Sony's TV Losses Continue to Dim Its PlayStation Video Game Star

NEW YORK (TheStreet) -- Sony (SNE) enters the E3 show in Los Angeles on a winning streak.

Thanks in part to the success of its PS4 and in part to the failure of Nintendo's Wii U, Sony has retaken the lead in video console sales from Microsoft (MSFT). At today's press event it is expected to roll out new titles and discuss its PlayStation Now streaming service.

Sony should also be favored to win the fast-growing China market, which is now opening up, given Japan's proximity to China.

CEO Kazuo Hirai, who ran the video game unit before becoming CEO of the parent company, is also expected to discuss Project Morpheus, a 3-D headset announced in March that will compete with Facebook's (FB) Oculus Rift.

But Sony's stock continues to be a loser, down about 17% over the last year. Shares were changing hands Monday morning at $16.32, up 22 cents from Friday's close.

The long-term decline is because the company as a whole continues to lose money, $1.28 billion for the year ending in March. I've called it a slow-motion train wreck. 

Hirai now says he is making hard decisions.

Before Hirai became CEO, entertainment executive Howard Stringer was the CEO, and movie budgets were kept in check, while the unit continued to grow.

Now budgets are ballooning -- The Amazing Spider-Man 2 cost $225 million -- but moviegoers may be tiring of superheroes and the return on that investment is lower.

As a result, Hirai is cutting budgets and has appointed Sony's former general counsel Nicole Seligman to the newly cr

The studio has been cutting headcount since last year, and it's shifting its emphasis to TV content.

Sony Entertainment is also linking new movie titles to video games and toys as never before. One of its big titles for 2015 is a movie based on the Barbie doll.

A second title, Pixels, has a plot that links video gaming to an alien invasion. 

Hirai's frankness in dealing with the reality of his problem doesn't change the problem.

The problem is with Sony's TV manufacturing business. TVs don't break any more. The primary point of failure in a TV was the picture tube. Replacing picture tubes with flat-panel technology eliminates this. TVs can last a decade or more -- the replacement cycle is dead. Sony's TV division has lost nearly $8 billion over the last decade, Business Week estimates. 

Hirai is promising that cost cuts can bring the TV business to profitability this year. He made the same promise last year, but it didn't happen.

The continued failure of Sony's TV business has cut its entertainment budgets and hurt its reputation in other hardware areas, such as phones.

Until Hirai admits the company's failure in TVs, it's hard for me to see the company turning around its overall results.

At the time of publication the author owned no shares in companies mentioned in this article.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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