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Sony's Hirai: We could be in 'serious trouble'
Sony's Hirai: We could be in 'serious trouble'
February 3, 2012 | By Mike Rose

February 3, 2012 | By Mike Rose
Comments
    34 comments
More: Console/PC, Business/Marketing



Sony president Kazuo Hirai, who took over the role recently, has admitted that the company has tough times ahead, thanks to "one issue after another."

Hirai was named the new Sony president and CEO earlier this week, having taken over the role from former president Sir Howard Stringer. He was instrumental in the early marketing success of Sony's then-new PlayStation video game brand in the mid-1990s.

However, in an interview with The Wall Street Journal, Hirai said, "I thought turning around the PlayStation business was going to be the toughest challenge of my career, but I guess not. It's one issue after another. I feel like 'Holy shit, now what?'"

With Sony's stock at a low, plus third quarter declines in revenue and a swing to losses year-over-year, Hirai also noted that he needs to make some tough decisions about the future of the company.

"We really need to buckle down and be realistic," he explained. "I don't think everybody [working at the company] is on board, but I think people are coming around to the idea that if we don't turn this around, we could be sitting in some serious trouble."

He added, "We can't just continue to be a great purveyor of hardware products, even though some people expect us to do that."


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Comments


Todd Boyd
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This is incredibly refreshing, coming from a CEO of a major mover/shaker in the industry. I am happy that he is not content to sit on his laurels and stick with the "same old, same old".

Laina Lain
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Maybe now they can get out of whatever hole they're in.

Fiore Iantosca
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CONSOLIDATE CONSOLIDATE CONSOLIDATE

Dave Sanders
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Hiria-san is now my new Steve Jobs. I haven't bought a Sony product since the whole root-kit debacle they had, but maybe if they get their crap together I'll give up my grudge.

Elizabeth Boylan
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Nice to see a CEO being realistic- it builds credibility (especially contrasted to RIM's Thorsten Heins padding the outlook for RIM's future). Sony of all hardware companies is a brand I would trust to make an attractive Android tablet. It will be interesting to see where Sony is 5 years from now.

Harry Fields
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Can they stay in the game the next generation? If they attribute their massive losses last year to price reductions on PS3 last year, I doubt investors will much tolerate another 3 years of massive losses brought on by PS4 R&D and subsidized initial sales?... Launching at 600$ would be as disastrous was it was 6 years ago or whenever. They are in a really tough spot... What they do, everyone else can do better or cheaper now. They really need a focus and quickly.

k s
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I'd suggest they focus on insurance, the only part of their business making money and yeah investors wont tolerate much more in the way of loses.

Russell Carroll
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Perhaps they should step out of the console game business entirely.



Seriously.



Shift business to Android, or just make software for MS & Nintendo hardware (MS at home, Nintendo for portable).

I don't see Sony just doing software though, so perhaps either focusing on Android, or partnering with Nintendo or Microsoft would make more sense than the financial turmoil they are going through. I don't see a silver lining for them in the console business, but maybe Vita will surprise in its US launch. Outside of that unlikely event happening they are looking at mounting losses that will continue to mount and mount.

Sean Currie
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I'm inclined to agree with Russell, at least when it comes to the games side of things. The big three are under attack from all angles. With mobile gaming growing rapidly, social gaming expanding and even the PC clawing back a lot of tech obsessed core gamers, the console market is in for a rough next gen. A consolidated effort and a partnership between Microsoft and Sony might help them retain dominance and give gamers a reason to be excited about new hardware.



I know that sounds childishly naive, but there's a lot to gain from the two companies leveraging their own individual talents.

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

Harry Fields
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They either need to blow the doors off in terms of quality (their former MO) or in terms of price. There's way too much competition coming out of Korea and China on the latter. I mean back in the Trinitron days, their TVs were the cat's meow. Now I can see no reason to buy a Bravia over a Sharp or Samsung. Playstation could be profitable, but they need to move away from the proprietary CPUs that waste hundreds of millions in R&D and stop the (PS7 WILL BE SO POWERFUL YOUR GRANDMA WILL DIE IN HER GRAVE!!) rhetoric.

Omar Gonzalez
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assumptions, assumptions, assumptions...

Mikhail Mukin
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It would be nice to see some cooperation between MS and Sony on the next gen "big" console. If they were more like ATI/Nvidia - competing but with common APIs... with great tool chains and ready to use, free, full source code engine (written by game developers, not "theorists"). Some agreement with physics, UI, sound 3rd party for cheap licenses. It is almost impossible to make am XBLA/PSN title for under $1M (unless you already have in house tech/people who know it well). This means nobody would try to make a game unless they expect at least around 200K units sales (assuming $10) and not a lot of games do this. While some companies would go for iOS game for $100K and facebook for $300K.



I hardly see Sony as a software company. From my own experience, their console software (apart from a few companies they bought and kept "independent") is not too good. Based on what I hear from my friends from the corporate part - I don't think they have a history of crunches, constant stress etc - it is much more "relaxed", big corporate atmosphere - it is not a company where what you do can be easily visible to "the boss" (might be wrong - maybe things changed)... Unless they switch to the model of making SW via only "assimilated studios"... and sort of just become another EA.

