Could the global recession kill PS3, Xbox 360 or Wii?
There’s no disputing the fact that we are now in a global recession, with no country immune from the fallout of the credit crunch and the boom and bust cycle hitting a definite bust. But how will this affect gaming? Could the economic slowdown mean the death for one, or even all, of the home consoles? And what about the next generation?
Every time you turn on the TV or open a newspaper, you will see or read a story relating to the economy and how it is struggling at the moment. Whether it be companies going out of business or shedding workers, or governments lending cash to the banks to dig them out of the hole they’ve been responsible for putting us all in.
The rumblings of a recession have been around for months, and back in July, I wrote an article detailing how hardware and software sales in the games industry were seemingly beating the credit crunch. In fact, sales were at an all-time record high. But things have change since then and monthly sales figures are now showing a downturn for the first time.
This week has also seen both Sony and Microsoft issue their latest financial reports. Microsoft is actually doing okay, with the Entertainment and Devices Division seeing sales of $1.8 billion. But Sony isn’t doing quite so well. And as Cinema Blend reports, the 65% operating profits loss could inflict heavily on future plans for the PS3 and beyond.
Nintendo is sitting pretty, building up enough reserves of cash from the incredible sales of the Wii already to ensure its survival through any kind of economic dip. But Sony is clearly struggling, and despite gaining confidence from the latest figures, the Xbox 360 is still only teetering on being profitable.
In the short term, this could mean a few things. Most importantly, Sony is going to have to cut the price of the PS3 in order to compete on a level playing field with the Wii and Xbox 360. Sure, it’ll mean an even bigger profits slide for a while, but it could eventually lead to sales being high enough to warrant the console’s existence.
In the long term, depending on how hard and long this recession is, the faltering economy could affect the development of next-gen consoles. While I think, barring a tragedy, all three manufacturers will play again next time around, the R&D budgets for future consoles could be much smaller, which could see Sony and Microsoft taking a leaf out of Nintendo’s book and releasing a cheap and cheerful console in the future.
Make the most of your current generation consoles because I have a feeling we could currently be experiencing the last generation where gaming is at the cutting edge of technology. If you hate the Wii, then the future may be bleak for you.
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12 Responses to “Could the global recession kill PS3, Xbox 360 or Wii?”
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October 25th, 2008
Anything slowing the adoption of big HD TVs impacts on Blu-ray.
The smaller the HD TV and the lower the resolution (the majority sold so far have been, by far, the 720p/1080i type) then the less benefit Blu-ray can be seen to offer & the closer upscaled DVD & HD TV services looks to it.
Sony were not exactly in the best financial shape before this recession happened.
Microsoft surprised everyone by remaining very strong across the board (most analysts were reported to be surprised by their strong numbers this quarter).
Nintendo just keep selling their products nicely & turning good profits.
October 26th, 2008
“Microsoft is actually doing okay, with the Entertainment and Devices Division seeing sales of $1.8 billion.”
“despite gaining confidence from the latest figures, the Xbox 360 is still only teetering on being profitable.”
Earning 1.8 billion dollars despite the toughest financial market for a long time is teetering on being profitable? What on Earth are you smoking, DAVE PARRACK?
October 26th, 2008
I think that profits were only like $180 million. Sales is how much they sold in XBoxes. But after all was said and done, they had an “operating income” of $180 mil.
Then again, as I read deeper into the article, operating income for Microsoft as a whole was $9 billion, but net profits were $4.4 billion.
So who knows what the actual net profits were for the Entertainment division. Could be $90 million if the ratio is the same as the company overall. Hardware probably has more overhead than the software that the rest of the company produces.
But hey, at least they’re still making money.
October 26th, 2008
what the fuck 1.8 billion is teetering on being profitable
October 26th, 2008
LoL at this no sense wow
October 26th, 2008
The $1.8 billion is SALES, not PROFIT.
Plus, that’s across the whole Entertainment and Devices Division which not only includes the Xbox 360 but also the Zune, Windows Mobile and more.
October 26th, 2008
speaking of windows mobile, I personally can’t wait for the Community games to come out on my windows mobile phone
October 26th, 2008
Ivan “LoL at this no sense wow”
Your comment makes no sense.
You shouldn’t bother posting if no one can make sense your posts.
I don’t think there are in trouble. with the exception of Sony. I think the PS3 is in trouble.
The PSP is probably carrying it.
October 26th, 2008
As for the recession…whatever. Jesus is coming people.
October 26th, 2008
No matter how you divide it up
(and Microsoft are not the only one to split the gaming/entertainment ‘division’)
the simple facts are that Microsoft measures it’s profits in several billions (quarterly!).
The rest measure in millions.
Then there’s the historic context.
Again, over the last 10+ years, Microsoft measures its profits in multiple $ billions (per quarter!).
The rest in millions
(and in a good year a couple of hundred million $ across the whole group if they are lucky).
October 26th, 2008
Dave P, how about listing Sony’s games devision results? Suddenly the MS figures look fantastic. Sony are taking in 2.2 Billion vs MS 1.8 Billion but can only muster 50 million profit vs 178 million, despite the hugely profitable PSP and PS2 boosting those profit figures. That is a meager profit return of 2.5% for Sony’s games devision vs Microsoft’s 10% profit return, despite the RROD costs. Add to that the problems Sony are facing with the value of the YEN and the global sales downturn pushing Sony’s total profits down by nearly 60% and you have a company that will have to do some drastic cost cutting to keep shareholders happy. It will take someone on Sony’s company board with some serious balls to argue for the continuing existence of the PS3 let alone the development of a PS4. Let’s hope Sony stick with it, because the last thing we need is Microsoft without a real competitor to keep them (reasonably) honest and drive progress.
October 26th, 2008
@ Rimmer,
This is Sony.BLORGE, they’re not going to be posting the Sony game division results.
I do agree though, Microsoft minus competition = lazy Microsoft.