Despite Rising Game Revenue, Sony’s Magic 8-Ball Says ‘Outlook Not So Good’

by Mike Futter on May 14, 2014 at 03:04 AM

Sony has released its year-end financial results, ending fiscal year 2014 with a net loss of ¥128.4 billion ($1.246 billion). Unfortunately, corporation-wide finances will not improve enough in FY 2015 to push the company into the black.

Sony is projecting a ¥50 billion loss ($489 million by today’s exchange rates), making the current year the sixth of the past seven to evidence deficits. The gaming business suffered a loss for the full year, based largely on R&D and promotional costs for the PlayStation 4.

Once the PS4 was released in November, returns were realized and the unit climbed toward profitability (as was evidenced in the third quarter report in February). The division closed the year with big revenue gains, grossing ¥979.2 billion ($9.507 billion) against last year’s close of ¥707.1 billion ($6.92 million).

Because of expenses, dipping PlayStation 3 hardware sales (software sales were up), and a major write-off of Sony Online Entertainment sunset titles in the amount of ¥6.2 billion ($60 million), the unit evidenced operating income loss of ¥8.1 billion ($78 million). Sony will be combining gaming with network services (PlayStation Network, Sony Entertainment Network) moving forward.  

Network services, which were previously grouped in an “other” category were a big loser this year. Based on calculations, we can report that the new piece of the game division lost ¥10.7 billion ($104 million). Despite these operations being an anchor on the gaming unit, Sony projects a sales increase of ¥176.9 billion (¥1.73 billion) and a ¥20 billion ($195.62 million) year-end operating surplus.

In summary, sales of PlayStation 4 and software are expected to jump significantly next year. Sony as a complete entity is expecting another major loss. The company is putting gaming forward as one of the three pillars of turnaround, and based on market capitalization history, that seems like a good bet.

[Source: Sony]


Our Take
Sony is an enormous ship, and the biggest vessels take the longest to turn. Sony’s market capitalization of $18.41 billion isn’t at its lowest level (that was in 1995), and the company managed to recover from $9.5 billion to a high of $81.83 billion in 2000 (the year the PS2 was released).

The question for Sony is whether the changes it is implementing now are drastic enough and if the leadership in place are the right people for the job. The bleeding has to stop, and there is only so much the gaming division can do to keep the entire company afloat.