The Console War May End Sooner Than Expected

In what may be the biggest open secret right now, there may not be the competition we expect for the next console generation. As we await the coming of the last two members of the next gen, investors of Sony and Microsoft are demanding some big changes.

Before we begin, most of this has nothing to do with the videogame market itself. The entire world is going through a series of heavy hitting recessions lately. In fact, another one could be hitting us soon. With this in mind, some very large companies are having to make tough choices on what to keep, and what to let go. This can mean whole sections of the company being sent away, or sold to another.

With this in mind, we turn to the world of videogames, and how the console companies are faring.

Sony as it turns out, has never made money off of their videogame branch. Right now, the movie, music, and life insurance part of the company are keeping everything afloat. In a New York Times article, it is revealed that many investors are demanding that Sony drop its hardware business entirely. The article says:

Its financial arm accounts for 63 percent of Sony’s total operating profit last year. Life insurance has been its biggest moneymaker over the last decade, earning the company 933 billion yen ($9.07 billion) in operating profit in the 10 years that ended in March.

Sony’s film and music divisions, which produced hits like the Spider-Man movies and “Zero Dark Thirty” and recorded musicians like the cellist Yo-Yo Ma and the electronic music duo Daft Punk, have contributed $7 billion to the company’s bottom line over the last decade.

In that time, Sony’s electronics division has lost a cumulative $8.5 billion.

Hardly Sony’s crown jewels, experts say.

In other words, all of those great games you are playing, and all of the arguments we are having about how Sony knows what it is doing, meets a point of rejection when we see its profits. This is not an easy thing to say, but it really looks like Sony is in trouble.

Now lets turn to Microsoft, the company has been dealing with “Activist Investors”. They don’t just sit, and wait for the company to come around. They demand control of the company, and how it works. The investment company ValueAct is demanding that they have a permanent member of the board of directors placed, that Steve Ballmer retire, and that the XBox division be sold. By the looks of it from this article from Puget Sound Business Journal, two of those three things are happening; ValueAct will be a member of the board, and Steve Ballmer is retiring. In other words, it looks like Microsoft will be selling the XBox division soon.

“Xbox is cool,” Sherlund [a business analyst] wrote, “but by our estimates Microsoft has not made money at this.”

In other words, the big titans about to clash, may not even show up. If they do show up, it may be one small hug, and then they both disappear.

Before you start to think doom and gloom, remember that this is pretty common to hear. Nintendo has had to deal with it for years. They were said to be behind the times when their system was outselling everyone. As this Kotaku article shows, Nintendo has dealt with doom, and gloom for a while now. As the article says:

People keep expecting Nintendo to get out of hardware and to just make games. Nintendo keeps ignoring these experts and, at worst, hangs in there—at best, thrives.

So, keep all of this doom and gloom in mind, but remember that it may all be nothing at all. What do you think though? Do you see the companies leaving the videogame market? Tell us in the comments.