Sony's PlayStation 3 Turns Profitable

Sony has finally begun making money on its PlayStation 3 console and expects its game business to turn a profit this year, the company said Thursday.

The turnaround represents a success for Sony's new management team, which made profitability at the division a key short-term goal when it took over in April 2009.

"The game business achieved a profit in the fourth quarter due to strong sales of first-party software and the elimination of negative margins on the PS3," said Nobuyuki Oneda, chief financial officer of Sony, at a Tokyo news conference. He was referring to the fourth quarter of Sony's fiscal year that runs from April to March.

The PlayStation 3 has remained a money loser for Sony ever since it went on sale in November 2006. High development and manufacturing costs combined with lower-than-expected sales meant Sony hadn't been able to realize profits from the device.

Things began to change in the second half of last year when Sony launched a redesigned PlayStation 3. Advances in electronics and manufacturing meant the console was cheaper to produce and Sony managed to boost sales by reducing the price.

The move paid off. In the final three months of 2009 sales of the console hit 6.5 million, up 2 million units for the same period of 2008. The strong performance continued into 2010 with sales in the first three months of the year of 2.2 million, up 600,000 units on the year.

During the three month period Sony started making money on each console sold.

The turnaround came too late in the year to reverse losses at the game business, which lost around ¥50 billion (US$540 million), but Sony anticipates it will be able to report much rosier results this time next year.

"For this year we expect to be able to generate at least double-digit profits," Oneda said of the games business.

Continued profitability of the PlayStation 3 will play a big part in this.

Sony hopes to sell 15 million consoles this year, up from 13 million in the fiscal year just ended.

The company will also be looking to game software and network sales as it expands the online PlayStation Store beyond games to include movies, music videos and comics.

The PlayStation 3 is also due to shortly get a firmware update that will add 3D capabilities to the device. The update, which will be offered at no cost, will enable 3D games and 3D Blu-ray Disc content to be viewed through the device when hooked up to a suitable 3D television.

Later in the year Sony will launch PlayStation Move, a handheld games controller than can sense and estimate movement and acceleration. The companion PlayStation Eye, a camera with image recognition capabilities, will be launched.

Management's next target will likely be the underperforming PlayStation Portable. The handheld gaming device, which competes against Nintendo's DS, registered year-on-year sales falls for each quarter of the last fiscal year and Sony doesn't anticipate things to get better.

Unit sales of the PSP were 9.9 million in the fiscal year, down from 14.1 million the year earlier. For the current year Sony expects sales to fall to 8 million units.

Martyn Williams is Tokyo Bureau Chief for IDG News Service and can be reached by e-mail at martyn_williams@idg.com and on Twitter @martyn_williams

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