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Sony Fined in Australia for Denying Faulty PS Games Refund

·4 min read

Sony Corporation SNE was recently brought to book by an Australian court for failing to honor the consumer law by denying refunds for faulty PlayStation (“PS”) games. The court fined Sony Interactive Entertainment Network Europe, the wholly-owned subsidiary that oversees its Australian operations, a sum of AU$3.5 million ($2.4 million) as the company’s digital games policy breached consumer trust with ‘false and misleading information’.

The year-long legal battle was enforced by the Australian Competition and Consumer Commission (“ACCC”) when Sony refused to compensate users for faulty PS games purchased online, arguing that the 14-day window after the purchase had expired. The consumer rights watchdog contended that the company could not shrug off its responsibility toward consumer guarantee rights after the expiry of an arbitrary period under the Australian Consumer Law and that they are entitled to get repair, replacement or refund of faulty products. The ACCC also pointed out that Sony was being unfair to consumers as corroborated by the court when it rapped the global video game firm for offering only store credits rather than cash to refund another customer.

Although the company has denied to comment on the developments, it is likely to unruffle the feathers before the official launch of PS5 in the near future. Notably, Sony was scheduled to launch the latest gaming console on Jun 4 but decided to delay the event till the holiday season as a mark of solidarity for the social unrest triggered by the death of George Floyd.

Sony is aiming to gradually replace PS4 with PS5. Since its retail debut on Nov 15, 2013, PS4 has been a key revenue driver with sales recently topping 106 million units, making it the second best-selling home console in the history of video games. In addition, more than 1.15 billion games were reportedly sold for PS4, generating additional revenues for the company.

However, with the PS5 launch on the horizon, PS4 sales have been on the wane as players seem more eager to wait for the new product. Sony had earlier disclosed the product features of the upcoming model with various market teasers, revealing its several hardware enhancements. These include a faster hard drive that will significantly reduce or eliminate load times, a 4K Blu-ray drive and a more adaptive controller. The company is also reportedly splurging on the cooling system to ensure that heat dissipation from powerful chips inside the console does not cause any issue for gamers.

Moving forward, Sony has undertaken a series of concerted efforts to attain a leaner organizational structure to augment growth. The company announced a number of changes in its internal administration and reshuffled its operating segments. Sony believes that converting its business units into distinct subsidiaries will enhance its organizational independence as each independent unit sets high targets in an effort to accomplish its mid-term targets. Sony believes that these steps will allow it to generate sustainable profit, accelerate decision-making processes and reinforce business competitiveness, which augur well for future growth.

The company has also undertaken a number of measures in its Branded Product Business, which include Mobile Communications, Imaging Product & Solutions, and Home Entertainment & Sound segments, to ensure stronger growth. A number of measures, including cost-reduction initiatives, lower exposure in low-profit geographic regions and reduction in advertising & promotion expenses, are expected to benefit this business in the long run. Sony plans to concentrate mainly on the premium segment of the branded products market to maximize its growth potential to better compete with rivals like Microsoft Corporation’s MSFT Xbox, Amazon.com, Inc. AMZN and Alphabet’s GOOGL gaming platform, Stadia.

Sony currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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