Whoever said that video games are a money-making, recession-proof machine obviously doesnt work for Sony, Electronic Arts, NCSoft or Vivendi. With Q4 2007 coming to a close for several companies and earnings reports streaming in, all four publishers posted net losses, with many of them coming despite increased revenues compared to the previous year.
The Guardian reported that the PS3 continues to be a money-losing preposition for Sony, with possible losses of up to $260 for every PS3 sold. Despite this, Kotaku reports that PlayStation group sales increased 26 percent, with losses declining from $232 million to $124 million on the year. The PS2 continues to handily outsell its younger brother, moving 13.73 million units compared to the PS3s 9.24 million, while the PSP beat them both with 13.89 million units sold. However, with overall interest in the PS3 increasing, the forecast for 2008 shows the PS3 finally edging ahead of Sonys old warhorse and the gaming division moving back into the black by this time next year. According to the latest NPDs, the PS3 has indeed outsold the PS2, with 187,100 units for the next-gen system.
Sony wasnt the only company to post a net loss despite an increase in overall revenues. According to GameIndustry.biz, EA posted a $454 million loss on the year compared to a $76 million profit the previous year, a result that could perhaps be owed to its $620 million purchase of Pandemic and Bioware in October 2007. EA CEO John Riccitiello said he was pleased with the revenue growth, but that it still wasnt good enough.
"A year ago, we committed to an aggressive change agenda at EA," he said. "Our employees stepped up to the challenge and we finished fiscal year 2008 with non-GAAP revenue up 30 per cent to USD 4 billion - a record for any third-party publisher. Our operating margins were flat to our prior year."
Meanwhile, Gamasutra writes that NCsoft blamed its first quarter losses on its decision to drop Spacetimes PC MMO Blackstar from its lineup, saying that profits would have increased 8 percent to $14.5 million without the write-off. Instead, the South Korean companys profits declined 43 percent to $7.7 million despite a four percent increase in sales. The Lineage games continue to be NCsofts bread-and-butter franchise in Asia, with Lineage 2 making a combined 78 percent and $61.9 million of the companys sales.
Finally, Joystiq reveals that Vivendi Games showed a 24 percent decline in sales, reportedly blamed on the lack of a World of Warcraft expansion to stimulate sales. But while sales are down overall, the money continues to pour in from the popular MMO, with Blizzard contributing $295 million to Vivendis bottom-line this quarter. According to Vivendis quarterly earnings report, Wrath of the Lich King is due in the second half of 2008, so that particular hiccup in in sales isnt likely to last much longer, especially with Vivendi merging with Activision to form the mega-publisher Activision Blizzard.
Despite the losses, all four companies expect to improve in fiscal 2008, meaning that 2007 was most likely just a glitch in the system. Expect more reports crowing over profits soon.