Nikkei Electronics Asia -- February 2010
Feature
Sony's Network Service Relaunches with Focus on Gaming

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Feb 1, 2010 00:00 Fumitada Takahashi

The press conference held an atmosphere of deja vu

The Sony press conference on management policy, held in November 2009, concentrated on strategies designed to return the corporation to profitability, including assuring profits from core businesses such as TVs and home gaming systems, and launching an Internet-based service for home electronics based on the PlayStation 3 (PS3). The firm's consolidated financial results for the year ended March 31, 2009, showed the first operating loss in 14 years, with total losses reaching their highest ever: 227.8 billion yen (Fig. 1). While operating profit forecasts for the current term (ending March 31, 2010) have been revised upward from their original figures, the company still expects to lose 60 billion yen. The primary cause is the slump in their electronics products overall.

Fig. 1 Will Abandoning the "Sell-and-Forget" Model Get Sony Through the Crisis?
Consolidated operating results for the year ended March 2009 showed the biggest loss ever, 227.8 billion yen, the first time in 14 years the firm has been in the red.

Six and a half years ago, Sony posted an operating loss of 116.4 billion yen for the period from January to March 2003, causing the stock market to plunge, especially in high-tech stocks. The event was later dubbed the "Sony shock." The policy press conference held immediately thereafter also focused on strengthening core businesses, and the new PSX network electronics designed to integrate home game systems and audio-visual (AV) equipment. Even though the specific products, implementation methods, and other details differ, the fact that Sony has been forced to define an almost identical strategy points up its difficulties.

Leveraging a Customer Base of 33 Million People

There is one point that is significantly different from the situation six and a half years ago, though: The PlayStation Network (PSN) distributing game software, video content, and other content to the PS3 and other equipment is doing very well.

As of November 2009, PSN had 33 million member accounts worldwide. The service has grown to the point that 5.4 million people use it every day. Revenues for the current term are expected to grow about three times over the prior term, to 50 billion yen. Sales of content, in-game items, and other products are strong, and the company hopes to finally turn a profit in the fiscal year ending March 2011. Kazuo Hirai, overall manager of game systems and the game network business, at Sony, stresses that the difference is that the Internet environment is vastly better than it used to be.