The theory goes that as we all stay at home during a recession, we buy more video games. But it's not turning out like that as both Sony (NYSE: SNE) and Nintendo report declining sales figures and lowered forecasts for games consoles and software.
Sony: Sony announced today in its Q3 results for the three months to 31 December that operating income for its games division dropped 97 percent to 400 billion yen ($4 million). Even considering the strong yen and faltering economy, Sony simply sold less consoles and software over the crucial Christmas period than it did in 2007: games sales were down 32.2 percent to 393.8 billion yen ($4.83 billion). Sales of PS2, PS3 and PSP hardware and software were all down year on year, except for PS3 games which saw a 14.8 million unit increase, suggesting the end is near for the once all-conquering PS2.
Nintendo: Nintendo is faring better, thanks to the popularity of the Wii and the DS, and today announced a 21 percent increase in operating profits for the nine months to December 31. However, Nintendo cut its full-year operating profit forecast by 100 million yen to 530 billion yen ($5.9 billion) and despite selling 20.5 million Wiis in the last three quarters, and 44 million to date, the company has cut its forecast for Wii sales by one million to 26,500,000 for the full 08/09 financial year. 2008 was second Christmas of Wii being the "must-have" gadget, so a slow-down in sales due to saturation and a relatively small catalogue of great games, seems inevitable. Release.
Sony's Q3 loss: Sony had already warned last week it expects to post its first full-year loss in 14 years and it re-emphasized that prediction today. Net income dropped from 200 billion ($2.21 billion) yen a year ago to just 10.4 billion yen ($104 million) in Q3; revenues were down 24.6 percent to 2,154.6 billion yen ($23.83 billion). The high price of the yen plus the global slowdown meant sales of TVs and gadgets were 29.3 percent lower year on year at 2,069 billion yen ($22.88 billion). Sales decreased "significantly" for Cyber-shot cameras and VAIO PCs.
Not all of this is Sony's fault: the appreciation of the yen has hit the firm hard and made its prices uncompetitive compared to Korean and US rivals, and the Japanese stock market has suffered a swift and damaging decline. The company says 57.7 billion yen ($638.33 million) was lost due to poor results at equity partners such as Sony Ericsson (NSDQ: ERIC), which lost Sony 11.5 billion yen ($127.22 million). A major restructuring plan is underway across several divisions globally to cut 16,000 full- and part-time staff at a cost of 170 billion yen ($1.9 billion).
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By Patrick Smith