Slumping PS2 sales sting Sony

TOKYO--After Sony Corp. announced its Q4 2004 earnings today, its games division had one big consolation--they didn't do as bad as its movie studio. Declining PlayStation sales helped decrease Sony Computer Entertainment earnings by 4.5 percent to 367 billion yen ($3.4 billion) in the quarter ending December 31, 2003. Operating revenues were also down, falling 1.6 percent to 70.5 billion yen ($659 million). By comparison, Sony's movie and home entertainment division's earnings sunk 29.3 percent to 181.2 billion yen ($1.7 billion). Operating revenues sagged by 82.3 percent to a flaccid 5.6 billion yen ($53 million).

Given that Sony was boasting about its holiday sales just two weeks ago, SCE's poor earnings may come as bit of a shock to some. However, many analysts expected the combination of slowing PS2 sales and PS3 preparations to cut into the games division's bottom line. Indeed, Sony confirmed the latter in its official earnings report, saying, "research and development expenses for semiconductors increased compared with the same quarter of the previous year."

In terms of software, Q4 2004 marked the highest sales of PS2 games yet. Software sales for the PS2 have increased by 32 percent worldwide, from 79 million units to 104 million units. However, the PS2 console took a 15 percent fall, from 8.03 million units down to 6.83 million units. Sales of the PSX were not calculated in SCE's PS2 console figures, as the multi-function machine is released by Sony's electronics division, which posted near flat earnings (although it did suffer a 39.7 percent drop in operating revenue).

As is to be expected, the original PlayStation took an even steeper fall than its next-gen sibling. PSone software sales dropped 54.5 percent from 22 million units to 10 million units. Sales of the console took an even more massive drop of 66 percent, from 3.02 million units down to 1.02 million units.

Overall, Sony Group reported a drop of 26.2 percent in its net profit for the third quarter, down from 125.4 billion ($1.2 billion) to 92.6 billion yen ($866 million). However, the company lifted its net profit estimates to 55 billion yen ($519.2 million) for the full year, commenting that the strong euro is bringing up its yen-denominated profits.