Harry Fields
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Difference between Sony and Nintendo is that Nintendo is sitting on a pile of cash and can easily endure a rough year or two.

A W
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I remember that too @anthony.



I don't know if Sony is ready to exit the home game console business just yet, however given the amount of coals in the fire they have compared to what Nintendo has I say it would be safer for them if they chose to do so. Just looking at the list of products they have produced to push games is overwhelming. The have a console, a portable console, a phone, a tablet, Laptop / PC (if they wanted), and a book device much like a kindle. I think Hirai would serve the company best by cutting the excess and going with just two main products for gaming and focusing on how the interface for gamers are going to look on those products. I think trying to monopolize all aspects of entertainment on Sony's terms is not good for Sony as a whole. I felt that is what they have tried to do ever since we entered the PS3 era.

Evan Bell
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Well VITA is turning into a debacle and prices on large panel TVs are under a lot of pressure. How can the price drop account for loss. Seems like all segments of their business are in trouble. Way forward is unclear.

T K
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For those that don't know Sony that well here are some numbers. Sony is guiding for total losses of -Y95B (-$1.2B) this year.



However the vast bulk of the losses are coming from its Consumer Division -Y215B (-$2.8B). This division is the TV, Games, Cameras, etc. It's running huge losses. In fact Sony hasn't made a profit on its TV business in over 5 years. Sony also recently bought its 50% stake in Sony Ericsson the handset business. This unit is also losing huge money. They are taking a -Y33B (-$400M) writedown on this division.



The other parts of Sony are making some money including Pictures (Y35B), Music (Y35B), and the biggest profit center of all is Financial Services (Y100B). Yes, Sony's biggest profits come from its insurance business!



Games, are a very small part of Sony. They have such huge issues in trying to fix the TV business and now to turnaround the Sony Ericsson handset division. Also Sony still has 160K employees! Apple by comparison has just 60K. They just can't make money in consumer electronics under the current structure.

james andrews
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Sony needs to create a partnership with Valve, then license Gakai tech for a Steam powered distributed PC gaming model exclusively on their systems. With Steam already connected to PS3 consoles via Portal 2, one can hope such an alliance has already been considered. You may see an MS/Origin reprisal, but the service and software issues of Sony could be greatly reduced with a Steam backbone in there.

Heng Yoeung
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The way out for Sony is innovation. That has always been the law in a capitallst market. What is innovative about Bravia? Can't think of any. What's innovative about VAIO? Can't think of any. What is innovatinve about a Sony phone? Can't think of any. All of these Sony products could be replaced by any generic such as Dell or Vizio or Tracfone. Why has Apple succeeded? Innovation. People used to associate Sony with innovation and hi-tech, but they don't anymore. For example, the walkman was innovative. Forget about a PS4 that's 10X more powerful than the PS3 but does the same thing. People have that experience with the PS3. So you can push more polygons onto the screen. Big deal. We've gotten to the point now where that idea is saturated, law of diminishing return. WoW is slowing dying. Everquest has gone free to play. Why? The experience is worn out. People now know what the experience is about. I, for one, don't play it because I get the same experience with, say, Oblivion. So you don't get the persistent universe and social experience. Who cares. If I want social, I goto Facebook (never used it, frankly) or some such. Why does the game of chess still a fascination? There's endless variations. The game is never the same twice. And, of course, the underlying experience is fun. Innovate, Sony. You've done it before. If you want to stay in the console arena, give us a reason to buy one. Come up with a unique user interface like the Wii did. Or chance the experience some other way. You can do it, Sony.

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

Heng Yoeung
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Yes, it's true that Samsung has succceeded by copying. But it wasn't a copy on the same platform. Some brand other than iOS had to succeed. It's the yiing-yang thiing. People just don't want to see a monopoly or something like that. Why Samsung? I have no idea. Maybe clever marketing. Frankly,I haven't seen many commercials for a Sony phone at all, maybe once or twice. I heard rumors that there was a Sony portable gaming phone. Had the Vita been that phone, I think it could have been a game changer, because really is it that fascinating to play a game where you tilt left and right all day long? I own a pay-as-you -go phone;I don't need Internet connectivity wherever I go. A Vita phone would have been awesome. I'd jump on that. Then, there'd be a real reason to go online.



But, going back to what I was saying, copying isn't the answer. There's only one winner. And it mgiht not be you as the Sony phone and other poor performing Sony products prove. And as XBox 360 proves. Someone had to succeed. Unfortunately, it wasn't in Sony's hand this time even though the PS3 is just as capable a computer as XBox. If you look at innovation in terms of the Wii, that system succeeded despite XBox's success. If everybody innovated,everybody would succeed in some way and no one had to lose.

Timothy Larkin
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I'm used to robotic market speak (and outright lies) from Sony execs. I'm shocked to see Kaz speak like a human.

Aiden Eades
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I still find it odd hearing the arguements about the PS3 being an early flop due to selling for a loss. If they didn't do that then it would have been an even bigger flop, and here's why.



