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Sony’s Success and the PlayStation 3 Liability

Sony posted its financials today. And despite a $583 million loss last quarter–the worst in four years–it has a net profit of $1.1 billion for the last year. This profit comes from the strength of their film division and electronics division. The video games division had a $1.9 billion loss for the last year. As many have said, including myself, the Sony PlayStation 3 looked doomed from the start. Each PS3 is sold at a loss, with sales numbers consistently below sales of Nintendo’s Wii and Microsoft’s Xbox 360.

Despite such poor performance, Sony has forecasted that this coming year will result in a record net profit of $2.8 billion. I suspect this forecast is the product of Spider-Man 3’s record-breaking performance and the growing demand for high-definition televisions. I will be surprised if the video game division has a turnaround this year. This fall will find Sony’s competitors at the top of their game–with Halo 3 being released September 25th for the Xbox 360 and Super Mario Galaxy for the Wii expected this holiday. And the high price of the PlayStation 3, at $599, remains a problem.

I believe PlayStation 3 can make a comeback. With a price cut on the console and the delivery of a few major titles, such as Final Fantasy XIII and Metal Gear Solid 4, they can begin a difficult reversal. But I think it will also take Nintendo and Microsoft both stumbling for Sony to regain the #1 spot they had for the last 10 years. If the competition doesn’t falter, I think Sony will be in third place for years to come.

Do you think Sony’s videogame business can make a turnaround? What do they need to do to succeed?

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