Spiderman movies are doing worse with each installment. Their credit rating is literally junk, and it seems that their non-console business is doing very bad all around. My question is, can they survive on just their consoles? Or could they become the next Sega?

 

[Rayce Archer]

The problem is that even if Sony divested themselves of everything not related to the playstation product family it would take years and cost millions. Their best bet for survival would honestly be to sell their gaming division SNK style under the condition that their brand remained in use, and use the proceeds to dissolve and sell off their other enterprises.

Bottom line: if their net finances are a loss, part of their efforts NOT losing money won't help.

And if I can go off on a tangent, it's easy to understand. Playstations are consistently good investments that combine solid support, a reliably long product life, lots of titles, and solid hardware. A Sony Laptop or TV or Stereo Receiver is more or less exactly like a Samsung or HP, only about a third more expensive. And their movies, yeah, ugh. Sony is failing because they make unremarkable products (unless you count the optical disk carousel for home theaters that cost 600 dollars and ate your blu rays as remarkable) that cost too much, the consoles succeed because they ARE remarkable and cost a high, but reasonable, price.

 

[Aesir23]

I certainly hope they don't become the next Sega. After all of the times my 360 quit on me I don't want to ever buy a console from Microsoft again and outside of Legend of Zelda, the stuff Nintendo produces isn't my cup of tea. I could focus solely on PC gaming and may eventually be forced to do so but I would like to hold that off as long as possible. Not that I have anything against the PC. I'm just not very tech savvy so it can be more than a little confusing.

 

[Johnny Novgorod]

I'm not an Amazing Spider-Man fan, but let's do some math.

First movie cost $230 million and grossed $760 million.
Second movie cost $200 million and grossed $710 million.

The profit for the first movie was 330% (gross revenue x 100 / original budget)
The profit for the second movie's was 355% (idem)

So not only did the second movie cost less to make, it also grossed an exponential 25% over the first movie.

I know the movies have gotten a mixed critical reception but since the rest of your post is about how Sony is "losing money"... well, not that I'm aware of. Links are welcome. For example:

http://www.bloomberg.com/news/2013-12-02/nintendo-seen-missing-target-as-sony-microsoft-sales-dwarf-wii-u.html
http://www.ign.com/articles/2014/01/17/nintendo-cuts-wii-u-sales-forecast-from-9-million-to-28-million

Nintendo is doing embarrassingly. Its shares have dropped consistently since 2007, having lost 82% of their value so far. It only managed to sell 5% of its target (Wii U) for the fiscal year of 2013 and it has more or less recently cut its Wii U sales forecast from 9 million to 2.8 million. That's 30% (!) of their original intentions. They don't think they'll even manage to make half as much money as they originally thought they would. They've recalculated their profit from 55 billion yen to a comparatively low 25 billion. Hell, the president of the company himself has been quoted as saying

"My duty, more than anything else, is to revive our business momentum"

You revive something that is dead, right?

 

[JayRPG]

Sony sold their computers division because it is a highly saturated market, most computer divisions of large companies (like Samsung, toshiba, etc) are losing money.

Selling that division was a good move for Sony.

As for TVs and phones, that is a problem area for Sony, but they are clawing themselves back. After an embarrasing 3-4 years in the TV market, they have managed to produce some of the best 4k TVs on the market (if not the best) which are getting incredible reviews and their sales are up.

Phones is tricky, they seemed to be carving a nice niche market with the water proofing stuff, but now that Samsung and other companies are picking it up they have lost all momentum.

Sony puts way too much bloatware and software addons onto their phones, they have incredible hardware specs but run like absolute ass, they're new z3 compact could be a winner though, with the iPhone's moving away from the small form factor, somebody has to pick up this market (which is bigger than a lot of people think).

It wouldn't be a bad move for Sony to drop phones altogether though, the 2 Korean powerhouses (Samsung, LG) are all over Sony in that department.

If Sony can keep clawing back with it's TVs they should be fine in the long run.

Both their movies and gaming divisions are doing well. (the movies might get bad/mixed reviews, but they do make nice profits)

 

[Matthew Jabour]

I'm not an Amazing Spider-Man fan, but let's do some math.

First movie cost $230 million and grossed $760 million.
Second movie cost $200 million and grossed $710 million.

