No, the Xbox One did not cause Sony’s stock to surge, stop it

No, the Xbox One did not cause Sony’s stock to surge, stop it

The narrative makes for easy headlines and wonderful clickbait: when the Xbox One was announced, Sony's stock soared! When traders took one look at the Xbox One, they rushed to buy shares of Sony, causing the price to go up, up, UP! This has been written about all over the Internet, and I'm still getting e-mails from people claiming that Microsoft bungled their announcement, and pointing to the stock movement as some sort of proof.

That's arguable, but it's safe to say the Xbox One didn't lead to a surge in the price of Sony stock.

It's hard to fully understand why stock moves up or down, but we can usually get a good idea for what happened with a bit of digging. Or, you know, leaving aside the gaming blogs and looking at financial coverage for that day.

This is what CNBC had to say about the stock movement:

Shares of Sony moved sharply higher Tuesday on heavy volume as reports circulated that the electronics giant is considering a proposal from billionaire investor and major shareholder Dan Loeb.

Japan's Nikkei reports that Sony will have third-party financial advisors estimate how much its value would increase from Loeb's proposal to spin off its movie and music business. Loeb has disclosed about a 6 percent stake in Sony.


Another story from Bloomberg echoed that assessment.

Sony has jumped 22 percent since Third Point LLC’s Loeb told Hirai that partially spinning off the entertainment assets would bring a higher valuation and raise cash for the company, whose movie studio topped the U.S. box office last year. Film and financial services earnings have helped the Tokyo-based company counter nine straight annual losses from making TVs.


There was much bigger news for Sony on that Tuesday, and it had little to nothing to do with the Xbox.

But doesn't Sony make a ton of money from games and consumer electronics? If the Xbox One is perceived as weak, doesn't it follow that Sony will make a ton of money from a newly resurgent games division?

The reality is that Sony makes the majority of its money from financial services. You can check out this chart to see the strength of electronics versus the financial division. This information is from 2011, but the broad strokes remain useful to consider.

“...Sony makes far more money today out of selling life insurance than it does out of making electronics,” the BBC reported in April of this year.

If you're looking for things that would lead to big swings in the stock price, it's important to look in areas that don't include the video game division, and it's a stretch to think that Sony would benefit so immediately and so strongly from the announcement of a competing product.