Support NeoGAF

[Ash Sparrow]

I just don't get the logic in this thread, surely the longer and more debt you take on puts you in a worst situation. It doesn't make you stronger. It seems some are saying any loss they have is par for the course and doesn't effect them. I thought it was usual that if you tread water constantly you will eventually sink.

 

[Busty]

Nintendo and Sony will merge in six years for the fight of their life against MS and Apple. You read it first.

Ten years ago you would have been carted off to the 'laughing academy' for saying that but now....., who knows where we'll be in five years.

This business mang. I'm telling you.

No one wants to see Sony go down, only because of the studios they have. Sony to me is a name on a box, I care about Naughty Dog, Santa Monica, etc.

This. Sony's first party portfolio is seriously impressive and I'd hate to see it broken up and sold off in chunks.

 

[DGRE]

Too late to say #gamechanger?

 

[z0m3le]

You should really stop talking about this stuff you have no clue on. Paying back debt has no relationship to a companies' profit or loss.

I'm more talking about their health, which debt does directly relate to. Obviously a company can't operate if they owe too much in debt, and I didn't post the debt numbers from those links because I'm sure the long term debt is out dated from a year, and some of it could be due this year, which means it moves over to that large short term debt right?

All I'm trying to point out is that Sony needs to be careful with their next console, launching one costs money.

 

[DragonSworne]

Having that much debt isn't in of itself a bad thing.

A company NEEDS to leverage itself using debt to grow as a business. However, you need to have the right amount of leverage. Sony is over leveraged and they might not be able to pay back the debt.

It's also not a good idea to be sitting on top of a huge cash reserve because you are not leveraging your company and does nothing to grow the company cough*Nintendo*cough.

 

[GCX]

This. Sony's first party portfolio is seriously impressive and I'd hate to see it broken up and sold off in chunks.

I'm sure studios like Naughty Dog would easily find a new home under some other publisher. Most of Sony's studios are pretty independent and not so deeply connected to the publisher like Nintendo EAD for example. If Nintendo went down all of the EAD and SPD studios would go with it.

 

[Clear]

I still think the most likely candidate for the deficit is the cost of buying out Ericcson from their partnership in Feb. There was a lot of juggling of departments and it may have been that the gaming and network services segment was the one that could bear the red-ink the most favourably.

 

[Busty]

All I'm trying to point out is that Sony needs to be careful with their next console, launching one costs money.

I'm really not sure what you're trying to say here.

Are you saying that Sony need to be as cost conscious as possible next gen?

Perhaps they could just wait a year, buy up all the unsold Wii-Us for pennies in the dollar, paint them black and put them out as the PS4?

 

[tinfoilhatman]

Wow crazy are we even going to see a PS4?

 

[Kenshin001]

Having that much debt isn't in of itself a bad thing.

A company NEEDS to leverage itself using debt to grow as a business. However, you need to have the right amount of leverage. Sony is over leveraged and they might not be able to pay back the debt.

It's also not a good idea to be sitting on top of a huge cash reserve because you are not leveraging your company and does nothing to grow the company cough*Nintendo*cough.

What are Sony's assets worth? Like if they wanted to sell off a few things, buildings, subsidiaries etc.

 

[Kung Fu Grip]

Sony is over $18 billion in debt and is bleeding money.

Even the most ridiculous posts in this thread about shutting down the company and selling off devs are actually realistic points of discussion right now with the company in these dire financial straits.

It's still overreacting. Sony has been doing bad financially for a long time and these threads get posted every minute like this is just now known with the same doom and gloom post. People need to relax. Seriously.

And some of the advice about what sony should do are just simply terrible. Thank god some of you don't run sony.

Wow crazy are we even going to see a PS4?

Nope. Sony has $0 in the bank.

My god.

 

[Busty]

I'm sure studios like Naughty Dog would easily find a new home under some other publisher.

Doing what for whom though?

Just ask the Rare fans how life under MS is at the moment.

What are Sony's assets worth? Like if they wanted to sell off a few things, buildings, subsidiaries etc.

