Microsoft and Sony are entering their critical season in the console battle. They face big economic headwinds. Nintendo is almost certain to come out fine, based on current demand for its Wii and DS consoles. The company promises a healthy supply of both.
But the battle for No. 2 is underway. Sony and Microsoft have (for the most part) higher priced hardware and games, so they will have a tougher job proving the notion that games are recession resistant and that their products are a good value proposition.
Odds favor Microsoft, which continues to outsell the Sony PlayStation 3. To a large degree, it depends on how well the big games of the season are received. Sony is counting on (slightly delayed) “LittleBigPlanet,” while Microsoft has a lot invested in “Gears of War 2.” Microsoft also has a lot riding on the Nov. 19 release of its revamped Xbox Live service, while it’s still not clear when Sony’s “Home” online world for PS 3 gamers will launch.
Microsoft said today that it sold 2.2 million consoles in the first fiscal quarter ending Sept. 30 — up 20 percent from a year ago. Revenues for the period (in the Entertainment & Devices division, which includes games) were $1.81 billion, down from $1.93 billion a year earlier. Profits were $178 million, up 7 percent from $167 million a year earlier. Revenues were under pressure from a year ago because “Halo 3” launched during the quarter last year and saw extraordinary sales. This year, Microsoft didn’t have an equivalent blockbuster. Revenues were also lower because of hardware price cuts that ranged from $50 to $79. Microsoft’s cheapest machine is $199, and its most expensive is $399.
Microsoft’s Xbox Live membership of paid and unpaid subscribers now stands at 14 million. That’s a pretty big accomplishment, making it a good contributor to profits. It’s interesting that Microsoft now has the business operating on a consistently profitable basis.
Sony’s sales in the game division rose 17 percent to $2.2 billion. That total is bigger than Microsoft’s, since Sony has a healthy portable games business with the PlayStation Portable, and it still does a decent business with the PS 2. PS 2 hardware and software sales are declining, but the division eked out a profit of $51 million for the quarter, compared to a big loss a year ago.
Sony sold 1.56 million PS 3s in the quarter, up from 700,000 a year earlier. It sold 3.72 million PSPs, up from 2.13 million a year earlier. And it sold 1.51 million PS 2s, down from 2.66 million a year earlier. Software sales overall were down because of the decline in PS 2 sales.
Sony expected the game division and TVs to report profits this year, but the company said that this isn’t likely to happen because of the economic turmoil. However, it raised its outlook for the hand-held PlayStation Portable videogame machine by 1 million to 16 million, saying hardware was selling well.