The profit for the first movie was 330% (gross revenue x 100 / original budget)
The profit for the second movie's was 355% (idem)

So not only did the second movie cost less to make, it also grossed an exponential 25% over the first movie.

I don't know where you're getting your numbers, (unless it's Wikipedia) but the movie had a production budget of $255 million That's also ignoring the cost of marketing, which was around $180 million. That kind of profit is a lot more...marginal.

Source: http://www.fool.com/investing/general/2014/07/08/should-sony-panic-about-the-amazing-spider-man-2-b.aspx

 

[QuintonMcLeod]

So, aside from the PS4, Sony isn't doing so good. They had to sell off their computer division, their TVs and phones are losing money, and their Spiderman movies are doing worse with each installment. Their credit rating is literally junk, and it seems that their non-console business is doing very bad all around. My question is, can they survive on just their consoles? Or could they become the next Sega?

Well...Sony has a lot of bad things happening. People said last year that the Playstation division was posting a profit (http://www.gamesindustry.biz/articles/2014-02-06-ps4-boosts-sces-op-profit-290-per-cent-in-q3), which was true, but that profit was extremely small (170 million dollars for Q3 2013), and was completely incapable of supporting Sony as a whole. Also, majority of those profits were partly due (actually, it was 50% of their 64.7% increase) to the yen becoming much stronger for that quarter (http://www.sony.net/SonyInfo/IR/financial/fr/13q3_sony.pdf). Last year, with a 1.1 billion dollar loss for the entire year (http://www.businessinsider.com/sony-warns-of-11-billion-loss-2014-2), that 170 million dollars meant absolutely nothing.

Last year, Kaz Hirai's image with Sony's investors had took a turn for the worst (http://www.bdlive.co.za/world/asia/2014/02/10/investors-losing-faith-in-sony-ceo-hirai), with many investors nearly depleted of all confidence in the CEO (http://www.bloomberg.com/news/2014-02-06/sony-ceo-credibility-takes-hit-with-1-1-billion-loss-forecast.html). With the 2 billion dollar projected loss predicted for _this_ year, you can't believe that the investors are becoming any more confident (http://www.nytimes.com/2014/09/18/business/international/sony-widens-expected-loss-to-2-14-billion.html?_r=0).

Aside from Sony selling multiple (http://www.reuters.com/article/2013/02/28/us-sony-property-sale-idUSBRE91R09L20130228) corporate (http://techcrunch.com/2014/02/28/sony-to-sell-former-tokyo-headquarters/) buildings (http://www.digitalspy.co.uk/tech/news/a452179/struggling-sony-sells-off-new-york-hq-for-usd11bn.html), firing 5000 people (http://playeressence.com/sony-is-forecasting-a-loss-of-1-1-billion-will-cut-5000-jobs/); that of which included 1000 people from two thirds of all of Sony's retail chains (http://www.escapistmagazine.com/forums/read/7.843467-Sony-Closing-Two-Thirds-of-U-S-Sony-Stores), which are now being shut down, and 50 people from their Santa Monica studio (http://www.ign.com/articles/2014/02/25/layoffs-hit-god-of-war-studio-sony-santa-monica), which lead to the cancelling of one of their own projects (http://www.neogaf.com/forum/showthread.php?t=775133)

Then you had Sony spinning off their TV division (http://www.forbes.com/sites/marksparrow/2014/02/09/sony-spins-off-tv-business-in-bid-to-reconquer-market/) and completely selling off their entire PC division (http://articles.latimes.com/2014/feb/06/business/la-fi-sony-pc-20140207).

This was only the tip of the iceberg for Sony bad news. Sony had been losing money year-after-year for over a decade now (http://www.latimes.com/business/money/la-fi-mo-sony-losses-layoffs-selling-computer-business-20140205,0,5421713.story#axzz2uc3Jv9aa). Each time losing billions (http://edition.cnn.com/2012/05/10/business/japan-sony-record-loss/index.html) upon (http://www.neogaf.com/forum/showpost.php?p=36861280&postcount=448) billions, upon billions (http://www.nytimes.com/2014/09/18/business/international/sony-widens-expected-loss-to-2-14-billion.html?_r=0) of dollars (http://www.extremetech.com/gaming/125961-sony-fires-10000-loses-6-4-billion-and-cuts-down-on-tvs-what-could-possibly-go-wrong). Sony's stock was turned into junk status (http://www.gamesindustry.biz/articles/2012-11-22-sony-stock-downgraded-to-junk-by-fitch)... twice, I might add (http://www.forbes.com/sites/maggiemcgrath/2014/01/27/sony-credit-cut-to-junk-status-as-smartphones-cannibalize-its-tv-and-pc-businesses/), and even Nintendo, at one point, was considered a bigger company (http://www.escapistmagazine.com/news/view/131152-Nintendo-Stock-Doubles-In-Last-Few-Months-Now-Bigger-Than-Sony).

