Lack of blockbuster games adds to effects of recession

NINTENDO AND Sony’s PlayStation division have both reported weak results, as a lack of compelling new video games added to the effects of recession.

The games division was the blot on an otherwise improved performance at Sony, however, as cost cuts and investment gains at the insurance arm led to a smaller-than-expected net loss of 37.1 billion yen (€275 million).

The weak hardware sales from Japan’s two big videogame companies will add to industry calls for price cuts on Nintendo’s Wii and Sony’s PlayStation 3.

Nintendo reported a first-quarter net profit of ¥42 billion, down from ¥107.2 billion. It sold only 2.23 million Wii consoles, compared to 5.42 million in the previous quarter, but did not cut its forecast for a full-year profit of ¥300 billion.

Sony’s newly created networked products division, which includes Vaio laptops as well as PlayStation, reported an operating loss of ¥39.7 billion. Sony blamed the result, which was the biggest contributor to overall losses, on “a decrease in overall software unit sales and a decrease in Playstation portable hardware sales”.

“Fundamentally, what’s going on is that the gap [between quality and mediocre games] is being exacerbated in this economic environment,” said Hiroshi Kamide, analyst at KBC Securities in Tokyo.

There have been no blockbuster game releases this quarter to match last year's Grand Theft Auto 4.

Excluding restructuring costs and its share of losses at affiliates – notably the mobile phone joint venture Sony Ericsson – Sony made an operating profit of ¥23.3 billion from April to June. That compares to a loss of ¥214.7 billion in the January to March quarter.

The turnaround was helped by financial operations, where operating profits were ¥48.2 billion, as rising stock markets led to profits on shares held by Sony Life.

Restructuring in consumer electronics also made a large contribution. Sales in the TV-to-digital cameras division were down by 27 per cent, but cost cuts meant the operating loss was restricted to two billion yen.

Sony and Sharp – which reported a ¥25.2 billion net loss yesterday – also said the former is to take a 34 per cent stake in the latter’s new ¥450 billion liquid crystal display plant.

Nintendo reiterated its full-year forecast for Wii console sales of 26 million and the handheld DS of 30 million.

Analysts expect demand for the Wii to get a boost later in the year with Nintendo scheduled to launch major titles for the holiday shopping season. Shares of Nintendo are down 21 per cent since the start of the year, underperforming the Nikkei’s rise of about 15 per cent.

– (Copyright The Financial Times Limited 2009)