Continuing its string of quarterly losses, Sony suffered a net loss of 26.3 billion yen ($292 million) for its second quarter, reported the company on Friday.
Compared with a profit of 20.8 billion yen a year ago, this marked Sony's fourth straight quarterly downturn.
Sales for the quarter that ended September 30 also took a spill, dropping 19.8 percent to 1.66 trillion yen ($18.26 billion) from 2.07 trillion yen in the year-ago quarter.
Recent cost cuts and hot sales of the PlayStation 3 game console both provided a shot in the arm.
But Sony was hurt by a downturn in sales for the venerable PlayStation 2 despite its recent claim that the PS2 was "showing no signs of slowing down." Weak demand for the Vaio line of PCs also dragged down the quarter.
As a result, revenue in the Networked Product and Services division, which includes Sony Computer Entertainment, fell 24.2 percent to 352.6 billion yen from 465.2 billion yen in the year-ago quarter.
Other segments also upset the bottom line.
The Consumer Products and Devices business, which includes TVs and cameras, watched its sales plummet 36.5 percent to 799.9 billion yen from 1.25 trillion yen a year ago. Sales were down for Sony's Bravia HDTVs due to intense price competition and the higher value of the yen. The company's Cybershot digital cameras also were impacted by a decline in unit sales and the appreciation of the yen.
Lower sales both in the theater and at home hurt Sony's Entertainment division, with revenue down 30.4 percent to 136.4 billion yen from 196.1 billion yen in 2008's second quarter.
Sony Ericsson also affected the quarter with sales of 1.6 million euros ($2.36 million), a 42 percent decline from 2.8 million euros in the year-ago quarter. An ongoing drag on Sony's earnings, the cell phone maker has struggled to turn a profit in recent years.
One bright spot was Sony's music business, which enjoyed a 147 percent boost in revenue to 124.5 billion yen, stemming in part from sales of Michael Jackson's product catalog, following the entertainer's death in June.
Despite the quarterly loss, results narrowly surpassed expectations, prompting Sony to boost its forecast for the full fiscal year. The company now is eyeing a loss of 95 billion yen for fiscal 2009 versus its prior forecast of a 120 billion yen deficit. Sony lost 98.9 billion yen in fiscal 2008.
Sony recently announced that the PlayStation 3 will offer Netflix streaming, a move it hopes will bump sales of the game console even higher.
Sony is not building a download store for the upcoming PSP Go, according to a report.
(Credit: Eurogamer.net)Could the disaster that was Sony's Connect music service have soured the international conglomerate on offering downloads at the PlayStation Network?
Rafat Ali over at the tech news blog PaidContent.org is reporting that not only has Sony scrapped plans--at least for the time being--to offer music downloads to owners of the PlayStation Portable, but the executive in charge of dealing with the labels has resigned, according to the report.
Two weeks ago, CNET News reported that Sony had talked to some of the largest recording companies about the possibility of offering music via the PlayStation Network, the online store for PlayStation, Sony's video game console, and PlayStation Portable (PSP), the multi-purpose handheld.
PaidContent's report comes on the eve of the expected debut of the new PSP Go, the latest version of the device. Sony executives were not immediately available for comment.
Music should have been one of the PSP's core offerings a long time ago. Sony is a major player in gaming and music. It's a little ironic that while Sony owns the second largest music label, the company can't offer MP3s to PSP owners.
James McQuivey, an analyst with Forrester Research, is just one of the people who has said that the PSP has failed so far to live up to its potential. The device is probably one of the best mobile video players available, with a larger screen than any of the iPods or iPhones. It provides an excellent game-playing experience. But it has been well chronicled that the machine was hobbled by Sony's decision to initially offer physical media (Universal Media Disc) rather than digital content. That appears to be changing as the PSP Go, according to reports, will not offer an UMD drive.
Sony has also been determined to keep the PSP's focus on gaming, which is understandable. But at the same time, Apple's iPhone has taken the Swiss Army knife approach and is offering a device that plays music, videos, and games, and also takes photos, downloads books, helps us organize our lives, counts calories and a lot more, thanks to all the applications being written for it.
Sony may have lost the taste for competing in digital music sales by the misguided attempt that was Sony Connect. Connect was a troubled effort marked by infighting and software glitches and the company finally shut it down a year ago.
Sony has spoken with some of the major recording companies about providing music for the PlayStation Portable, music industry sources told CNET News.
The sources said the talks are only preliminary and no deals have been struck. But apparently, Sony is considering offering music on the PlayStation Network, the company's nascent multiplayer gaming and digital download service. Such a move could place the PSP in direct competition with other multiuse music players, most notably the iPhone.
Spokespeople from Sony and the big recording labels declined to comment for this story.
The PSP is a nifty little handheld that plays games, video, and music, but has never fully lived up to its potential, many say. With a larger screen and superior games, the PSP could have rivaled the iPod. The PSP's development, however, was partially hobbled by not offering digital content for download.
PlayStation Portable
(Credit: Sony Corp.)Instead, Sony early on chose a walled-garden approach to content. To watch videos on the PSP, the company stuck with physical media and required customers to buy Universal Media Discs, the mini DVDs that play only on PSPs. UMDs never caught on, and one reason was that Sony didn't initially offer a means to watch the discs on a television. This meant PSP owners who bought a UMD movie had to pay out again for a DVD if they wanted to watch on a TV.
