Sony said to be sitting on $1.1 billion annual loss, first in 14 years

Belt tightening at Sony already underway during Sir Howard Stringer's keynote.

There are plenty of directions to point fingers: trying to be a premium brand in a weak world economy, a strong Yen (harder to export) or difficulties in making the PlayStation 3 profitable, but whatever the cause, it looks like Sony lost $1.1 billion last year, the company's first practical loss in 14 years. Of course, the report isn't official just yet, earnings aren't due until the 29th, and Sony has put out a statement to that effect, with no further comment -- but let's just say this is a pretty widely bandied number at this point. This seems to line up with rumors of additional cost cutting, with 16,000 jobs already cut at Sony thanks to the hard times. But don't worry, the VAIO P with Windows 7 will save us all.

[Via Electronista]

[Jon Acheson @ Jan 13th 2009 10:51AM]

Sony really needs to work at getting PS2 owners to upgrade to the PS3.

The system is good, and the games are there now, it's down to price and lack of backwards compatibility. I think the latter may actually be more of a stumbling block than the former.

[Verythrax @ Jan 13th 2009 11:00AM]

I believe it's the former - backward compatibility is cool, but after you start playing the new games, it becomes just a gimmick, I hardly come back to the older ones.

And "the games are there" is not good enough, with the 360 library being much more attractive, even without considering all the franchises they lost.

Not to mention the Wii, that despite it is not my thing, it's selling like hot cakes.

[phrank @ Jan 13th 2009 11:07AM]

I think their issues go way farther than their gaming business. Although I do feel that they have a lot of work in turning around the gaming business, I haven't seen Sony really shine in any department lately. This is due to poor management.

They've always done well as a premium brand. The problem is that electronics have gotten cheaper to produce. The difference between a mid-level electronic component isn't as far off from a high-level electronic component as it was in the 90's. In other words, they need to figure out a way to compete a little better.

The recall of millions of potentially exploding batteries is another example of poor management. QA should have caught that one. It seems that the only business that is doing well for them is the movie business.

[Doug @ Jan 13th 2009 11:53AM]

Dropping PS2 functionality was a big, big mistake. I still have a small stack of PS2 RPGs I still want to play despite having a PS3 AND a 360.

As it stands, the PS3 is only used to play movies, and the PS2 was moved into the bedroom with the old TV.

Meanwhile, RPGs continue lining up for the 360. For a Playstation, the PS3 has really dropped the ball in this area.

[Verythrax @ Jan 13th 2009 10:57AM]

Considering that the Entertaiment division (PS2) was the only part of the company that wasn't on red (but it was good enough to sustain ALL the company), it's not unexpected, since the PS3 is not being able to pay itself.

[Like_A_Glove @ Jan 13th 2009 12:07PM]

Agreed, it's entirely expected since pretty much every non-portable-sized company nowadays suffered from this "Global" down turn. The bigger the company the greater the loss.

[J @ Jan 13th 2009 10:58AM]

It's widely accepted that premium brands do better in a recession, because people are willing to pay for quality if money is tight. The problem with Sony is that the latest group of consumers no longer associate it with quality anymore than they do with Samsung, Panasonic or Pioneer. How can I justify spending 10-30% more on a similar product from Sony?

[Chuckles McGee @ Jan 13th 2009 11:03AM]

Uhmm, I don't think it is widely accepted at all that people purchase more premium brands if money is tight. Looking at the hefty profits of McDonalds and increase in generic store brand purchases during this recession and the decline in the luxury goods market, I'd say just the opposite.

[boe @ Jan 13th 2009 12:20PM]

I agree with the comment about Sony. I can say I just bought the sony s5000es BR player and have to admit - it is great! I have an Onkyo885 and it sucks - I had a Sony 9000es prepro and it was great but it didn't even have HDMI so I bought the Onkyo - my 8 year old Sony sounds much better even though it is much older. I wish Sony made a new prepro to replace the 9000es - I spoke to two guys from Sony who asked me why I didn't just buy a receiver and use it as a prepro so I explained and they both admitted they were prepro people as well and wished Sony sold something new to replace the 9000es as well. I think part of Sony's problem is they don't like to listen to what their external markets are asking for or they are listening to the wrong people in their company. I think Sony is capable of good things but is to big or something to get their act together.

I had an exec from from the LA office ask me to look at their system diagram - what a disaster - if they employed me full time it would take me 3 years to straighten out their systems!

