Dharma Bum

In one of my earlier entries, I mentioned that the video game industry was approaching twenty billion dollars a year, and it is growing. For comparison, the pornography industry is a 42 billion dollar a year field, and everybody loves porn. So what’s holding things back? Let’s look at some exciting company profits for the third quarter 2007!

Microsoft made $165 million dollars in the past three months. A meager profit, but they’ve been held down by hardware failures until now, and had the common decency to extend their warranty. It would have been better if they had working machines to begin with, but good for them for profiting.

I don’t know what Nintendo’s profits are for this past quarter, but here’s some good news. They’re going to make nearly four billion dollars this year. Add in all the software they and Microsoft have been moving, and you can tell that this is going to be a big year for everybody in the business, which means they can continue supplying what is being demanded, and the consumers win.

Except, wait. Sony lost nearly $900 million dollars in the last three months. Profits from their other divisions had to make up for all the cash the gaming division is hemorrhaging.

I beat up on Sony a lot. A lot. In the past, I’ve said that their leadership is incompetent, that their architecture is impractical, that their business sense is arrogant, and that their corporate focus was xenophobic. I stand by all of these criticisms. The PS3 is a stuttering failure compared to the PS2, which was a triumph of simple, affordable and elegant design. They try to spin these numbers as a result of the price changes in the PS3, but last month, when they had a sharp decline in sales after their cheapest model was announced, they tried to spin that as a positive – since they sold less consoles below production cost, they claimed, they lost less money, schwoo, thank God. Except that less hardware sales means less software sales, and less software sales means less cash.

Some Sony fans have been quick to point out that the PS3 sales are mirroring the 360’s first year as if that were fine. It isn’t, this is not a good thing. Microsoft and Nintendo’s console sales numbers go up, or at least stay high above Sony’s numbers, every single month according to the NPD group. If Sony is perpetually a year behind Microsoft, how the Hell do they get out of last place short of a temporal anomaly? And how do they make their gaming division profitable if third party developers consistently favor their competitors?

Where Nintendo is set to make nearly four billion dollars this year, Sony is getting ready to lose four billion. That is just not Sparta – it’s the other two things.