Sony's games division has reported revenues of ¥268.5 billion (£1.82b) for the quarter ended December 31, 2012, down 15 per cent year-on-year from ¥316.1 billion.
Operating income for the division was hit even harder, taking an 86 per cent hit down from ¥33.8 billion to just ¥4.6 billion (£31.3m) for Q3.
Sony has blamed falling hardware and software sales for the steep drop off.
Sony no longer reports sales of the PS3, instead lumping the console in with the PS2. Combined the two consoles sold 6.8 million units during Q3, down from 7.4 million the year before. Sony continues to forecast full year sales of 16 million units, two million down on the previous fiscal year.
Handheld devices are fairing even worse, with Sony slashing the PSP and PS Vita sales forecast by three million units, even though sales for the quarter are up year on year by 300,000 units to 2.7 million. This is an improvement, but it's also the first Q3 in which the Vita has been available in all major territories.
Sony now forecasts handheld sales to hit seven million units by the end of March, a figure only in May 2012 it forecast would reach 16 million.
Sony says the PS Vita has suffered from "slow penetration", which is a major ongoing concern for the firm. The current strategy to turn around the PS Vita's fortunes is to release more quality games.
Software sales are down across the board. Console software units slipped from 68.7 million to 61.7 million and handheld software units are down from 11.4 million to 8.9 million year-on-year.
Sony Corporation as a whole reported a 6.9 per cent rise in revenues, and a net loss of ¥10.8 billion ($115.1m/£73.5m) – a huge improvement on the ¥159 billion posted in Q3 last year.
The PlayStation 4 is expected to be announced on February 20 at a New York City event.