Sony Turns to Google ‘Heresy’ to Revive Games Profit

Sony Corp. (6758) plans to begin offering game titles playable on smartphones and tablet computers equipped with Google Inc. (GOOG)’s Android operating system, reaching out beyond its PlayStation machines to challenge Nintendo Co. (7974)

The PlayStation Store will allow users of Android-powered handheld devices to download and play titles made by Sony and third-party developers as early as this year, the Tokyo-based company said in a statement yesterday. The games will also work on Sony’s new PlayStation Portable handheld, it said.

The move builds on Sony’s partnership with Google in Internet-enabled TVs and differs from practices at Nintendo and Microsoft Corp., which develop titles exclusively for their own platforms. More than 16 years after entering the game industry, Sony is responding to the popularity of products such as Apple Inc. (AAPL)’s iPhone and iPad among casual gamers, said Jack Tretton, head of the Japanese company’s U.S. operations.

“This is an acknowledgment that the games business has changed over the past few years,” said Jay Defibaugh, an analyst at MF Global FXA Securities in Tokyo. “It’s an interesting contrast with Nintendo, which will never provide content outside of its hardware platform.”

Sony aims to turn the game business profitable in the year ending in March for the first time in five years. The company’s Networked Products & Services group, which comprises PlayStation games, Vaio computers and Walkman media players, was Sony’s biggest money-losing division last fiscal year.

‘Heresy’

Sony climbed 0.2 percent to 2,921 yen as of 10:17 a.m. on the Tokyo Stock Exchange. Nintendo, which reported a 74 percent drop in nine-month earnings yesterday, fell 1 percent to 22,320 yen in Osaka.

Nintendo President Satoru Iwata has dismissed selling the company’s software separately from its consoles and handhelds, referring to the idea as “heresy.”

“You won’t see it, not as long as I am the president,” Iwata said in an interview on Jan. 9.

Jennie Johnson, a Google spokeswoman in Tokyo, declined to comment.

Console makers typically post losses on the machines initially, forcing them to rely on software to boost earnings.

Sony, the world’s second-largest maker of portable game players after Nintendo, said yesterday it will offer the new model of the PSP by the year-end holiday season. The device will offer access to third-generation wireless networks and have front and rear touch pads, it said.

Casual Gamers

“This is an opportunity to go to where casual gamers are emerging, introduce them to the PlayStation brand and maybe migrate them back to a more sophisticated device down the road,” Tretton said in an interview in Tokyo yesterday. The company will reveal more details about the portable player in June at the annual E3 game conference in Los Angeles, he said.

Introduced in late 2004, Sony’s PSP has failed to match the popularity of Nintendo’s DS touch-screen player. Sony had sold 64 million PSPs worldwide as of Sept. 30, while Nintendo has sold 135.6 million DS players, according to the two companies.

The new Sony handheld will face competition from Nintendo’s successor to the DS, which will allow users to see 3-D images without the need for special glasses. The 3DS will be sold in the U.S. from March 27 at $250, while sales in Europe are scheduled to begin March 25, Nintendo said earlier this month. Japanese sales begin Feb. 26.

Nintendo’s net income tumbled to 49.6 billion yen ($600 million) in the nine months ended Dec. 31. The Kyoto-based company cut sales forecasts for the motion-sensing Wii by 8.6 percent and the handheld DS player by 4.3 percent.

‘Rocket Start’

Nintendo reiterated a September plan to ship 4 million 3DS units in the first month to prevent shortages. Iwata earlier this month predicted a “rocket start” to U.S. sales of the player, boosted by the device’s high-definition graphics and titles that showcase its features.

“With the new player, we are trying to create an ultimate entertainment system where a user can really get buried in games,” Kazuo Hirai, president of Sony’s Networked Products & Services Group, told reporters in Tokyo yesterday. “We also recognize that casual games being played on portable devices have grown in popularity and want our PlayStation business to make an entry into that market.”

The Android service, called “PlayStation Suite,” will let users download games made by smaller developers as well as order titles from the company’s first-generation PlayStation console, Sony said. The company’s titles will face pricing pressure from cheaper games available on Android’s marketplace, said Amir Anvarzadeh, part of BGC Partners Inc.’s Asian equity sales team in London.

“As history has shown time and time again, prices tend to correct to the lowest common denominator,” Anvarzadeh said by e-mail yesterday. “This leaves Nintendo, which still plans to sell its games through cartridges at prices well above $20, with its head firmly in the sand.”

To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Mariko Yasu in Tokyo at myasu@bloomberg.net; Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.