It's my understanding that Sony's break up value is much more than it's current market cap.

It's still overreacting. Sony has been doing bad financially for a long time and these threads get posted every minute like this is just now known with the same doom and gloom post. People need to relax. Seriously..

While I think that 'relax' might be too strong a word there is no way that the Japanese government would ever let Sony simply cease to be.

Expect Sony to be merged with another (struggling) Japanese giant before Sony reaches any apocalyptic financial situation.

They really are too big to fail.

 

[Vinci]

Sony having debt isn't so much an issue. The problem is the company is overgrown and deeply entrenched in markets where it's seeing negative return. In addition, it has not showcased any skill recently in predicting the market (any market) or in being able to release successful products. Does that mean it can't? No, of course not. But if your growth prospects are poor while carrying a lot of debt, that's not a good thing.

 

[tuffy]

It's also not a good idea to be sitting on top of a huge cash reserve because you are not leveraging your company and does nothing to grow the company cough*Nintendo*cough.

But sitting on the reserve is better than investing it unwisely, like growing the company too aggressively or in the wrong direction. That's the situation Apple found itself in which prompted them to buy back stock and start paying dividends. There's only so much R&D one can usefully invest in, after all.

 

[z0m3le]

Sony having debt isn't so much an issue. The problem is the company is overgrown and deeply entrenched in markets where it's seeing negative return. In addition, it has not showcased any skill recently in predicting the market (any market) or in being able to release successful products. Does that mean it can't? No, of course not. But if your growth prospects are poor while carrying a lot of debt, that's not a good thing.

Yes, that is true... but that link I posted to their short term debt, isn't that money they owe this year? short term debt is part of their balance sheet right? so unless they make 14b in profits, doesn't that mean they won't even break even next year? I mean we all joke around about console war stuff, but I agree with a lot of people in this thread, Sony collapsing isn't good for the industry at all.

 

[Vinci]

But sitting on the reserve is better than investing it unwisely, like growing the company too aggressively or in the wrong direction. That's the situation Apple found itself in which prompted them to buy back stock and start paying dividends. There's only so much R&D one can usefully invest in, after all.

Nintendo holding onto cash and maintaining its relative small size does give it enormous flexibility, but it still could be more aggressive in terms of how it invests into the development of other dev houses and so forth. It's clear their hardware philosophy is going to stand at odds with most 3rd parties', so it would be wise of them to prepare for the worst case scenario - abject isolation.

 

[Barkley's Justice]

This is red ocean industry, dude. Not one with its sane mind will enter this market. MS was exception because it got money and software know-how to back it up.

But your logic is based on old timey trends. In 10 years the "console" space will look nothing like it does now. It will take considerable amounts of money, but it's wide open for others to break through. Google, Apple, Samsung, OnLive, Amazon, Steam, Netflix...These are just some of the potential contenders.

If the games industry is anything, it's unpredictable.

 

[z0m3le]

Nintendo holding onto cash and maintaining its relative small size does give it enormous flexibility, but it still could be more aggressive in terms of how it invests into the development of other dev houses and so forth. It's clear their hardware philosophy is going to stand at odds with most 3rd parties', so it would be wise of them to prepare for the worst case scenario - abject isolation.

Yeah I can agree here too, Nintendo and Western devs really don't see eye to eye. I just don't know if they will be able to ignore Nintendo this next generation, considering the architecture of the consoles being basically the same and thus portable across the board, and how many devs have closed their doors this generation.

 

[grimshawish]

I would say that the smiling guy in the middle represents most of GAF with Sony's current prediciment. As screwed up as Sonys current position is, and its their own fault for their mismanagement, i just don't understand the thought process that goes into being joyful when a company is having misfortunes. Out of all the sites/forums i go to, nothing is like GAF with the blatant, and continuous bashing of Sony...i just dont get it, but oh well it is what it is.

Bollocks. People are just discussing the implications. In fact most people seem to think Sony can get through this - they just need to take certain actions/change their strategy.

You should really stop talking about this stuff you have no clue on. Paying back debt has no relationship to a companies' profit or loss.

