- Tram Ho
Last week, for the quarter ended June 30, Sony’s operating profit rose to 280.1 billion yen ($2.57 billion), from 221.7 billion yen in the same period a year ago. last. This is better than the average prediction of 207.96 billion yen from 10 analysts surveyed by Refinitiv.
Sony reported strong business results when less than a decade ago, the group was in jeopardy.
In particular, Sony’s management also expressed confidence in future business results and made positive predictions. Specifically, Sony also revised its fiscal year profit forecast to 3%. Previously, the prediction was a loss of 3%. Sony’s expected year-on-year profit in March 2022 is expected to drop 32%. Before adjustment, this figure was 36%.
This is Sony’s surprising business result when less than a decade ago, the corporation was in danger. When Hirai assumed the position of Chairman and CEO in April 2012, Sony had experienced four consecutive years of losses, even reaching a record net loss of 456.6 billion yen ($4.1 billion in billion dollars). current price).
To revive the company, Hirai began drawing up plans for the next step in restructuring Sony. He realized that ” Sony doesn’t have a mission, values and vision for what the company wants to be “. Their electronics, games, movies, music and other fields are all disjointed and go their separate ways. He considered it necessary to define ” why we exist and how to exist “.
Believing that the answer lies within the company, Hirai visited Sony’s factories and their research and development centers around the world, listening to people speak. He said that since its founding, the spirit of Sony has always revolved around the word “kando”, which means “emotional” in Japanese.
” I believe it’s possible to figure out what founders want to achieve, and that’s kando .” Sony was founded with the goal of making products that would make people say “wow” at the mention of it.
Hirai explains that Sony’s mission is to be ” a company that creates products imbued with Kando ideology “.
After years of efforts to improve itself, Nikkei reports that this time Sony is gradually regaining its lost glory.
SUCCESSFUL BECAUSE OF THE PASSION
However, it must be admitted that Sony also benefited greatly when the outbreak of the Covid-19 pandemic caused the demand to buy PlayStation 5 (PS5) game consoles, TVs, cameras, and consume music and video content. movies are on the rise.
Chief Financial Officer Hiroki Totoki said digital camera sales were strong in all markets with the trend shifting towards high-end products.
Sales of cameras and camcorders hit 116 billion yen ($1.06 billion), more than double the same period a year ago after people “wake up from hibernation” during the pandemic. In addition, the exchange rate is benefiting its business.
Sony has begun restructuring production aimed at professional users, focusing on producing mirrorless digital cameras at a higher price point. The Alpha 1 series with 8K video recording was a huge hit for Sony. This proves that the company has successfully applied its image sensor technology to the development of high-quality electronics.
Sony’s entertainment business is also keeping its momentum. Revenue from music and anime increased, especially the hit anime The Demon Slayer. Following the success, the movie version of the Demon Slayer: Infinite Train premiered in 2020 earned billions of yen in ticket sales.
Meanwhile, games sales fell short of analysts’ expectations in the second quarter because of reduced demand due to the pandemic as well as profits from software and add-on content.
In the second quarter of 2021, Sony’s game sales recorded a 2% increase to 616 billion yen, lower than the 45 billion yen forecast. Profit fell 33% to 83 billion yen.
NO MORE SELL PS5
One notable point during last week’s earnings call was that Totoki revealed that the company’s PlayStation 5 product line no longer had to sell at a loss.
Although the PS5 version with the drive is no longer sold at a loss (sale price is lower than production cost). However, the PS5 Digital Edition version for $ 399 is still in a state of loss. And Sony has to make up for this loss with sales of accessories, as well as the PS4. Sony sold 500,000 PS4 consoles in its most recent quarter, bringing lifetime sales to an impressive $116.4 million.
It took Sony years to end its losses with the PS3, but the company stopped selling the PS4 at a loss about six months after its launch in 2013. The PS5 took a bit longer, but the production is clear. This product does not repeat the expensive process of the PS3 although early reports suggest that Sony is having trouble pricing the PS5 due to expensive parts.
Analyst Serkan Toto said: ” In the future, Sony will sell each PS5 after they hit the shelves just a few seconds. So the challenge is not demand, but supply to meet. Covid-19 is also affecting game production, so sales will continue to be driven next year .”
In fact, for many years, Sony has been using the high-handed tactic of Loss leader with the PS5 product.
Game console companies often have to stick to “razor-thin” profit margins to stay competitive, improve market share, and attract new players. When developers see a popular platform, they engage and add to the diversity of that platform’s content. Thus, the selling price is a decisive factor to the expansion of the console.
But in the end, companies like Sony and Microsoft can’t make money selling machines. Because with only 20-30 USD left over, it’s not enough to cover the marketing budget, shipping, discount for retailers… Surely they all suffer a lot because of hardware production.
Hardware is usually only profitable in the second half of its life, when the initial investment cost has been significantly amortized. However, the console companies don’t care at all about that, because they can make up for it with the software they sell later. Each game disc $ 60 (for PS5 and Xbox Series X/S onwards, some AAA games increase the price to $ 70) is the target of profit.
Since its launch in November 2020 until the end of June 2021, Sony has sold a total of 17.9 million PS5 units. The company aims to sell more than 14.8 million units in fiscal year 2021.
Not to mention, Sony is also succeeding in developing the game segment with the introduction and improvement of subscription services, shifting revenue away from hardware and software. During the pandemic, PlayStation Plus subscriptions have stabilized at over 45 million people.
CFO Totoki confirmed that Sony’s user base is steadily increasing, and the game segment is on a long-term momentum.
However, there are still some difficulties ahead. In addition to the shortage of semiconductor chips, Sony is concerned that the returning wave of Covid-19 in a few Southeast Asian countries will adversely affect sales of electronic devices due to travel restrictions.
Source : Genk