Sony on Negative Credit Watch – And why it’s not a Sega.

Sony aren’t having a good time of it.

A couple days ago, Sony – after posting four consecutive annual losses in a row – were downgraded on the credit market, meaning to borrow money from the bank like any business would do at varying points would cost them more, so rather than paying back 5% interest, it may rise to 10 or 15 %, to offset the risks.

That said, we must remember it isn’t just Sony suffering – Microsoft does seem an unusual target, but Microsoft have been very coy in the past that the X-Box division may never turn an overall profit – the losses sustained on the initial console launch, coupled with the operational loss made by the Live service and the awkward expenditure that came with the Red Ring Saga have mounted up to the point where the machine may never even break even.

Nintendo too, as we know, have posted their first quarterly losses. The 3DS was expected to perform above what it is now, which says something for unrealistic expectations. And a lot of their financial hopes are pinned, quite rightly, on many of their games – Zelda: Skyward Sword (mini-review over the weekend, along with Skyrim!), Mario Kart 7 and Kid Icarus, and of course they hope to buoy their shareholders in the new year with good news and final specs on the Wii U, the brand new HD console.

The differences of course are simple – Microsoft are a massive corporation that make larger profits in other divisions than the losses sustained in the X-Box division, and therefore as a whole the X-Box Division is a nice little sideline to sink some money into now and then. Nintendo, on the other hand, are sitting on reserves estimated in the billions of dollars, from years of success on the DS and its many variants and the Wii (the Wii alone is estimated to have exceeded making a billion dollars in profit).

Sony, on the other hand, are posting overall losses for the entire business. The expense of the Playstation division may have a part in that, but it isn’t the whole story.

Equally annoying is this idea that companies may eventually “do a Sega”, and be forced to withdraw from the hardware race.

There is this assumption that Sega messed up with the Dreamcast. This couldn’t be further from the truth, the Dreamcast was their saviour – just not their miracle worker.

Sega had been making poor decisions for a decade before they ended up designing the Dreamcast. The multiple design choices for the Mega Drive, the flawed controllers, the Sega CD and 32X which cost an arm and a leg to research and develop, and yet sold really badly, forcing Sega to spend more on the Sega Saturn. To cut costs here, the Game Gear – the only real competition Nintendo ever had in the handheld space – was ditched. The Sega Saturn was great, but if legend is to be believed, Sega abandoned financing a project forcing it to go multi-platform. This title ended up as Tomb Raider, they say. Whether or not it is true, Sega are known to have had the opportunity to gain exclusivity on Tomb Raider. We all know the rest.

And it got worse. Sonic, their flagship mascot, wasn’t around for the Sega Saturn, and the arcade ports were not cheap to do either. The Sega Saturn was notoriously hard to develop for, extremely clunky internally, and – towards the end of its life – Sega started to turn away very good projects for the machine. When they abandoned the Saturn, before the generational gap was over, they severed ties with dozens of talented studios the world over.

By the point, Sega were also suffering losses in their Arcade division – meaning that overall the company was suffering losses. The answer lay in the Dreamcast, a little dainty white box with their VMU, a sort of memory card come mobile LCD gaming device. Everything we expect now in consoles – from the firmware, to online capabilities and the design – originated from this machine.

The Dreamcast was not, as many say, a failure. The problem was, by the time the Dreamcast hit the market, Sega were in financial dire straits anyway. The Dreamcast was their last shot at glory – and what a shot! Built in modem. Gorgeous design. Great games. Fantastic stability. Reliable. Beautiful in nearly every way. Even using Windows firmware.

But it wasn’t enough. The Dreamcast simply couldn’t sell in the volumes Sega needed – it needed to predict in excess of 100 million units in three years. Not even the PS2 managed that, it took nearly six years.

It was blind hope, a wing and a prayer, and then it was all over. Sega were bankrupt.

Sony have made some poor choices – the PS3 and the much-maligned Cell processor, the PSP and the UMD and of course, the Vita – which is being sold at a loss in a vain and desperate hope to achieve the kind of market penetration that Nintendo usually enjoy.

But none of this really means Sony will “do a Sega”. To do a Sega, you would need to have made a decades worth of bad choices – from dumping valid hardware early, to neglecting your employees and chasing away studios willing to make games and ignoring core franchises for the sake of it. To do a Sega, you’d need to have made some of the worst choices possible.

Sony aren’t there yet. Nintendo have never been close to it – they make more realistic choices. And Microsoft have the financial clout to keep the X-Box Division running indefinitely.

But it is sad, and I often think about this idea of “doing a Sega”. Because, after all those years of bad ideas, choices and designs, quite by some stroke of luck they made the Dreamcast – a gorgeous, simply amazing little piece of equipment.

If anyone does a Sega in the future, I look forward to it… because if we get another flash of brilliance like the Dreamcast, doomed or not, I will be an extremely happy gamer.

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3 Responses to “Sony on Negative Credit Watch – And why it’s not a Sega.”

  1. Donald Carel says:

    Just wanna remark on few general things, The website design and style is perfect, the subject matter is real wonderful : D.

  2. dr dre says:

    An impressive share, I just given this onto a colleague who was doing a little analysis on this. And he in fact bought me breakfast because I found it for him.. smile. So let me reword that: Thnx for the treat! But yeah Thnkx for spending the time to discuss this, I feel strongly about it and love reading more on this topic. If possible, as you become expertise, would you mind updating your blog with more details? It is highly helpful for me. Big thumb up for this blog post!

    • Kami says:

      When more information comes through, I will certainly do more on the subject. I feel strongly about the Dreamcast myself – I still think it was a fantastic piece of kit, and although it was never going to save Sega from their excessive deficit, to see many claim it as a failure hurts. It wasn't – not in that regard, in any case. Sega failed it, but it was a long-term thing. There was no singular cause for their losses – it was a decade or more of careless, often silly mistakes that slowly saw them weakened.

      As for Sony, with the end of the fiscal year looming in close, no doubt that will also be back in the news and people will run around screaming as if their pants were on fire proclaiming the end of all things. E3 also may see hints and prototype demos for a next-gen, which will be interesting to see.

      But hope the breakfast was good! That put a big smile on my face, which is much appreciated. Always good to see a comment in my list that isn't a spambot pushing something totally unrelated to what I write about! I really need to somehow fix that problem…

      Take care, peace and cupcakes,
      Kami

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