Interest rates are. Also the big LOSS directly creates borrowing.

 

[grimshawish]

Nintendo holding onto cash and maintaining its relative small size does give it enormous flexibility, but it still could be more aggressive in terms of how it invests into the development of other dev houses and so forth. It's clear their hardware philosophy is going to stand at odds with most 3rd parties', so it would be wise of them to prepare for the worst case scenario - abject isolation.

If WiiU isn't supported by third parties, Nintendo should either set up a studio - buying in talent - or purchase a current studio.

They need variety on their system. One or two western developers would offer this.
However I think theres a big big problem in the culture of Western developers in relation to costs.

 

[Barkley's Justice]

I think a question we should ask ourselves is: Does gaming need a chaperone?

Do we need a Sony or a Microsoft to tell us which games we're allowed to play and how much we should pay to play them and on what box sitting under the TV?

Or is the future of gaming simply a platform we log into on multiple devices, with prices and release dates set by the developers and publishers and conversely by the market?

 

[GopherD]

Guys we are not even sure this info is correct before you rush into Sony = Sega mode.

 

[CadetMahoney]

Wait I thought their gaming division was the only thing thats turning them profit.

I remember a few posters saying the gaming business for Sony was one of their only profitable divisions, and that it was the TV market ruining profits...

PS3 and Vita are successful, it's just PS4 R&D dragging it down. I think.

 

[2MF]

I've always wondered about corporate accounting at really huge multinational companies. Sony has lost something like $15 billion in 4 years? How much money did they actually HAVE? At the level of the individual person, you can't lose more money than you actually have, because that's called bankruptcy. At the multinational corporate level, it seems to happen all the time and the company just seems to conjure up more money out of nowhere to lose.

Not all of the losses are actual cash losses. Any asset Sony owns that loses value must be accounted for.

Let's say Sony owns a building somewhere, and the housing market crashes 50% in that area. Sony has to consider half of the building's value as lost, which results in losses being declared in their financial statements. This doesn't result in any lost cash per se, but it's still bad for the company to lose assets, because those assets could help them out if they suddenly needed to raise cash (through assets sales or borrowing against those assets).

This is not to say that Sony isn't in trouble. They very much are in trouble considering their long-running losses and their operational losses.

 

[Sir_Crocodile]

Can't believe sony lost another £3.6bn in one year.

First thing they need to do is get the hell out of the LCD market and gamble on one of the future techs.

 

[d[-_-]b]

PS3 and Vita are successful, it's just PS4 R&D dragging it down. I think.

What alternate universe is this?

 

[Johann]

Sony having debt isn't so much an issue. The problem is the company is overgrown and deeply entrenched in markets where it's seeing negative return. In addition, it has not showcased any skill recently in predicting the market (any market) or in being able to release successful products. Does that mean it can't? No, of course not. But if your growth prospects are poor while carrying a lot of debt, that's not a good thing.

If you want to know the textbook response or the Harvard case study answer to making Sony Corporation profitable, it is to double down on insurance and gradually eject everything else. Insurance/financial services has the highest profitability and growth. They can no longer compete as an electronic company in light of a strong yen, powerful Korean competitors, and poor quality control. They can't even transition into being a lower tier manufacturer due to just how high their operating costs are. Many of their non-insurance products and services suffer from high costs of operation, poor growth, or an inability to pass the hurdle rate in the future. The core problem is that the company has had great difficulty competing since the market has transitioned from valuing electronic products to valuing quality service software.

Obviously, Sony would be reluctant to transform themselves into an insurance/financial company. They have a rich history of manufacturing electronics which they would want to continue at whatever cost. It's usually easy to find a way to make a company profitable but difficult to implement it due to inertia to change, company culture, and internal politics.

 

[2MF]

What alternate universe is this?

I would bold PS3 as well, some years ago it had not only made a loss, but also erased all PS1/PS2-era profits. Even if the PS3 is making some profit now I quite doubt it is enough to make back that lost money.

