Gaming giants start to struggle

03 August 2009

TOKYO: Sony and Nintendo, two of the world's biggest videogame manufacturers, have seen their performance in this area slow, with the recession thought to be impacting consumer behaviour in a previously buoyant sector of the electronics market.

In-game advertising is expected to be a platform that enjoys rapid growth in the future, while previous research has also demonstrated that consumer perceptions of challenger and established brands using this medium tend to differ.

Sony recorded an operating profit of ¥23.3 billion ($245m; €172m; £146m) in Q2 this year, up from a loss of ¥214.7bn in the first quarter of 2009.

The arm of the Japanese company responsible for products like its Vaio laptops and PlayStation games console, however, registered an operating loss of ¥39.7bn in Q2.

Sony argued the major factor behind this negative outcome was "a decrease in overall software unit sales and a decrease in PlayStation Portable hardware sales."

Nintendo posted a profit of ¥42bn in its most recent reporting quarter, but this total was down from ¥107.2bn in the same period in 2008.

Shipments of its innovative Wii console, which has been argued to have revolutionised the gaming industry, fell from 5.42 million to 2.23 million year-on-year.

One key trend said to be impacting this sector is an absence of compelling new releases, while consumers are also seemingly increasingly unwilling to buy less impressive titles.

Hiroshi Kamide, an analyst at KBC Securities, argued that "fundamentally, what's going on is that the gap [between compelling new games and other products] is being exacerbated in this economic environment."

More positively for the electronics market as a whole, Sanyo Electric now predicts it will make an operating loss of just ¥5bn this year, compared with its earlier estimate of ¥20bn.

The company announced that it returned to profitability in June, and has now lifted its annual sales forecast by 5%.

Fujitsu similarly revised its expected operating loss for the half-year to September to ¥35bn, rather than ¥50bn.

"Market conditions for electronic components and car audio and navigation products have improved beyond expectations," the company said.

Sharp has also stated that sales of its LCD panel televisions were improving, further signifying that various segments of the electronics market  are starting to see levels of demand rise.

Data sourced from Financial Times; additional content by WARC staff