Sony Moves Towards First Annual Profit in Gaming in Years

Sony's gaming business is moving towards profitability this year -- something that's eluded the company each year since the PlayStation 3 was launched in 2006.

The gaming unit is being helped by sales of the flagship PlayStation 3 console, which have improved since a redesigned model was launched in August last year. The new console sells at a lower price, which has helped stimulate demand among consumers, but crucially for Sony is also cheaper to manufacture.

Sony had been struggling to return its gaming business to the black since the PlayStation 3 launch, because it was losing money on each console it sold. In April this year it passed a milestone when the PS3 finally became profitable.

That profitability continued into the July to September quarter, the company said Friday.

Sales of the PS3 were 3.5 million units, higher than the 3.2 million sold during the same quarter last year.

"The game business has been profitable for four quarters in a row and is steadily progressing to a profit for the full year," said Masaru Kato, Sony's CFO, in a webcast briefing with analysts in Tokyo.

Kato also said Sony expects to achieve its sales target of 15 million PS3 consoles in the fiscal year from April 2010 to March 2011. In the first six months of the period sales totaled 5.9 million consoles.

Whether Sony can achieve the full-year target will likely be decided during the current quarter, which includes the year-end sales period and is typically the strongest period for console sales. If Sony does make target or even come close, it will mark the best year yet for PlayStation 3 sales.

The gaming business was also helped by a successful launch of the Move motion controller. The controller and companion camera bring the type of motion gaming pioneered by Nintendo's Wii to the PlayStation platform and demand appears strong. Initial sales of 2.5 million of the controllers were previously reported by the company.

But despite the improving conditions for the PlayStation 3, there are some dark clouds hanging over the gaming business.

Sales of the PlayStation Portable dropped sharply in the quarter, down by half from the same quarter last year to 1.5 million units.

A new version of the handheld, the PSPgo, hasn't lived up to expectations and earlier this week Sony cut its price from US$249 to $199. The price cut is expected to stimulate demand and help Sony achieve a sales target of 8 million units for its fiscal year. In the first two quarters of its financial year, sales totaled 2.7 million units.

An unknown factor for the business comes in the shape of a possible PlayStation cell-phone. Such a device has been apparently under development for sometime and earlier this week Engadget published photos of what it said was a Sony Ericsson prototype.

During the analyst briefing Kato said Sony was looking at the cell-phone gaming sector, but he declined to provide more information on a possible product.

Martyn Williams covers Japan and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

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