How many years of actual profit has Sony's gaming business actually had since the start of this gen? The first few years were of big losses due to Cell, Blu-ray and PS3 price cuts, and now we have the strong Yen / Vita / PS4 R&D eating any meager PS3 profits as well. Looks like a big disaster...

 

[wages]

Karma is a bitch.

I remember when Sega left the scene so yeah, funny how that works out. I don't want to see them go down but, I didn't want to see Sega leave either.

 

[muu]

The biggest thing to come out of this report isn't that they have a huge deficit for the year, but a huge negative net worth -- to the tune of -72.2B yen (純資&#29987. SCE dissolved the last time this happened, with Sony itself handling the debt.

Sankei has a 5-part (~20pgs total) live report on the stockholders meeting that was held Wed. Morning (JST). Nothing directly related to gaming, but there were several stockholders that questioned Chubachi/Stringer's position in the company after descending the parent company into such debt. Frustration runs high, and these guys could be seriously risking their positions if they decide to pony up to save SCE once again.

http://www.sankeibiz.jp/business/news/120627/bsb1206271207007-n1.htm

 

[shinra-bansho]

The biggest thing to come out of this report isn't that they have a huge deficit for the year, but a huge negative net worth -- to the tune of -72.2B yen (純資&#29987. SCE dissolved the last time this happened, with Sony itself handling the debt.

Sankei has a 5-part (~20pgs total) live report on the stockholders meeting that was held Wed. Morning (JST). Nothing directly related to gaming, but there were several stockholders that questioned Chubachi/Stringer's position in the company after descending the parent company into such debt. Frustration runs high, and these guys could be seriously risking their positions if they decide to pony up to save SCE once again.

http://www.sankeibiz.jp/business/news/120627/bsb1206271207007-n1.htm

Are you a native Japanese speaker?

Just wish someone could verify the actual OP doc - since it (A) contradicts other public record info (not just with regard to Sony) and (B) this data isn't available anywhere on Sony's actual IR site.

 

[Doc Holliday]

Kaz stepped down! Old?

 

[Orca]

It's still overreacting. Sony has been doing bad financially for a long time and these threads get posted every minute like this is just now known with the same doom and gloom post. People need to relax. Seriously.

And some of the advice about what sony should do are just simply terrible. Thank god some of you don't run sony.

To be fair, Sony's advice to themselves has been pretty fucking bad too judging by the "doing bad financially for a long time" part of your own post.

 

[Sir_Crocodile]

Kaz stepped down! Old?

More like UP.

 

[Plinko]

The biggest thing to come out of this report isn't that they have a huge deficit for the year, but a huge negative net worth -- to the tune of -72.2B yen (純資&#29987. SCE dissolved the last time this happened, with Sony itself handling the debt.

Sankei has a 5-part (~20pgs total) live report on the stockholders meeting that was held Wed. Morning (JST). Nothing directly related to gaming, but there were several stockholders that questioned Chubachi/Stringer's position in the company after descending the parent company into such debt. Frustration runs high, and these guys could be seriously risking their positions if they decide to pony up to save SCE once again.

http://www.sankeibiz.jp/business/news/120627/bsb1206271207007-n1.htm

Wow. You're right--that's what should be being looked at.

 

[chris0701]

Are you a native Japanese speaker?

Just wish someone could verify the actual OP doc - since it (A) contradicts other public record info (not just with regard to Sony) and (B) this data isn't available anywhere on Sony's actual IR site.

To argue the authenticity of the government released document would only put your desperate effort in vain.

The safe bet is there are lots of things uncovered when Sony talks about "Game business". For example, RD cost of PSV/PS4,management cost,debt...etc.

The profitable word could be based on actual sales of PS3/PS2/PSP console&game only.

 

[muu]

Are you a native Japanese speaker?

Just wish someone could verify the actual OP doc - since it (A) contradicts other public record info (not just with regard to Sony) and (B) this data isn't available anywhere on Sony's actual IR site.

What info are you referring to that this contradicts? The image link on the first page is a snapshot of data publicized by the gov. If this isn't legit then I don't know what is.

 

[wages]

Let's not pretend its been anything like the shit MS tried to pull this gen.