If you believe the rumors that have flooded the gaming sector in recent months, Sony plans to release a totally revamped PSP. Some reports say the device will feature a larger screen than the PSP 3000 and have slide-out controls--and it will no longer play UMDs. Told that Sony was interested in music for the PSP, Michael Pachter, an analyst with Wedbush Morgan Securities, a financial services company, applauded the idea.
"This makes total sense that Sony would try to get content for the device," Pachter said. "If Sony is smart, they would manage it the same way iTunes has and be device-agnostic. Whatever you get on a Sony site should play on an iPod as well.
"(Sony) should want that but right now you can't download a Sony PSP game to an iPod Touch because the operating system won't allow it," Pachter added. "I know I can get music from iTunes to the PSP...It's just a question, but I wonder if Sony will configure the PSP so it would be incompatible with iTunes. They could come up with their own proprietary format for music so that MP3s won't work."
As the current music format of choice is MP3, this would be bucking the popular trend in music, to be sure. The PSP currently plays unprotected MP3s and Apple and most other leading download services have removed digital rights management from their songs. Nonetheless, Pachter knows Sony's long history of trying to force proprietary formats on consumers.
Remember the Music Clip, Sony's first digital music player that ignored the public's preferance for MP3 and only played in its own ATRAC3 format? Sony's MiniDisc was supposed to replace the cassette tape but failed to catch on anywhere but Asia.
When it comes to selling music online, Sony hasn't had much luck there either. Connect was Sony's answer to iTunes, but the download service proved hopelessly buggy. Sony shut the service down in August 2007.
The good news for Sony is that CEO Howard Stringer appears willing to adopt a more open approach.
"If we had gone with open technology from the start, I think we probably would have beaten Apple," Stringer told Nikkei Electronics Asia recently. "Sony hasn't taken open technology very seriously in the past. Its Connect music download service was a failure. It was based on OpenMG, a proprietary digital rights management (DRM) technology. At the time, we thought we would make more money that way than with open technology, because we could manage the customers and their downloads.
"This approach, however, created a problem," Stringer said. "Customers couldn't download music from any Web sites except those that contracted with Sony."
This should be welcome news to PSP fans, many of whom consider the device an excellent game and video player. If Stringer is good to his word, and if Sony does offer music downloads, the company apparently won't try to imprison songs in a Sony system.
The global recession has hit Sony hard--the company on Thursday reported its first annual loss in 14 years.
Sony lost 165 billion yen ($1.72 billion) in the quarter that ended March 31, the fourth quarter of its fiscal year, compared with net income of 29 billion yen in the year-ago period. Revenue for the three-month period was 1.5 trillion yen ($15.5 billion), a drop of 22 percent from a year earlier.
Adding that to the previous three quarters of fiscal 2008, the company saw an annual loss of 98.9 billion yen ($1 billion). The loss was a dramatic reversal from the preceding fiscal year, when Sony earned 369.4 billion yen. The company blamed the decline on lower sales, increased competition, the stronger value of the yen, and the sluggish Japanese stock market. Annual revenue dropped 13 percent to 7.73 trillion yen ($78.8 billion).
The downturn is forcing Sony to cut costs and staff. The company plans to shut down three manufacturing plants in Japan, reducing the number of worldwide plants from 57 to 49. Sony says it is on track to eliminate 8,000 jobs by year's end, mostly through forced retirement. The company now hopes to reduce costs by 300 billion yen for the year ahead
Despite these steps, Sony said it doesn't expect a recovery anytime soon and is projecting a 120 billion yen ($1.2 billion) loss for the fiscal year through March 2010.
Since taking over as Sony CEO, Howard Stringer has been on the move to cut costs, reorganize, and shake up the company's status quo.
Sony's business segments each saw a sales drop. In the gaming arena, revenue from the various PlayStation game consoles sunk 18 percent in the face of competition from the Nintendo Wii and DS and Microsoft's Xbox 360.
Revenue in the electronics business declined 17 percent. Sales were actually up for Sony's Bravia HDTVs, but down for camcorders, digital cameras, and PCs.
On the entertainment side, sales dropped 16.4 percent. Motion picture and TV revenues grew but were offset by a slide in the home video market.
Apparently Netflix and Sony have solved some of their licensing issues. An unknown number of films from Sony Pictures that disappeared last week from Netflix's streaming service for the Xbox have returned, but still no word on when the rest might be back.
Steve Swasey, a Netflix spokesman, has declined to discuss licensing deals with specific movie studios since last week, after Xbox owners complained that Netflix' streaming service was no longer offering Sony films on the console. Swasey said some of the movies have returned but not all.
"We said earlier that titles come and go," Swasey told CNET News. "That is part of the natural ebb and flow (of these licensing deals). Some titles are back while some are not."
Immediately after the Sony films disappeared, the blogosphere began accusing Sony, the maker of the PlayStation video game console, of trying to stick it to rival Microsoft, the maker of the Xbox. What really happened was Netflix didn't have a licensing deal with Sony that covered the Xbox and several other boxes that offer Netflix's streaming service, according to my film industry sources.
Sony films will no doubt be back on Xbox as soon as the studio and Netflix can come to terms. The big question I have is why Netflix didn't have these deals in place well before now?
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