Sony is in Big Trouble! good read!

I was browsing the VG chartz forums and found this

There has been a lot of scattered discussion in several threads about Sony's financial situation and future. Discussions like this will become more and more prevalent in the next few months, and there's a lot of misinformation flying around, so I thought there should be a thread to discuss this and accompany the evolution of their situation.

Here are Sony's current problems:

1- Weak Western currencies.

This was already discussed at length in this article, and it's something which also affects Nintendo (although the impact is much worse for Sony). If you want to know why this is such a big problem for them, you can read that article or this one.

This is so much of a problem that according to an article from yesterday, Sony is increasing the price of products it ships to retailers in the UK by up to 33%. No news yet on whether this will affect consoles and games, or if it also extends to other European countries.

2- Fragile profit margins

If you check out Sony's official Investor Relations page, you can see their financial data many years back. For illustration, let's look at the main indicators, revenue and profit for the latest financial years and quarters. The profit margin is simply the profit divided by the revenue, and indicates how much money Sony makes off of every Yen (or dollar or whatever) they have in sales.

1.00%

This has been one of Sony's biggest problems, and Sony's CEO has been pledging to solve it, as you can read in this article.

For reference, Microsoft usually has profit margins of around 30%. Before the currency problem explained above, Nintendo also had great profit margins of around 25%, and after that they fell to around 10%! That alone should tell you how much of a problem the currency exchange factor poses. It's important to note that the currency problem has gotten worse since the last quarter, making it very hard to believe Sony can pull a profit during this holiday quarter.

When you're only making one or two dollars for every 100 dollars you get, and you suddenly start receiving 80 dollars for the same products, that spells big trouble.

3- Lower consumer confidence due to the economic crisis

This doesn't seem to affect the gaming market a lot, but it does affect Sony as a whole. For information on this, there are tons of reports about lower retailer sales and expectations for the holiday season. Some articles:

Article 1
Article 2
Article 3

There are also specific reports on how it's affecting Sony's products, for example:

Sony's TV sales slump
Blu-Ray sales forecast down

4- The economic crisis is nowhere near over

There are tons of articles about this, but here are two:

Article 1
Article 2

Discussion

The factors above, IMO, create a perfect storm for Sony. This is not yet very discussed if you look at the mainstream media, but I believe in January after Sony releases its earnings it will become more and more public, and then we may start seeing Sony's actions to get the company to survive the storm. I'd be very surprised if Sony doesn't become a smaller company in the next few years.

What do you think Sony will do? Big layoffs? Getting out of some markets or cancelling product development?

In my opinion, the best case for Sony is:

1- A recovery of the Western currencies during next year.
2- A successful downsizing/restructuring which allows them to become profitable even with lower consumer purchases.

We could get to a point in which most people don't have money to buy the sort of products Sony makes, making it impossible to justify the existence of such an electronics giant.

The worst case is, of course, bankruptcy. If Sony can't or doesn't want to change itself quick enough, they may have to get "bailed out" (a very fashionable expression these days) or file for bankruptcy, which would either end the company or force it to sell off a lot of its parts.

http://vgchartz.com/forum/thread.php?id=50069

Discuss!!

LOL...now we are resorting to threads created by somebody on another forum. So sad.PvtGump8

It is from the forums, a user said it. Did you even read his post??ArrancarVizard

So a random user on VGchartz said it. I don't think that is any better.

This is a good read. Links together the economic crisis around world to the video game industry.

The points they makes alot of sense:

weaker dollar/euro is hurting Japanese based Sony/Nintendo profits more than US based MS. 

MS does have much better profit margins than Sony, which gives it more investor appeal. More investors during this financial crisis = more money and more growth

The way I see it, besides the obvious steps Microsoft has taken to increase sales, this financial crisis is actually inadvertently helping MS out agianst its competitors. 

You know, it's probably not a good idea to make a theard based on the thread of another person from another site!

LOL...now we are resorting to threads created by somebody on another forum. So sad.PvtGump8

This is a good read. Links together the economic crisis around world to the video game industry.

The points they makes alot of sense:

weaker dollar/euro is hurting Japanese based Sony/Nintendo profits more than US based MS. 

MS does have much better profit margins than Sony, which gives it more investor appeal. More investors during this financial crisis = more money and more growth

The way I see it, besides the obvious steps Microsoft has taken to increase sales, this financial crisis is actually inadvertently helping MS out agianst its competitors.

IshmaelSonata

Indeed. Weird oxymoron.

[QUOTE="ArrancarVizard"]It is from the forums, a user said it. Did you even read his post??Chaos_HL21

So a random user on VGchartz said it. I don't think that is any better.

It is from the forums, a user said it. Did you even read his post??ArrancarVizard

Sony confidence effected by the economic crisis?

Can we say BS. The Sony game division (like any game division) has proven all but recession proof these past few years.