[Quix @ Jan 13th 2009 12:07PM]

I agree with J - being a "premium product" company doesn't have to mean certain death in a bad economy. And I also agree with J that the problem with Sony is they haven't exactly kept their "premium product" image, despite the premium pricing. Sony lost its prestige years ago. Their quality has slipped significantly. And they have *way* too many products to be a premium product company. Sony needs to pull a Steve Jobs and slash their product line to the essential core. You *don't need* 200 different camcorder models. And dump the clock radios and other low-dollar junk.

Nintendo continues to eat Sony's (and Microsoft's) lunch in the gaming console wars. Sony (and Microsoft) need to wake up and realize that you can't keep throwing money at a money-losing proposition. Selling a gaming console at a loss with the hope of making up for it on the software side years down the road turns out to be a *really bad* business plan.

[sonick @ Jan 13th 2009 11:46AM]

Chuckles, I think you slightly missed J's point. Purchasers of luxury/premium brands are assumed to be by-and-large fairly wealthy and so their consumption would not be affected as greatly in an economic downturn. They may spend less in harsher economic times, but not to the drastic extent of the general middle-class population; and they will still continue to spend it on luxury/premium brands but just less than they would have in the past (e.g. a Bentley Owner would be less likely to trade down to a Honda in an economic slump)

The 'elasticity' of spending (if that is the correct usage of the term, I am not an economist) is much less in the extreme ends of wealth (the wealthy and the poor) than the entire middle-class.

[Temple @ Jan 13th 2009 11:54AM]

Premium brands and products are the biggest hit in a recession. Which is the reason why Wal-Mart is still doing fine, and Porsche and other premium brands have also experienced huge drop in sales since the financial crisis hit.

For Sony, the biggest problem is the yen. The dollar has dropped after the banking mess and is now below 90yen/$, which means that an export driven company like Sony earns less per dollar it makes.

[J @ Jan 13th 2009 12:01PM]

sonick, well put - that is a part of the point.

The other part is that even middle class spenders tend to go for higher quality products in a recession. There have been a handful of economic studies that have said that even middle class spenders will buy fewer items of higher quality during bad economic times - especially uncertain economic times. The common sense reasoning that goes with this is: "If I buy this [cheap] Vizio plasma for $899 and it breaks in 2 years, I'll have to spend another $899 to get a new TV. If I buy this [well made] Sony for $1499, I will most likely spend more money, but at least I'll have a good deal of certainty that I won't be out another $899 in 2 years."

I'm not sure how much I buy into the common sense reasoning, because I think it's difficult for consumers to quantify the expected cost of a purchase when reliability comes into play. The way it was explained to me relied heavily on people wanting to "control their destiny" via the purchase of something super reliable even if they knew it would be significantly more expensive. The study continued to conclude that low cost goods do better in good times, because people view even big purchases (like plasma TVs) as throw-away devices if they think they'll have the money in a few years. The specific study I'm thinking about specifically looked at larger purchases via consumer electronics and plasma TVs, but I don't see any reason why it shouldn't hold up with all non-perishable (or consumable) goods: Cars, Computers, Home Furnishings.

I can't find the study now, and it's killing me.

[Quix @ Jan 13th 2009 12:19PM]

"For Sony, the biggest problem is the yen" - Temple

Wow Temple, if you think Sony's biggest problem is the exchange rate, then you're as delusional as...Sony.

[trevor @ Jan 13th 2009 1:15PM]

the hell's with all the long ass comments that noone's gonna read?!

[balls @ Jan 14th 2009 1:26AM]

@J you're spot on with that. Premium brands generally do not take a hit revenuewise, however they may take more of a beating in the markets due to unsavvy investors making improper conclusions of their business units.

@Temple: Bad example. In 2008, Porsche made a killing with a short-squeeze, roughly netting 6-8 million EURO on VW stock. Porsche is doing fine.

In addition, Wal-Mart does well because it has high volume, and percieved "lower cost" items, so when the middle class start penny pinching, they'll tend to shop at wal-mart, looking for deals, and forgo more moderate retailers like Sears.

[Ryan Hoare @ Jan 13th 2009 11:00AM]

Im really not sure its backwards compatibility did you ever play a ps1 game on your ps2?

[Chin-Poh @ Jan 13th 2009 11:03AM]

I actually did in the first year of the PS2 when there weren't many quality games for the system. But when Fall 2001 came around and games like Jak and Daxter, Final Fantasy 10, Metal Gear Solid 2, ICO, Devil May Cry, etc. came around, I pretty much stopped playing PS1 games on it. : )

[Najakwa @ Jan 13th 2009 11:03AM]

Yes. I am sure I am not the only one.

