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Sony Losses Spiral To $2.9 Billion, Game Division Underperforms
Sony Losses Spiral To $2.9 Billion, Game Division Underperforms
January 22, 2009 | By David Jenkins

January 22, 2009 | By David Jenkins
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    17 comments
More: Console/PC



Sony Corp. has revised its projected annual operating loss from a previously expected figure of ¥100 billion ($1.1bn) to as much as ¥260 billion ($2.9bn).

As previously reported, the loss will be the company’s first in 14 years and only the second in its history.

The strong yen and declining demand for its products in the current global economic environment were again blamed for the results. Previously, Sony had expected a ¥200 billion profit for the year.

As stated yesterday, the company is accelerating its restructuring plans, with job cuts of up to 16,000 expected. According to a Reuters report, Sony has doubled its cost-cutting target for the financial year ending March 2010, to ¥250 billion ($2.8bn).

As part of its cost-cutting initiatives, Sony indicated future headcount reductions and other restructuring measures to its movie, music, and games divisions, according to a Sony presentation slide published by game weblog Kotaku:



In addition, the company has announced that it expects losses for its games division to rise up to ¥30 billion ($338 million) for the fiscal year, with half of that attributed to lower than expected sales.

Although Sony’s games division is still struggling to turn a profit, after previously being one of the company’s most profitable areas, the main problem continues to be television sales. Digital camera and video recorder sales have also disappointed, with even Sony Pictures underperforming.

Sony has said it will end TV production and design at one plant in Japan and reduce its TV design headcount by 30 percent overall worldwide. Plans are also afoot to consolidate its workforce in areas such as batteries and small and mid-size LCD panels.

Although no specific plans for Sony Computer Entertainment (SCE) have been revealed, SCE Europe president David Reeves insisted in December that the division was “not scaling back at all”.

[UPDATE: Details on game division losses, possible cutbacks added.]


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Comments


stryka1on1 1111
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David Reeves insisted in December that the division was “not scaling back at all”.

I don't buy into this take. Both the morning star and bloomberg reported somewhere in between 85 to 98 billion dollars in liability and profits yielding in the low 30 billion.



How can they not consider SCE and game projects abroad as part of that restructuring? It looks bad. This is something that has been building for months. Its just worse now because of the Economic situation.

Gabriel Verdon
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I hope this doesn't affect the new Team Ico game that's supposed to come out this year...

stryka1on1 1111
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Based on what I'm hearing,.. and this is strictly my professional opinion,..I would think that everything is on the table at this point. ICO, SOE, SCE, you name it. This also could affect other teams outside the Sony's umbrella that is currently being funded. Playstation console development as well.

stryka1on1 1111
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My thought and prayers go out to families during these hard economic times.

Lo Pan
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For me Sony has always been shortsighted on their electronics pricing - as evidenced by the PS3 pricing. Additionally look at their TVs, totally overpriced based on feature set when compared to Samsung and VIZIO.

Z Z
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...

[User Banned]
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This user violated Gamasutra’s Comment Guidelines and has been banned.

Christopher Plummer
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@B N



Thanks for the laugh.

Mickey Mullasan
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When there's a vacuum hole in the financial web, it forces companies to show their cards. Time's up pencils down, how did you do? And if the company's strategy is not a successful one on the bottom line, they can not hide it on their balance sheet like they normally do when there's lots of credit flowing and they can borrow away their mistakes. That's why we're seeing some titans stumble (Sony, Microsoft) and others (Google, Apple) surpass expectations.

Z Z
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...

Stephen Horn
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@ B N



Clearly your reach exceeds your grasp of both economics and history. Have you, per chance, heard of a small country that was once known as the U.S.S.R.? They had a saying: "We pretend to work, and they pretend to pay us."



This is the fundamental problem with communism: Either a person is rewarded proportional to the value of their contributions (the free-market economy), or everyone is rewarded equally whether they contribute or not.



Applying basic game theory to this situation, the action of any given agent in a free market economy has two main factors applying to it:

* Willingness of an agent to perform an action.

* Value of action.



A rational agent will choose an action which best maximizes these two factors.



The communistic system you've described has one factor:

* Willingness of an agent to perform an action.



The problem becomes clear - if nobody wants to perform a given action (such as replacing a broken street light), then nobody does because there is no incentive to perform that action. Unless blind chance happens bring the right people together at the right time, the infrastructure of society breaks down, because maintaining things like roads, sewers, power lines, and other niceties are generally considered less desirable actions than fishing, swimming, and playing football.



This is where you would probably say something like "well, certain jobs will get paid more." But who gets to make that call?



In the free-market economy, every person has a small say in the value of a good or service. All agents are equal, and therefore a rational agent in the free market determines the value of a good or service relative to themselves and then decides to pay for that good if its benefits to the agent exceed its cost. The overall value of an action is then determined by the balance between the those who find that it maximizes the above two factors (supply) and those who do not (demand).



Not all agents are equal in the communist model. If all agents were equal in the communist model, they would seek to maximize the one factor in the model, which would lead to the collapse of society. Some agents, then, must be entrusted with the power to decide what the economic benefits of an action are, in order to artificially re-insert value to otherwise sub-optimal actions. The other agents are forced to decide their action based on the rules set by the controlling agents. We'll call the controlling agents "the government," and the non-controlling agents "the masses." Rational, self-interested agents of the government will then choose to maximize the value of their actions at the expense of all others, balancing the value of all other actions to be just enough for the masses' best course of action to be to maintain the necessary infrastructure of society.



In the end, assuming you have rational, self-interested agents, communism leads to the direct opposite result of its intent - creating a class of rulers with all of the power and economic advantage, minimizing the power and economic advantage of their subjects.



I suppose you could choose to reject the assumption of either rational agents or self-interested agents, but I believe your key complaints about capitalistic greed undermines the validity of your argument.

Jonathan Pynn
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I don't think abolishing capitalism is the right answer. I might suggest that we use that thing we call democracy to help people a little more and corporations a little less.

Z Z
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...

Christopher McLaren
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Think this might have gone a little off topic....

Gabriel Verdon
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I think you are doing more harm to your solid points than you need to B N by even suggesting its communism. If anything, it's capitalism with socialistic elements.

Tawna Evans
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How about a spiritual solution to the economic problem: The CEOs willingly choose less pay for themselves in order to keep more people in lower paying jobs employed. This would entail personal sacrifices on their part, such as fewer vacations and eating out less, but it benefit more people by providing job opportunities for others... resulting in less unemployed people bumming off the hard work of other people that do work.

Stephen Horn
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B N,



You ignored the key question to your quazi-communism solution: Who gets to decide how much certain people are allowed to make? As I argued, any collection of rational, self-interested agents with the authority to make that call will choose to maximize their gain at the expense of everyone else.



You can't answer "everyone gets to make that call," because that's the existing free-market system which you claim is broken. You can't give it to a subset of agents, either, because it produces a result opposite of your intents, unless you seek to invalidate the assumption of rational, self-interested agents.



Even if you say, "fine, I'm putting irrational, selfless agents in charge", you have to figure out who decides what an irrational, selfless agent is, who should be placed in charge, because rational, self-interested agents (who we'll call "political lobbyists") will choose the people who will maximize their gain. You have a similar problem if you say "irrational, selfless agents decide that, too," for the same reason, ad infinitum.



It's turtles, all the way down!


none
 
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