Tuesday, April 10, 2012

Sony Increases Forecast of Loss to $6.4 billion


As if the slate of bad news didn't keep on coming, Sony has announced today that the company is expected to lose $6.4 billion for the 2011 fiscal year. They recently announced plans to cut 6% of their workforce or 10,000 jobs [1]. A major reason why is because of the ailing television division that is dragging down the organization. This division has lost money for the last eight years [2]. The new CEO of Sony, Kaz Hirai has his work cut out for him as he tries to steer the organization into profitability. Sony has recently launched the PS Vita all over the world, with a fairly icy response from the gaming community. This has led to fairly poor sales across the board, with the consoles failing to live up to sales forecasts [3]. The tepid response to the PS Vita and the legacy debt from the PlayStation 3 along with the increased competition from tablets, Microsoft, and Nintendo means that the PlayStation 4 will likely have difficulty establishing itself when released next year.

The company has traditionally used the marketing strategy of being a premium product and priced it accordingly. With the onset of LCD technology, Sony has lost that edge and the public perception of being a luxury brand. Companies like Samsung have done a far better job marketing themselves and repositioning themselves in the public sphere. The difficulty for Sony is that they were charging a premium price for its LCD televisions, while they lost plenty of brand equity to Samsung. If the company is to remain in television development, they need to find a way to reposition themselves or they will become a footnote of history, since the Television Division is dragging down the entire company with it.

On the bright side, Sega has just announced a new Project Diva game for the PS3 and the PS Vita and Compile Heart has announced the third iteration of the Neptune franchise.

Sources

[1] Gallagher, Chris. "Sony to ax 10,000 jobs in turnaround bid: Nikkei - Yahoo! News." Yahoo! News. http://news.yahoo.com/sony-cut-global-workforce-10-000-nikkei-044827492.html (accessed April 10, 2012). 

[2] Buerk , Roland. "BBC News - Sony doubles forecast of annual loss to $6.4bn." BBC. http://www.bbc.co.uk/news/business-17662059 (accessed April 10, 2012). 

[3] Caoili, Eric. "Gamasutra - News - PS Vita's Japanese sales stall as third-party 3DS games take off." Gamasutra. http://www.gamasutra.com/view/news/165799/PS_Vitas_Japanese_sales_stall_as_thirdparty_3DS_games_take_off.php (accessed April 10, 2012)

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