Business Blog: Hoover’s Business Insight Zone

After the gruesome loss it reported a quarter ago, Sony must be pleased with the strong profits it just reported. Spider-Man 3, brought out by Sony’s movie studio, racked up huge gains for the company — and good thing, too, since Sony continues to lose loads of money on its hiiiiiiiigh-tech but pricey PlayStation 3 video game console.

Lately Sony has been squeezed by rivals large and small. On the big end, you have Samsung Electronics — which is comparable in size to Sony — whose star has climbed steadily in the past decade-plus, such that Samsung’s products are now considered by many to be on a par with Sony’s in terms of quality and style. Such a thing would have been unthinkable in, say, 1990, when most consumers around the world saw South Korean brands as inherently inferior to Japanese ones. (Turnabout is fair play: a generation before, American consumers thought the same thing about Japanese electronics and cars when comparing them to US-made goods.)

At the small end is Nintendo, which is less than a tenth of Sony’s size, but which has been beating Sony like a drum in the video game market. While the PS3 has lost scads of money for Sony, Nintendo’s Wii continues to rock the Casbah so hard that Nintendo just raised its annual profit projection by 40 percent after the first quarter of the company’s fiscal year.

Maybe one of these days, we’ll look back this and laugh, if huge profits from the PS3 bail out Sony in a quarter when the movie studio bombs.  But for now, Sony is reliant on big hits — whether in movies or digital doodads — to bail out its video game business.  This looks to be the pattern for at least a while to come, since PS3 profitability hardly seems to be lurking around the next corner.  That’s a risky position for Sony to be in.