Selling at a loss due to blue ray player, that at the time would have cost anyone else around 1k. Instead they buy a ps3 for 600. Loss on the sale of a ps3, but sony wanted to push blu-ray, they had lines of blu-ray players, and TVs which were relying on this, if the blu-ray failed it would have been a far bigger hit to Sony, yeah sure, if they dropped blu-ray and sold the console for a few 100 less, it might have sold better, but then in all likelyhood the blu-ray player wouldn't have gotten as much support, would have died, and most other divisions in sony would have lost far more than the gaming segment.



As for changes they need to make, they need to fix their prices. Yes the bravia and the viao are sexy, but that isn't worth the price tag. Why buy a viao for 900, when I can buy the same spec laptop that feels a little cheaper for 500? Or maybe even less?



Today isn't a market of "I want to buy the very best." Its "I want to buy the best, within my budget" and budget TVs are what is selling, samsung, LG, similar quality to the bravia, but for half the price tag.



If the ps4 is to stand a chance they need to focus on price, performance and how easy it is to develop for. I'd like to see them stick with the cell as the cpu, with the new manufacturing process they could up the clockspeed and tighten the timings to get a lot more performance out of it. The only problem is its a pain to code for, they'd be better off working on some kind of middle chip which works as a buffer so the cell is seen as a single logical core, and splits the code as needed itself.



whether that'll happen or not though, or if its even possible I don't know.

Maurício Gomes
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Also, do not forget: Sony manufactures and sells equipment for movie production (and also insure them), like cameras, blue-ray printers (the thing that write the data, not the design), editing stations, editing software (Sony Vegas anyone?), etc...



Sellling the PS3 at loss, gave a huge loss to PS3, but also gave those profits in non-consumer equipment and insurance, since it forced movie studios to use blue-ray and HD and whatnot.

Mark dogg
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It is tough time for Japanese companies with foregin exchange rates, natural disaster. Panasonic just like others is expecting big loss as well:



[url]http://www.businessweek.com/news/2012-02-04/panasonic-forecasts-r
ecord-10-billion-loss-on-floods-charges.html[/url]

Sagar Patel
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I am not uber knowledgeable about Sony's internal structure but, doesn't it seem like their departments fight each other - more than other entities - so much that their products become overburdened junk?

Alan Rimkeit
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To save money for the PS4 Sony needs to use the Cell processor in it. Reuse the tech, just double up on the Cells, double the RAM and go with a top of the of the line NVidia graphics card. One that is off of the shelf so it is not custom and expensive.



If Sony reuses the Cell and keep the same basic hardware then they can keep the dev cycle for the PS4 near to the PS3's. The dev houses have the advantage of knowing how to develop for the PS4 off the bat then there would be no issue with making games on the cheap, or at least cheaper than learning a whole new system. Just res up the graphics, up the AI, and add in some more advanced effects.



Sony would save money and so would the developers.

Duong Nguyen
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As most mentioned, Sony isn't just games. A company as diversified as Sony will take a hit when the economy goes down since it has to many products and services. However conversely these are the companies which rebound the fastest when the economy goes up as well, due to their very diversification.. So we'll see.. It's not like Sony loss 1.5 billion from their entertainment segment..

wes bogdan
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From my point of view playstation is a great well known brand which makes many inovative and hardcore games whereas nintendo has mostly series dating back to the nes/snes era and if the wii u doesn't allow 4 tabletpads and can barely support 2 i see problems for nintendo.



As pointed out nintendo has a war chest while sony doesn't so sony needs to have more money faster-perhaps lending the sony brand to products someone else makes like the camera,tv,laptop or tablet devisions so sony could consolidate,regroup and rebound keeping brands like playstation for themselves.



The next gen systems should be between $299-399 at most to sell well.

Darcy Nelson
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Pretty sure the next generations of consoles are going to include some kind of built in display (IE, sony bravia+PS4 built into it) or personal computer. Maybe that kind of newfangled tech would help float things. That being said, I feel like the PS3's not even close to the end of its lifecycle. The new 3D sony television designed for the PS3 is interesting... I wonder if it will come in a fancy console bundle?

John Owens
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I suspect Sony are going to announce at E3 that they're dropping the playstation "console" and replace it with a set-top box that allows playing playstation games using a service such as OnLive.



If they do it will be a huge gamble as it will leave the market wide-open for Micosoft and I'm not sure if the network infrastructure is ready but it could also be an inspired decision.



They will never "move to Android". Owning the platform allows you to make huge profits that you just can't make otherwise, look at Apple's bottom line.

Darcy Nelson
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If they're not ready to give up TV's at this point, I don't see them stopping production of the Playstation brand.

Mark dogg
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Granted SCE has a big pool of talents devs. That would be terrible idea.



Sony problem is not PS. They got issues elsewhere. Kaz Hirai with new managment with be trying to fix that, consolidate right now

Mark dogg
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^

Since PS3 slim they are not loosing money on PS3 hardware and obvisouly software wise it is getting better.



PS3 in 4th and in it's 5th this time too is expected to do some 14million. Considering PS2 is still been sold in Asia. Give it another 5yrs. PS3 will exceed 120million and I reckon software will grow. PS3 is just hitting strides now and they hinted targeting on family too.


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