[216 @ Jan 13th 2009 11:06AM]

I did for a while, but then I sold all but one PS1 games (Final Fantasy VIII)

And now I have a PS3 with backwards compatibility, and I still play Devil May Cry 3, Madden 07 (I hate the new Maddens), DBZ BT2, Dark Cloud 2, Shadow of the Collossus, GTAsa etc.. Really the one reason that I jumped out and got a PS3 is cuz I heard they were discontinuing the feature on future SKUs. I hurried out and got me a MGS Bundle quick.

Of course I realize that I'm not the average consumer either, and backwards compatibility really is unnecessary to most people

[Elora HRanma @ Jan 13th 2009 11:22AM]

On the other hand, I still play Chrono Cross, Persona 2 or the WipeOuts (PSX), Shadow of the Colossus, ICO, FFXII, BurnOut Revenge, NFS Most Wanted, Persona 4 (PS2)...

A good game is a good game, and so the TV at my house is surrounded by all three PlayStations (and some other).

[Najakwa @ Jan 13th 2009 11:22AM]

8!? seriously? i hope that's a typo.

[Jon Acheson @ Jan 13th 2009 11:59AM]

I still occasionally play PS1 games on my PS3. Though I have to admit, for some games, the really bad old textures are a show-stopper.

And, if my experiences are any indication, it's definitely an issue with PS2 owners looking at the PS3 and going "should I get a PS3?" With backwards compatibility, this was pretty much a no-brainer, as the 60 GB PS3 was a much better PS2 than the PS2 was, with the wireless controllers and ability to turn it on and off remotely. And of course, it plays PS3 games and Blu-rays.

Without BC, people go "geez, I don't want to have this AND my PS2 cluttering up my living room." Or they say "I'll wait and see if BC comes back." Or they buy a Wii or a 360, because without BC there's no reason to be tied to a Sony platform any more.

[Robbie @ Jan 18th 2009 7:48PM]

I actually played PS1 games on my PS2 all the time! Backwards compatibility is way more important than everyone thinks it is. I liked the Wii, which I owned for two years before selling to a friend, because it was backwards compatible with Gamecube games. When even a novelty console like the Wii is BC, and yours isn't, you should know you messed up. I currently only own two PS1 games and no PS2 games. I kept Final Fantasy VIII and Harvest Moon: Back to Nature. Anyone who wants to diss those, please remember that I'm female. I'm not into murdering zombies or other people in violent first person shooters. I'm into games that calm me, and I loved those two. Rather than reinvest in a PS2, after mine was fried, or invest in a PS3 (why would I? It wouldn't play my games!), I plan to seek out and find an original PS1 to play my games.

Now, to be fair to Sony, my husband wants a Blu-Ray player. He's very into movies and likes the higher quality. However, since the PS3 would be useless otherwise and is way too expensive to fit into our budget at ALL, we are simply going to buy a Blu-Ray player. Maybe if Sony lowered their prices and added BC back to the system, we would actually purchase the PS3. Since those are the two things that Jon Acheson brought up, I suppose he was right.

[Najakwa @ Jan 13th 2009 10:59AM]

awe dangit, there goes ps4.

[From My Cube @ Jan 13th 2009 11:04AM]

more like oh shit a bunch of people are going to loose there jobs....anyone who pays there own bills can feel for all the employees at Sony

[kjb434 @ Jan 13th 2009 11:01AM]

And they are also still make PS2 games. I just saw a commercial recently for a brand new PS2 game.

Sony has the problem of being to big for their own success. They have so many divisions that the company just can't run efficiently.

They'll have to layoff 1000s of middlemen to make themselves profitable. And they should do that. If they aren't profitable, then they can't spend as much on RandD work.

[Jon Acheson @ Jan 13th 2009 12:07PM]

I don't think that is a problem though. Quite the opposite, the overlap provides SCEA with income from the older console's user base while the new console isn't turning a profit yet. This helps cushion the transition so that they don't wind up posting losses like Microsoft's gaming division did when they sharply cut off the XBox, and had to eat the startup losses from the 360 on top of that.

[Chin-Poh @ Jan 13th 2009 11:01AM]

What Sony should have done with the PS3 is make the games on DVD format, release this base model for $400 and release another model that could play Blu-Ray discs as movies for $500-600. It would have been a much larger success than it is now.. Blu-Ray has helped and harmed the PS3, but I would say more harmful.

