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Sony, Next Big Software Company?

January 22nd, 2009 by Derrick Schommer · 6 Comments

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Every day we’re hearing of a company running through a round of layoffs or going out of business, it’s really not a happy time. Sony is not immune to the economic troubles either. Sony is talking restructuring and that involves a potential head count reduction of 16,000 jobs due to plant closings.

floppyThis leaves Sony with some hard decisions. Restructuring can mean drastic changes that effect all their product lines. The PlayStation 3 isn’t currently a shining example of high profit margins. The console needs time to reduce its overall cost, chip sizes and bring profitability. Is it in danger?

“Sony’s not in a position to halt all domestic production but it has to do something that drastic,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. “If it announces plans to move production overseas while keeping only planning and development functions in Japan, that would be a positive.” (gamestooge)

The yen is losing value in our global economy making it more difficult to export the product and build any type of profitability plan. “A source said this month the company will likely suffer an annual operating loss of about $1.1 billion, its first such loss in 14 years” (news.yahoo.com) All this noise is making CEO Howard Stringer contemplate Sony’s involvement as a “software only” company, making us recall the changes at SEGA to this same result.

The Financial Times reported Sony will unveil details of its restructuring steps on Wednesday or Thursday. It said Chief Executive Howard Stringer was meeting with resistance from some executives to shifting the company’s focus to software from hardware and cutting jobs in Japan. (news.yahoo.com)

Is this just a case of a fearful executive trying to lay plans for a more stable future? Software is easier to develop, pays for itself quickly and becomes pure profit as it ages. Hardware requires constant upkeep at manufacturing facilities, chip reductions and a boat load of quality planning for first shipment. Would Sony go full software?

Let’s face it, Sony isn’t SEGA, they’ve been developing hardware for consumers since anyone can remember and they’ve been doing it with quality and market penetration. It seems absurd to think they’d forgo hardware designs in replacement of a full software solution to the problem. In addition, Sony has already invested a large amount of cash into seeing PS3 through it’s 10-year plan and letting that die now is realizing a huge loss on investment.

If Sony pushes through the economic and maintenance course, the PS3 will become highly profitable, much like the PS2 last generation (with a slower ramp up for sales). Even if they break even after ten years it seems a lot better than throwing all the effort away.

Perhaps Howard Stringer is talking “software” for the next generation home console? You think Sony will create a PlayStation 4?

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Tags: Industry News · playstation 3 · Sony

6 responses so far ↓

  • 1 hood ganagstazNo Gravatar // Jan 22, 2009 at 7:57 pm

    why would they make a playstation 4 when they can just upgrade the tech thru firmware….. i think where they might be heading in terms of software since you can download full movies and games onto the console anyway so thats where the software pays for itself at…… plus the last time i check, the ps3 is capable of handling 4d graphics i dont hear nobody talking about that part of the tech at all if u dont believe me digg it up

  • 2 Derrick SchommerNo Gravatar // Jan 22, 2009 at 8:02 pm

    A few reasons a PS4 would trump software updates:

    1. CPU technology in 7 years is going to smoke what we have today. Competition will eventually eat you alive.

    2. Current hardware will reduce in price, but eventually be costly to keep alive as technology will just be no longer developed anymore. What happens when the CPU’s their utilizing are no longer manufactured?

    3. It’s hip to have new stuff, people like to buy new gadgets and game consoles. It’s a good marketing move to keep the hype up about your business.

    If the PS2 had firmware updates today, would we still all want one? Firmware isn’t going to fix the hardware being ancient in terms of technology.

  • 3 BrianNo Gravatar // Jan 23, 2009 at 12:05 am

    More pathetic FUD. The PS3 is doing fine. Ubisoft just reported they made more money off of the PS3 than the 360 and Wii. And didn’t EA and capcom say the same thing?

    The big 360 games seem to sell much more than the big PS3 games so people make up stories about poor sales. But PS3 games overall sell better than games on the other consoles.

    Sony has a lot wrapped up in the PS3 so no way will they dump it. Now Microsoft, they make horrible hardware. I won’t be surprised when they get out of videogames.

  • 4 Derrick SchommerNo Gravatar // Jan 23, 2009 at 10:37 am

    @Brian:
    FUD stands for “fear uncertainty and doubt,” you realize that right? Usually you use that when an article is trying to invoke some type of doubt.

    Sony’s troubles aren’t FUD, their FACT.

    The rest focuses on “would they do this?” and ends with asking if they’d make a ps4 at this point.

    The last statement is more of what I was looking for in terms of a comment. As for PS3 games selling better than all the others (overall), I’d love to see some NPD figures on that, as I don’t believe it. Are you talking US sales figures, europe, japan?

    For US figures, I’d love to see proof. Considering the other two consoles have more units in the market, it’s easier for them to make more sales on field numbers alone.

    For Japan, I think it’s obvious that 360 won’t be winning anything. Of course, Nintendo owns that market pretty tight (isn’t it like 4:1 or something?)

  • 5 awil8717No Gravatar // Jan 23, 2009 at 5:36 pm

    The current price tag on the ps3 is just ridiculous. it’s become a luxury product and in this harsh economic/financial climate people are just turned off by its hefty asking price considering how inexpensive the 360 seems in comparison. sony is going to lose money regardless so why not lower the price and make up for it in software sales. they’ve probably got their reasons but for me its a no brainer.

    I’m waiting out for GOW III, Killzone 2 and a possible price drop before i snag one.

  • 6 FGNo Gravatar // Feb 17, 2009 at 1:05 pm

    for starters EA lost tons of $$ trying to develope for ps3 .http://gamer.blorge.com/2008/02/03/ea-claims-ps3-harder-to-develop-for-than-xbox-360/

    Sony cannot count on software sales alone , They have no solid 3rd party devs lined up . Sony is just stuck people dont need to buy a ps3 now to use as a BD player with sub $200 players on the market now . I personally cannot see a recovery in sonys future with the pure ammount of loss upto this point .
    They might of won the format battle but they have lost the format war .

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