Winning the format war has not yielded Sony the rewards they had hoped, as the company cut profit forecasts on slower than expected demand for Blu-ray media.
The Japanese electronic giant announced that it was taking a $USD 245m writedown on the value of its disc manufacturing business. The writedown is based on estimates made by the company on reduced future profitability of disc manufacturing based on declining demand for physical media.
While Blu-ray movie sales in the US is continue to grow, the growth rate appears to be slowing down, largely due to the increasing demand for digital-only content. At the same time, DVD sales are declining by double digit percentage points annually. Sony also says that the disc slowdown trend is particularly notable in Europe.
"Demand for physical media contracting faster than anticipated, mainly in the European Union. The future profitability of the disc manufacturing business has been revised. Consequently, Sony has determined that it does not expect to generate sufficient cash flow in the future to recover the carrying amount of long-lived assets," noted the company.
Sony won the infamous HD format wars by investing heavily in promotion of the Blu-ray format, opting to use the format for its PS3 game console. The decision led to a delay in the release of the console and the subsequent loss of market share, compared to its predecessor, the PS2. Both of the top two current generation game consoles support Blu-ray discs, for gaming and movies, but both also have extensive support for digital-only download and streaming games.