One selling point of the PS3 is to play Blu-Ray MOVIES, not GAMES. I believe only MGS4 has taken advantage of the extra space, most games completely waste its extra storage capacity. That's why Sony should have put the games on DVDs and release an optional SKU for those that want to play Blu-Ray movies.

And due to the drives slower read speed than DVD drives, this is why so many PS3 games also require mandatory installs. Its sad to have large games like GTA4 and Fallout 3 run fine on my Xbox 360 Arcade without a HDD but require 4-5gb installs on the PS3 for the same or marginally improved performance.

Too bad Sony forever killed PS2 B/C and the memory card readers in the new PS3s, at least they are more energy efficient and cooler running.

[Mike @ Jan 13th 2009 11:19AM]

Right but what you have to consider is how much did the PS3 help Blu-Ray win the format war and in the long run (5-10 years out) how much money is Sony going to make because Blu-Ray won. That is really what matters.

[Nomi @ Jan 13th 2009 11:18AM]

I disagree. I like consistency...also, it would also have prevented games that require more space than a DVD. You might not see it now but eventually large games won't be able to fit on DVDs. Just like they don't fit on CDs any more...remember the difference between CD to DVD was much greater than the difference between DVD to Blu-Ray.

0.7GB to 8.54GB - 12x bigger < I doubt people thought they would need 12x the amount of space for a game.
8.54GB to 50GB - 6x bigger < So its not hard to believe they might need 6x the amount of space now.

[Elora HRanma @ Jan 13th 2009 11:28AM]

What you call wasted extra capacity is multiple language choices for me. I prefer playing videogames in their original language and in Western Europe FIGS (French, Italian, German, Spanish) is the norm in DVD releases. Having the option to play in English makes the Blu-Ray extra cost worthy. At least for me.

[afoote @ Jan 13th 2009 11:37AM]

I personally don't miss B/C because I have a ps2 slim and plenty of memory cards. Sure it would be convenient to be able to play the ps2 games on the ps3 and have virtual memory cards, but I'll gladly pay less to not have it. I also don't miss the card reader cause I wouldn't really use it and will gladly pay less for not having it in there. For those who would use it there is a nyko card reader for pretty cheap.

While your idea for having a cheaper SKU might attract some buyers it would ultimately be a horrible decision. Like Nomi said, what happens when developers start actually using the space provided on blu-ray discs? Now people who have the DVD SKU won't be able to play new games and will be pretty pissed that their ps3 can't play ps3 games.

[Troy Powers @ Jan 13th 2009 11:36AM]

I doubt Sony would have been able to put out a system with a projected 10 year life cycle using dvds for games. Even if MGS4 is the only game so far to take advantage of the extra space (which, I doubt it's the only one), just the fact that two years in there were any games at all that took advantage of the extra space says a lot. I'd guess that in another 2 years being limited to 8 gigs will be crippling. Besides, from what I hear, MGS4 is a friggin' MASTERPIECE!

I think Sony's downfall as far as the PS3 is marketting. 360 and Wii are plastered all over my television. I rarely see PS3 commercials. And I've seen lots of commercials for multi-platform games that end with a huge 360 logo, indicating to those that don't know better that the game is only on the 360. Then, Sony has it's next masterpiece coming out next month in Killzone 2 (I was in the beta. The hype is all true!), and they're not even pushing it. Microsoft had Halo plastered all over Mountain Dew cans. But, only video game enthusiasts even know Killzone 2 is coming out and how great it is. Sony is screwing themselves on that one.

[sjdurfey @ Jan 13th 2009 4:06PM]

@Troy

If you were in on the Killzone 2 beta, then obviously you have PS3. so the question remains, WHY havent you played MGS4 yet?! It is arguably the greatest game I have ever played. Its between that and FFVII (*crosses fingers for a remake*)..

[Shinigami @ Jan 13th 2009 11:16AM]

Vaio P will really save us all as soon as its price drops to $500. Or better - $200.

[Ineed911 @ Jan 13th 2009 11:30AM]

Sony needs to start coming to grips that their current products (PS3, x1, Vaio P) are not innovative enough, and do not differentiate themselves enough to justify the foolish price differences.

PS3 has always been "overpriced" compared to the 360. It does not matter how "technologically advanced" it is = the point is to sell consoles and get developers to write games that lure little kiddies in like crack.