You don't have to pretend, the problems with PS1 and PS2 breakdowns were horrible. Having to turn your console upside down so it would play the darn game? I'd have to say that it was at least as bad, just not as reported on.

We still don't know what the failure rate was for them back then.

 

[acksman]

Time for Sony to expand their life insurance offerings to car and home!

 

[Sir_Crocodile]

Just wish someone could verify the actual OP doc - since it (A) contradicts other public record info (not just with regard to Sony) and (B) this data isn't available anywhere on Sony's actual IR site.

Given that their total loss for the year as a company was £3.6bn, a £750m gaming division loss doesn't seem that unlikely.

 

[chris0701]

Time for planning more amazing spider man movie.
I remember the Spider man movie trilogy brought lots of revenue for Sony.

 

[volturnus]

Guys we are not even sure this info is correct before you rush into Sony = Sega mode.

Why would this be fake? The source seems to be a government report and the numbers are consistent with recent Sony losses.
Also this isn't Sony=Sega, it's actually quite worse in terms of numbers. SEGA losses before going 3rd party would be worth ~$600 million today (inflation adjusted), the difference being that SEGA had nothing to back it up.

 

[GoofsterStud]

In the words of the all mighty SEGA,

"GAME OVER... YEAAAAAAAHHHHHH!"

This coming from the guy that owns a PS3 and PSP. Sony doesn't know what to do with the PSV, so I not know what to do with it. It'll stay on the shelf.

 

[wages]

They should move HQ to America for a government bailout.

LOL! This

 

[shinra-bansho]

What info are you referring to that this contradicts? The image link on the first page is a snapshot of data publicized by the gov. If this isn't legit then I don't know what is.

The slide from an investor presentation by Hirai on future strategy - it's been posted in the thread already - states that "Game" had a positive operating income in FY11 of ~30B yen; and differed in sales revenue numbers.

 

[Elios83]

What info are you referring to that this contradicts? The image link on the first page is a snapshot of data publicized by the gov. If this isn't legit then I don't know what is.

Sony has been saying that the gaming business has been profitable for the past two years, they have re-focused the whole comnpany around gaming, digital imaging and mobile. Those are the three pillars for the future because right now they are the healthy divisions within Sony.
Also:

http://www.sony.net/SonyInfo/IR/financial/fr/11q4_sony.pdf

CPS (the division which includes both TVs and games) posted an operating loss of 230 billion yen for the 2011 FY. This loss includes a one time charge of 63.4 billion yen for bailing out of Sony-Samsung LCD, an other 16.7 billion loss for LCD television asset impairment and a 12.6 billion yen loss related to the PSN hack.
If you take out the one-time charges related to the TV business we're left with a 150 billion yen less. Then there are the losses of TVs sold at a loss and other electronic unprofitable products.
Basically this report would imply that the gaming division is the major money losing division here so I'm not sure what we're talking about.

 

[clockpunk]

Time for Sony to expand their life insurance offerings to car and home!

Bet they won't cover consoles, though, given how much they charge to fix them!

 

[wages]

People keep saying "Sony has all these great games/IP's".

No they dont.

That's been one of their key failings imo. Nothing they have imo is on the level of Mario, Zelda, Gears, and Halo.

They have Uncharted, imo a decent franchise at best in both sales and quality (and besides that, it's single player focused, which probably isn't the future), and nothing else that really stands out. Nothing at all. Putting out a lot of content, the Starhawks and Resistances of the world, doesn't mean that stuff is any less forgettable.

Agreed

 

[Elios83]

http://www.sony.net/SonyInfo/IR/financial/fr/viewer/strategy/2012/

Gaming business was profitable in FY 2011.
They're also targeting huge growth for the coming years.

 

[andthebeatgoeson]

In the ghetto, people have a lot of debt and spend way too much than what they make. Sony lied. About USBs....now this.

Although, their street cred is rising. They can't raise us out of the ghetto when they are stuck in it themselves.

Time for Sony to expand their life insurance offerings to car and home!

I've seen their new mascot.