Bad Day for Sony Computer Entertainment

The good news for Sony was that its film and electronics division did remarkably in its fiscal third quarter.  The bad news was the games division. The costly delays for the launch of the PS3 and the slipping sales of the PSP contributed to a $443 million loss for the quarter, and VNUnet, a sister publication in the EU, is reporting that the games division could loose up to $2 billion for the fiscal year ending in March. 

The question now is, can Sony recover?

Rumors are starting to float that Sony will cut the price of the PS3 further, even though it is blaming price cuts in Japan for part of its operating loss this quarter.  This will help to ease one of the main factors for the lower-than-expected sales figures for the console, but I’m not sure it will be enough.  The Xbox has a better game line up, and it will be in a position to cut the price of its already cheaper console later this year.  With Halo 3 (which, by the way, is already #3 on the NIE Game Buzz Tracker) and other highly-anticipated games coming toward the end of the year, I think the Xbox will remain a formidable challenge for Sony. 

The real question, at least in my mind, is whether the over-the-top hardware built into the PS3 will be enough of a reason for consumers to fork out a couple of hundred extra.  That might depend on the adoption rate of blu-ray – and that’s not a bet that I’d like to take.

The problem for the PSP is that Nintendo’s DS seems to be beating it by releasing better games. Here, the future also looks dim for Sony. With games like Hotel Dusk: Room 215 coming shortly, I think Nintendo has the advantage.  The PSP will probably continue to suffer from the low adaptation rate of its PSP video format (are you seeing a pattern yet?), and I think it will only continue to stumble while the DS gains.

The surprising this is how well the PS2 continues to sell. This bit of news looks good for Sony.  If the PS3 can hold on for the next couple of years, and game studios continue to produce quality games for the console, I think Sony might be able to make up its losses; it just will take a lot longer than expected.