[QUOTE="ArrancarVizard"]It is from the forums, a user said it. Did you even read his post??thanos723

He clearly posted facts and links that support his arguements. I won't be surprised if sony drops out of the console race if they don't do some thing quick

While people are only focused on having discussions about game scores and ratings in the business world this stuff is pretty serious.  It's like a domino effect.  It starts off with a weak economy and the highest starting price console, the PS3.  If Sony does not meet sales expectation to recoup, expect layoffs and a decrease in PS3 hardware production, since producing them are costly. 

Throw in the PS3 game development difficulty which can equal more effort and time, time equals money, and that can lead to more problems with developers favoring more cost affective consoles.  So not only the PS3 hardware takes a hit but also their software takes a hit.  And a decrease can equal investors to not invest in Sony which can lead to even more problems.

If worse comes to worst, Sony's gaming division will likely need a bailout plan for reals.   Play B3yond.

[QUOTE="ArrancarVizard"]It is from the forums, a user said it. Did you even read his post??thanos723

but the stuff said here IS true, theres tons of articles to support the facts being said

LOL...now we are resorting to threads created by somebody on another forum. So sad.PvtGump8

LOL, whats up with the cows, can they not see all the links and facts that the poster listed in his post. Give it up cows the ps3 will be DEAD LAST this gen. I would rather prefer the ps3 to be in last place than sony to pull out of the gaming market for goodArrancarVizard

I think Sony should slow down and cut down on product quantity in sectors where the market is slow. Also, reducing PS3's price is fundamental, to do that they must use a cheaper Blu-Ray drive and develop the 45nm Cell ASAP and release a slim version to spur interest once again.

Also, making their MP4 players more competitive in price and features is a must as well.

It is irrelevant who wrote it, the point is it is spot on. The fact that Sony knows they are going to get killed this holiday season and CAN'T lower the price of the PS3 proves this.

They know they are shooting themselves in the foot keeping the PS3 @ $399 but can not afford to lower it so they are caught between a rock and a hard place right now.

Ignore those fanboys spaming this tread

This is indeed good read!

It made me think about some stuff i didnt account in!

all that stuff is impacting companies everywhere.

so, why isolate sony out of all of it? other than fanboyism?

all that stuff is impacting companies everywhere.

so, why isolate sony out of all of it? other than fanboyism?

all that stuff is impacting companies everywhere.

so, why isolate sony out of all of it? other than fanboyism?

useLOGIC

 Strong Yen will cause problems to Sony, Nintendo and other Japanese comppanies. It's explained in the links, you should read them.

*gasp* vgchartz said it! it must be true :roll:thanos723

anyways, by terms of sales and meeting idt there is trouble..maybe, who knows

[QUOTE="thanos723"]*gasp* vgchartz said it! it must be true :roll:trasherhead

If you have nothing intelligent way to counter these arguments, the thread is still open. It doesn't really matter who wrote the article if it's well sourced and logical, which it is.

[QUOTE="Gh0st_Of_0nyx"] oh c'mon not you too :(nintendo-4life

While people are only focused on having discussions about game scores and ratings in the business world this stuff is pretty serious.  It's like a domino effect.  It starts off with a weak economy and the highest starting price console, the PS3.  If Sony does not meet sales expectation to recoup, expect layoffs and a decrease in PS3 hardware production, since producing them are costly. 

Throw in the PS3 game development difficulty which can equal more effort and time, time equals money, and that can lead to more problems with developers favoring more cost affective consoles.  So not only the PS3 hardware takes a hit but also their software takes a hit.  And a decrease can equal investors to not invest in Sony which can lead to even more problems.

If worse comes to worst, Sony's gaming division will likely need a bailout plan for reals.   Play B3yond.

 

ReverseCycology

I hope you realize that were talking about a product that is being mass produced in China. No one is going to get laid off there, plus i dont believe sony that it costs them 400$ to make a ps3, i think its close to 250 by now because they have outsourced the development of the Cell+The RSX Link. Dont think this means they threw in the towel the fact of the matter is that sony isnt a chip devolper. blu-ray diodes are becoming super cheap to make. 

Look everything gets cheaper from now on out Oil falling means cheaper Costs on shipping products as well as cheaper costs on the manufacturing of some components 

And you bet your ass that MS is making a profit on that 360 it probably costs them now because of Jasper 

I know Sony as a whole is begining to feel the heat,

But I was aware that Sony Computer Entertainment (Playstation) and Sony Pictures Entertainment (James Bond and Spider-Man) Were Doing Just Fine from the Recession :|

I did hear that they lost a lot of money on their TV's tho.

"I was browsing the VG chartz forums..........."

In the words of the immortal Shawn Carter, "We don't believe you, you need more people."

Reminds me of the whole "Nintendo going 3rd party" tripe that people used to spew out. Ain't gonna happen.BladesOfAthena

1st: It's VG Chartz 2nd: It's from another user 3rd: I wanna make a post and say its a good read :P 360 Sucks, Cuz of RROD PS3 Sucks, Cuz of No Exclusives Wii Sucks, Cuz of teh Kiddies And lol Pc. Now I'm waiting for somebody to use me as a credible source :)JIT93

If you'd actually read the post without stopping at "VGchartz" you would have actually seen that everything he's said has at least one credible source linked to it.