A financial look at the "console war"... how each is faring

by Nick Doerr { Oct 30th 2006 at 11:00AM }

The third calendar quarter has come to a close and with it, some financial statements from Sony, Nintendo, and Microsoft. What does this matter, you ask? Looking at the earnings can really cut through the internet hype, jargon, rumors, and walls of flame and really show you whether or not a company is in trouble (financially). Let's start with the company that's in trouble: Sony.

Sony has reported earnings that have "plummeted 94 percent to $14.4 million because of costs related to its laptop battery recall. But it also reported a $369 million operating loss in its video game business because of start-up costs for the PlayStation 3. Sony's game revenues decreased 20 percent to $1.4 billion from a year ago because of a decline in PlayStation Portable and PlayStation 2 sales, as well as a price cut on the PS2." Ouch! There's also a ton of spare PS3 inventory in Japan (save the blue laser diodes, we imagine) and $3 billion short term and long term debt. They've got $4.7 billion in cash, though, so they're not "under" yet. Should the PS3 fail, Sony will have one hell of a time coming back.

Microsoft, naturally, has a war chest of cash -- $31.4 billion (in gold bullions, too!). Let's talk sales: "sales rose 70 percent in the Entertainment and Devices division, which includes games, to $1.03 billion in the quarter. The division cut its loss from $173 million a year ago to $96 million. Microsoft says it is on target to hit profitability by the fiscal year that ends June 30, 2008." On XBL, there are over 4 million subscribers. Even more good news (for Microsoft, they're probably throwing a $2.3 million party for this) is that the 360 consoles in Japan that come bundled with Blue Dragon have sold out. Yep, all 20 of them (joking, joking).

What of Nintendo? "Nintendo reported sales of $2.5 billion, up 69 percent from a year earlier. Net income was $458.6 million, up from a loss a year ago. Nintendo has $6.6 billion in cash. Nintendo is forecasting sales of $6.2 billion and profits of $843 million for the year ended March 31, 2007." Everything else is pudding -- of course they're selling tons of DS's and GBA's... Nintendo's doing well, as usual (GameCube aside).

Tags: DS, Game Boy Advance, GameBoyAdvance, Microsoft, Nintendo, Playstation 3, Playstation3, PS3, Sony, Wii, XBox 360, Xbox360

Reader Comments (Page 1 of 1)

Bob @ Oct 30th 2006 11:56AM

Sony really REALLY needs the ps3 to do well. It's is going to hard for them at first, but the sales imho will increase pretty fast, as long as they can get the ball rolling getting units out.

Oh, and believe it or not, the gamecube was in the third place last gen as far as sales, but since nintendo made a profit on every console sold, they didn't lose any money with the cube, they made money.

ndoerr @ Oct 30th 2006 12:10PM

@ Bob -- exactly my point with the GameCube. Nintendo could afford to have it do, well, not poorly, but not kingly. If Nintendo went solely handheld, they'd do just fine. But hey, they won't limit themselves to that. I'm not complaining.

Jason @ Oct 30th 2006 12:34PM

I'm still amazed that with Sony losing 20% and Microsoft gaining 70% that Microsoft is so far behind Sony. They've been practically coasting for years with the PS2 sales and Microsoft still hasn't caught up. In fact, Microsoft is still not making money from the Xbox sales, which is even more amazing to me.

The difference in cash reserves is really what could make or break the companies in the struggle for console domination, though. If Sony fails with the PS3 (let's hope not), they haven't got much to fall back on and will end up cutting loose a lot of resources. Even Nintendo has more cash reserves than Sony because, as Bob points out, they make a profit on all their sales.

KilgoreTrout XL @ Oct 30th 2006 1:56PM

Heh - I don't think that there's any way that the PS3 will "Fail". Might not have as big a share of the market, or might not even be the largest share of the market, but they'll still sell boatloads of the things.

tony @ Oct 30th 2006 1:57PM

I support what MS is doing with the XBox, but even so, I have no intention of getting one. There is really nothing they have which interests me.

I -was- holding out for a PS3, but Sony went and priced me out of it. I can afford to pay that much for a console, but why on earth would I? Why would anyone? So I ordered a PS2 this weekend.

I'm planning on trading in my GC and putting the money toward a Wii. I gotta have Metroid, gotta have Zelda. Plus, I'm loving the heck out of my DS Lite.

Here is hoping MS and Vista do for PC gaming what XBox Live did for console gaming.

skyrous @ Oct 30th 2006 2:10PM

Nintendo is the only company that can afford to come in 3rd. I can realistically see either sony or ms getting out of the video game industry altogether if they placed a distant 3rd say less than 20 million this gen. they'd refocus on their core businesses consumer electronics or PC software respectively. nintendo core business is video games so they can come in 3rd and get ready for the next gen anyway. by turning a profit on every system and with the portable cash cow there is no possible way they end up like sega. But if either of the other two start really losing money or market share on video games pulling out would not be out of the question.

MrD @ Oct 30th 2006 3:12PM

Nintendo has MORE money than Sony!?

Never saw that coming. It's interesting considering that Sony is a major electronics maufacturer, and Nintendo is just an entertainment software manufacturer.

Edge of Blade @ Oct 30th 2006 6:14PM

Jason:

I agree with your comments about cash reserves. That's why I think Sony screwed up. They didn't play this smart, risk-wise. IF PS3 fails (wishful thinking on my part, but will probably do well enough), Sony bet everything on one product. If PS3 fails, Blu-ray fails. I don't know about Cell though. I wouldn't be surprised to see Sony divest from games and pitch Microsoft or Nintendo the Cell within two generations.

But, to be fair, PS3 will do well enough. Unless Sony does something monumentally stupid right in front of thew whole world.

Edge of Blade @ Oct 30th 2006 6:15PM

Oh, and Nintendo can REPLENISH it's pockets better than anyone. You would be hard pressed to argue that fact. In the game industry, no one is more profitable.

GL @ Oct 31st 2006 2:40AM

Oh nooooooo! The SKY IS FALLING! Sigh...not another one of these articles.

Listen folks! Sony is a restructuring phase. It happens. It's pre-PS3 release! The PS3 is a major part of their consumer products plan. The fact remains: People love new technology. They love high-def TV. They love great games. They love great movies on high-def! Sony owns movie and music companies. And they will give the fans want they want. They are in the consumer product business because they are good at it and are name that people trust and love (M$ bots hate this! Oh well, boo hoo!).

Sure, Sony has its share of detractors. But if you take a poll around the world on how many people hate Microsoft the number would be staggering. It's Microsoft dream to get as many people to hate Sony (FUD, propaganda, paid M$ employees) as they have people hating Microsoft. Sigh...it wont work. Microsoft is an inherently despised company.

TheGuyNextDoor @ Oct 31st 2006 6:11AM

@ GL

I agree.

I think Sony's problem is that its left hand still doesn't know what its right hand is doing. The management needs to pull the reigns in tighter and watch more closely what each part of the business is doing, so that we don't have the bad-PR debacles of the BMG-division's infamous "rootkit", and the Chinese manufacturing plant getting lapse on battery production causing a recall.

You can see they're trying and I think Howard Stringer has got the right idea, but they still have a long way to go.

Here's hoping PS3 will be a good step in the right direction.