It is likely that the launch of the PlayStation 4 is the most successful in home video game history. The PS4 shifted a million units in its first 24 hours on sale in the US alone, with the worldwide launch two weeks later roughly doubling that figure.
Sales have stayed strong, as well, with Sony announcing last month that the PS4 was the No.1 selling console in the US for eight consecutive months, maintaining a comfortable lead on Microsoft’s Xbox One.
At the Gamescom games show in Cologne, Germany last month, Sony announced that it had sold ten million PS4 consoles worldwide in less than a year. This sales milestone took only nine months, compared to 15 months for the hugely successful PS2 and much longer for the PS1 and PS3.
It may seem odd, then, that Sony is in the midst of one of the most financially difficult years in its history. Sony made headlines this week when it announced a downgrade of its earnings forecast, the sixth time it has done so since new chief executive Kazuo Hirai took on the role only two years ago.
In May, Sony had predicted a more modest loss of ¥50 billion ($510 million), but only two months later that prediction has mushroomed to a ¥230 billion ($2.35 billion) for the April 1 to May 30, 2015 Japanese financial year.
Based on sales of PS4, the problem does not appear to be in Sony Computer Entertainment, which is responsible for Sony’s interactive entertainment products. SCE has not done as well as investors would have hoped, owing to still sluggish sales of the handheld PS Vita device and PS4 console sales not translating into as many game sales as they would like.
The latter is especially problematic because of modern video game business models. Typically, a console manufacturer will break even or perhaps even make a loss on the sale of the hardware, aiming to make a profit on software sales.
While the PS4’s rival, the Xbox One, is behind on hardware sales, its “attach rate” (the sales ratio of games to consoles) has been estimated to be about 2.75, compared to about 2.1 for the PS4. These are slightly below the figures of the previous generation, but not terrible for the games-starved launch period of a new console.
The big problem for Sony is its mobile phone business. After formally absorbing Ericsson fully into the Sony mobile business in 2012, it was recently forced to report a ¥180 billion ($1.84 billion) impairment charge due to a loss in value of the Ericsson assets.
While Sony’s Android-based mobile phones review well, this has not translated into strong sales. Some commentators blame this situation on Sony failing to forge a strong relationship with a large mobile service provider in the US.
Consumers tend to buy a new phone in a bundle with a new service contract, and several of the biggest American mobile providers do not offer Sony-branded phones on post-paid contracts. This locks Sony out of a large portion of the 1 billion smartphones that will be sold in the US this year.
Things are not too grim for Sony, however. It says it is shedding about 15 per cent of staff from its mobile division and will be dropping mid-range phones to concentrate on entry level devices and high-end premium phones.
Mr Hirai was brought on board to turn around Sony’s consistently bleak financial performance, and if he can just fix the problems in Sony’s mobile division he may just succeed.