I have been reading for weeks now how the Yen is absolutely killing Sony. Why is this? I thought the Dollars was doing poorly. I know that our economy affects japans but still? Whats the deal?

Before $100 could get you 150 yen. Now, with the dollar getting weaker and yen getting stronger, $100 gets you 100 yen. Since Sony, Nintendo, and other Japanese companies deal in yen, the amount of money they make has decreased.

Note: All money values above are made up.

As a Sony specific example, they sell a PS3 at $400 US, which would previously have made them 60000 yen. Now it makes them 40000 yen (well, that's revenue, not profit, and it ignores that the distributors get a slice, but it still shows how a strong yen hurts Japanese export companies)

What izaaz and scottie said.

Except now the Yen is also rising against the Euro and the GBP too.
The dollar is still weak against the Euro, so MS can afford to price the 360 cheaply in euros.

The Yen doesn't seem to be killing Nintendo.

Strange...

It's easier to think about it in terms of the dollar/euro being weak. Sony is paid in dollars, euros, British Pounds, Australian dollars etc.

All those currencies are lower against the Yen than they used to be, so Sony (and Nintendo) is getting less money for the things they sell. Everything from games to accessories and hardware.

The reason why Sony suffers more than Nintendo is that Sony's profit margins are very low (1-5%), so this Yen issue alone is enough to get them into net losses (the currency drop is bigger than profit margins). Nintendo has 20-30% profit margins so they're much more robust.

PS: The weak dollar/euro also has some benefits for Sony such as lowering their expenses on American/European salaries. This, however, doesn't lower their expenses in Japan (or China where the Yuan is also higher lately) where a lot of their high-paid employees and real estate are. In other words, their revenue decreases faster than their expenses.

It does hurt their figures though. But instead of amazing they'll be very good. That's why no-one really pays attention to it.

Ah, the benefits of not living on razor-thin profit margins...

I wouldnt feel too sorry for them, if their payments are not denominated in Yen then that means that they have been making a fortune on the carry trade over the last few years.

What they should have done is put a option in their contracts to swap the denomination, but they, like everyone else thought that things would last forever.