The Industry of Today: Part 2

From the picture in the previous post, I think it's clear that the industry is not in great condition. Of course, it's just stock prices right? We can define the cost of shares of stock simply: more people are selling their stocks than there are buyers.^[1] But why would traders not want to buy stocks in a company like Sony? Sony has a hand in almost every form of consumer electronic device, so there should be no reason they're doing poorly, right? Unfortunately, that's wrong, so let's have a look at Sony's decline.

Purely from a video game standpoint, Sony was a magnificent player during the 2001-2006 generation of consoles, when their PlayStation 2 (PS2) was in the prime of its life. The console even continued outshining its successor, the PlayStation 3 (PS3), during the holiday season of 2006.^[2] Even as recently as April of 2009, the PS2 was still outselling the PS3, and note that this was after the $100 USD price reduction given to the PS3 in August of 2007.^[3] As any business minded individual can understand, when you pour time and resources into making a superior product only for its predecessor to outdo it in sales figures (even AFTER a price cut), something has gone wrong. Even in 2010, as the sales of the PS3 finally started to pick up, Sony was losing about $18 USD on every PS3 console it sold.^[4]

Sony is an example of a company that has pushed itself almost to the breaking point, and given their liabilities of $135.61 billion USD as of June 2012^[5], compared to their assets totaling in at $166.22 billion USD^[6], it's no wonder that investors have chosen to stay away from Sony on the stock exchange.

Next post, we'll be looking at Nintendo to see how their overall performance has been in this clearly tumultuous industry.





References:
[1] Joseph Nicholson: What Happens When a Company's Share Price Drops Sharply? (Accessed November 2, 2012)
[2] Chris Baker, March 7, 2012: What's the Hottest Video-Game Console of Them All?
[3] Carlos Bergfeld, July 8, 2007: PS3 Price Cut Confirmed, New $599 SKU Announced (Updated)
[4] Don Reisinger, February 5, 2010: Sony still losing on every PlayStation 3 it sells
[5] YCharts.com: Sony Liabilities Chart (accessed November 2, 2012)
[6] YCharts.com: Sony Assets Chart (accessed November 2, 2012)