And as of right now, Sony is 44% more likely to go bankrupt in 2 years (http://www.macroaxis.com/invest/ratio/SNE--Probability-Of-Bankruptcy). That number has come down from 78% last year, but with the number of losses they are still making, it's still pretty relevant.

 

[Casual Shinji]

Sony as a company is just kind of outdated, and I doubt they will ever get back up. That's not to say I think they're going to die, I'm sure they have some aces up there sleeve, but I fear they will remain an old, outmoded giant for years to come, maybe forever.

 

[crypticracer]

If they die, and the playstation dies that could be the death knell for console gaming. Do we really think japan would stick around for the xbox? Though it would probably help nintendo.

 

[Evonisia]

If they die, and the playstation dies that could be the death knell for console gaming. Do we really think japan would stick around for the xbox? Though it would probably help nintendo.

Microsoft would probably just go more anti-consumer knowing that the European and North American markets will belong to them, and Nintendo can probably revive itself in Japan.

 

[Adam Jensen_v1legacy]

Companies as large as Sony don't die so easily. If they were in dire straits they'd seek government assistance and they'd receive it.

 

[stroopwafel]

Sony as a company is just kind of outdated, and I doubt they will ever get back up.

How so? I think Sony is still one of the most innovative tech companies. Sure, not everything is a success but atleast they try. Unlike some other companies that only re-release their same fucking phone every other year.

Anyways, I don't think Sony will get out of business any time soon. Though being such a huge conglomerate maybe its time to trim the fat, cut some losses and divide the company up into smaller pieces. Sure, they will lose some of their reach but they are no longer the dominant force in consumer electronics anymore anyway. Espescially with TV and phone markets being as oversaturated as they are.

Sony's gaming division is doing excellent and its a shame it needs to compensate for so much dead weight in the company. With such a steady influx of revenue its unlikely financial losses will bankrupt Sony, but it does corner them in the precarious situation of having almost no reserves or assets to liquify.

Sony has gold in their hands with their gaming division so if they change their strategy absolutely nothing stands in their way of becoming profitable again.

 

[Johnny Novgorod]

I'm not an Amazing Spider-Man fan, but let's do some math.

First movie cost $230 million and grossed $760 million.
Second movie cost $200 million and grossed $710 million.

The profit for the first movie was 330% (gross revenue x 100 / original budget)
The profit for the second movie's was 355% (idem)

So not only did the second movie cost less to make, it also grossed an exponential 25% over the first movie.

I don't know where you're getting your numbers, (unless it's Wikipedia) but the movie had a production budget of $255 million That's also ignoring the cost of marketing, which was around $180 million. That kind of profit is a lot more...marginal.

Source: http://www.fool.com/investing/general/2014/07/08/should-sony-panic-about-the-amazing-spider-man-2-b.aspx

"They didn't make THAT much money"?
Anyway, to answer your title question: Nintendo's the closest to Sega. No need to worry about Sony

 

[Casual Shinji]

Sony as a company is just kind of outdated, and I doubt they will ever get back up.

How so? I think Sony is still one of the most innovative tech companies. Sure, not everything is a success but atleast they try. Unlike some other companies that only re-release their same fucking phone every other year.

It is well known that Sony's business practices are pretty stodgy, which is likely due to it being a Japanese company where they still have this hierarchy mentality. Kaz Hirai himself has said in an interview that they need to do a lot of restructuring to be able to really compete with other companies like Samsung. Because at this point Samsung is really becoming the new Sony, minus the entertainment divisions.

Sony has a lot of cleaning up to do, and with a company of that size that may be like mopping with the faucet running.

 

[themyrmidon]

It looks like they are going towards a corporate breakup, which is a real shame. They are competitive in every market they put out products for, and get no respect in none but gaming.

