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Mixed fortunes for game developers

Posted by: Ian Rowley on November 30, 2006

Yesterday, my colleague Kenji Hall wrote a story about Sony’s decision to relieve Ken Kutaragi of day-to-day ovesight of Sony Computer Entertainment. Paying for the PlayStation3’s jittery launch, daily management of the unit will now be undertaken by Kaz Hirai, his deputy in the U.S., with Kutaragi assuming a chairman role.

Kutaragi isn’t the only one paying for the PS3’s troublesome beginnings. Game developers are also suffering. According to a report in today’s Nihon Keizai, a Japanese business daily, PS3 problems are offsetting the benefits of next-generation consoles, sch as the PS3, Nintendo’s Wii and Microsoft’s Xbox360 which launched a year ago. On the one hand, some Japanese game companies are expecting higher profits in the year ending March 2007. Square Enix, for example, expects operating profits to rise 23% to $164 million. Sega Sammy, meanwhile, also expects a big rise in profits in its video game division.

Others, though, aren’t so lucky. A decision by Sony to delay the PS3 launch in Europe to March, for example, forced Koei Co. to halve its sales target for PS3 games to 640,000 units. Unsurprisingly, that’s hurting the company’s earnings outlook and stock price, which is yet to recover since Sony announced the European delay in early September. Namco Bandai has also cut estimates.

Rank and file game development staffers also have reason to bleat. Last week, I caught up with a friend who works at another Japanese game developer in London. She fumed that the PS3 delay meant she wouldn’t be getting a bonus this year. Her pay, she said, is linked to the company’s performance during the financial year ending March—just after Sony’s revised European launch date. Like many gamers, she’s hoping the PS3 will,eventually, be worth the wait.

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