X1 is yet another handset that costs ~2x compared to devices that are considered competitors (G1, Touch Pro, iPhone, Storm)

And the Vaio P is really just an odd shaped netbook that happens to be more than 2x the price of the next best competitor

I, for one, am not sad to see an elitist company like Sony taking a bite of the big crap sandwich.

[AC0 @ Jan 13th 2009 11:58AM]

Hah, wow, reading through some of these comments you'd think Sony had killed all your grandmothers considering you bitter you seem.

I'm not fussed about how Sony does; i've had a PS3 for several months and only just watched my first Blu-ray movie on it, because i didn't care for all the hype... well turns out the Blu-ray quality really is quite impressive. So i'm already getting more value than i thought i was. Now i'm just finding out about being able to stream all the movies and music from all the computers in my house to my plasma via the PS3, i didn't know it was so capable in that respect either. I think they should sell the PS3 for more if you consider what the cost would be to get all these features in seperate devices!

Their biggest problem is that even PS3 owners don't realise just quite what you can do with it, let alone those that haven't even bought one yet.

[fh @ Jan 13th 2009 12:20PM]

I know you didn't just compare the -unsubsidized- X1 to the subsidized G1 / Touch Pro (Fuze) / iPhone / Storm.

[Spiny Norman @ Jan 13th 2009 11:25AM]

Premium brand my ass. Premium price? Absolutely.

Sony doesn't make anything that is better than anyone else in the market place. They've been riding on their laurels for far too long.

Personally, I haven't bought anything from Sony since their infamous rootkit fiasco. Any company that believes it can install malware on my PC doesn't deserve to get another dime.

[Nomi @ Jan 13th 2009 11:30AM]

O stop whining...sheesh. People won't shut up about that..its been what...two years now?

[Adderz @ Jan 13th 2009 11:37AM]

Agreed, they give off the "essence" of quality but they are now just another Panasonic or Pioneer. I also havent bought a Sony product in a long time. Mostly due to their love of proprietary formats (Mini-disc, UMD, Memory Stick and more or less Blu Ray)

[SOOPERGOOMAN @ Jan 13th 2009 11:42AM]

You definitely have an XBUX 360! Fanboy fanatic!

[afridgetofar @ Jan 13th 2009 9:51PM]

man he has like a big head.....but a small body. he got mo head than he got body.

Pretty much everything Sony makes has a property or two that displays some sort of complete consumer ignorance. Usually it's the price. Not really that thats all that much of a exclusive problem in a tech market. It's that most of their stuff is either feature bloated or not exactly indicative of why it costs so much. It's like that on damn near everything they sell. I'm quite surprised they ever even came out green at all. I can't be from consumer products....it can't.

[Blacksheep @ Jan 13th 2009 11:35AM]

Their prices are far to high. I'd like an XBR8, but not for $5,000 - $8,000. While the Samsung 900 series isn't as good, it's like a hair below the XBR8 in quality and over $2,000 cheaper (comparing 46 inch versions here). Sony, your pricing is unrealistic.

[SOOPERGOOMAN @ Jan 13th 2009 11:43AM]

They're trying to much to be like Apple.

[Jona @ Jan 14th 2009 1:16AM]

No they arent. Apple products work together. You get a better experience the more you buy. I get nothing from buying more and more Sony other than a lighter wallet.

[ArtVandelay @ Jan 13th 2009 11:39AM]

Sony is just too big for its own good. Sony still makes the quality products it always did, the problem there are so many products out there it has diluted the brand. They need to get back to that exclusivity of owning a Sony product. It used to be that instead of having 25 camcorders or Blu-Ray Players or whatever on the market they would have one or two but those one two would have the latest and greatest tech inside and the competition couldn't compare. In recent years they have tried to compete with the Samsungs and LG's for the Wal-Mart and Sam's crowd.

They need to stick to making quality cutting edge products for those who can afford them. That's what made Sony, Sony.

[SOOPERGOOMAN @ Jan 13th 2009 11:40AM]

"Hey is that a Sony Vaio P in your pocket or are you just glad to see me?"

[simon @ Jan 13th 2009 11:53AM]

There are many comments here focussing on isues such as BC in the PS3 or this or that. Sony is a big company and while little things like this do add up it's not "tweaking" that will turn things around. One needs bigger vision, planning, and implementation. Until that's done no amount of tweaking will fix the problems. That said I agree with those who lament that Sony makes too many products in each market. I think it's OK to have many markets concentrate on fewer products in each market and get them right.

Howie does not have an easy job ahead of him.