The one that upsets me most is their smartphones. I imported a Z1 because I wanted it that much more than a Samsung S4 or HTC One or LG G2. I've been using the phone for almost a year and it has met or exceeded my expectations in every way. But because Sony doesn't have the market presence of Apple, Samsung, or HTC they are unable to get relationships with supplies necessary to saturate the market. The Samsung S4 and S5 are not that good phones, but they rule the roost because Samsung has built its supply chain to the point that it can just crank out phones.

It looks like Sony has been trying to do this with light-revision 6-month cycles instead of 1-year cycles. Unfortunately this seems to have backfired as public perception is that Sony has to put out that many just to compete and that your phone will be outdated even faster. The truth, when you look at the launch of the Z, Z1, Z2, and pending Z3, is that Sony is getting their ducks in a row. The Z barely dented the market, the Z1 suffered from major supply issues, the Z2 sold well abroad but was kept out of the US due to supply issues. The Z3 is getting a more-or-less global launch, but supply issues kept it from launching until 2 months after announcement. Sony was one of the first on stage at IFA, but among the last to release their device.

My hope is that the Z4 will come out globally the month of launch in the spring of next year, maybe later if that allows it to launch with the new Snapdragon 810 processor, but not behind the competition. Sony has improved their supply chain with each revision, if they get it to the point where they can have a solid product launch they can finally play with the big boys, and maybe turn a profit. Which would be great, because whether people know it or not, Sony has the best phones on the market.

TL,DR: Sony has the best phones on the market, they need to get straightened out to sell more.

 

[Hairless Mammoth]

Sony is going to have to downsize, a lot. Their movies aren't doing as good, and they're banking on the next Spidey and spinoffs to help give them a boost. (And, who knows when the super hero movie fad is going to die? It been about 12 years now, so there is no telling when even Marvel's cash cows start under performing. Even less predictable is the character who's been at the forefront of the fad the whole 12 years and Sony wants to reboot after 3 movies again.) Their TV's are being upstaged by Samsung and LG. Same thing with their phones. Sony Computer Entertainment got lucky that Nintendo thought the Wii U would be a low effort cash printer like the Wii was and Microsoft dropped the ball really bad before the xbone release and keeps fumbling whenever they get it back. They were smart enough to sever the gangrenous limb that was their PC division. (But, they were stupid enough to get into that mess by giving premium prices to basic PCs with the same internals and software as an HP or Dell and not fixing that issue by the time tablets threatened the industry to change.) I'm sure something major will be auctioned off. (Probably not Sony Computer Entertainment, since that has the most promise to make a profit in the near future.)

 

[gorfias]

Sony is making an interesting move with their live box.

This site long ago had a video explaining that consoles are to gaming what arcades were in the late 70s, early 80s. A dinosaur.

Be interesting to see what happens. ITMT, I'll enjoy my PS3/4 to the fullest possible and hope they're supported for another 10 years.

In 10 years? I think we'll game in radically different ways. Smart TVs that stream games? Good reason for Sony to stay in the TV business. I hope they're 4K OLED TVs become affordable for me.

 

[flying_whimsy]

snip

That was surprisingly well-cited. I didn't know they were having so much trouble with their investors and stock prices.

OT: Sony used to the trendy luxury brand, but two things happened: they got complacent and Apple stole their thunder. Sony used to have the best quality and features for stuff (I only bought sony walkmans and diskmans because they were the best), which used to justify the higher prices. But they stopped pushing as hard and all of the other electronics manufacturers caught up, offering competitive devices for lower prices or even better devices at luxury prices. Then Apple came along with the ipod, and suddenly sony simply wasn't trendy anymore.

I kind of hope sony finds a way to turn things around, but honestly I don't expect them to. I like Sony, but I don't think their corporate leadership is any good at looking beyond Japan's borders and understanding the international market in any meaningful way.

 

[SonOfVoorhees]

Maybe Sony should just stick to console and games and dump everything else. Spiderman still makes money but its not the amount they wanted - they could make a fortune either selling it back to Marvel, or selling co ownership. Also their electronics department are getting hammered because there tv's etc are not as good and are to expensive compared to other companies.

They still believe their Brand has meaning and keep their prices high. I would hope they get things fixed because Playstation is what made gaming what it is now.

As consoles cost loads and are sold at a loss. It would be great if Sony, MS and Nintendo got together to make an awesome console with all the games. It would get rid of fanboyism and people can try other games they normally would never buy due to exclusivity on another console.