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EpicRandy on 31 May 2024
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PotentHerbs said:

That's why all the discourse about profit margins, the shrinking console market, Microsoft's multiplatform pivot and Sony Too, was a bit too hyperbolic for my liking.

Don't get me wrong, issues such as longer development time and massive budgets are definitely worrying, but the PlayStation platform is stronger and more sustainable than its ever been, and that includes the PS2 generation. I think many are overlooking the fact that Sony's first party IP's are still growing on the PS5 despite higher prices and less discounts. GoWR, SpiderMan 2, Helldivers 2, and GT7 are all primed to hit close to 1B+ in revenue, with their first party portfolio accounting for nearly 20% of overall software sales on the platform, with their legacy IP leading the way for engagement in terms of PS+ Premium subscribers, which has around 8M - 9M users.

It depends on who you talk to but I don't view those discussions as hyperbolic. The issue is definitively there but it's not about the industry not being sustainable or profitable, it's specifically about profit margins.

The cost of doing business in this space has risen so much while the consumer pool has stagnated and despite the rise in game price profit margins are very low. Sony is strong but it has been stronger with the PS4 for sure and way more sustainable with it than it is with the PS5.

This slide from the presentation explains it better : 

Profit margins for 2022 and 2023 have been < 7%

This is an issue, it is literally what led Sony and the industry to cut expenses and let go of so many workers. 

Also going forward you can see see what Sony intends to do:

• Continued expansion of the installed base
(this would be hard to achieve as PS5 is tracking under PS4 so it is probably intended to be achieve through expansion on PC)

• Drive consistent revenue from Content, Services and Peripherals
(This makes me think the focus is much more on increasing monetization of content than increasing the amount of content, this can be seen through large investments in GAAS)

• Thoughtful investments in key innovation areas Studio Business Group
(Thoughtfull is the keyword here, security will be played bold/risky move will be avoided, no more studios acquisition for sure during the next 2 years)

• Strong release slate and ongoing execution of live service roadmap

• Expansion of franchise reach
(this screams PC release for sure)

• Continued financial discipline
(Expect more layoffs and/or closure. One thing is certain keeping the status quo in the way business is done in the console space is not an option. This is where the hyperbolic discussion comes in, but it is greatly subjective. I don't view discussions saying the industry needs to change/adapt to the current context as hyperbolic. It just is what it is an actors are adapting to it.)

• Early returns from past acquisitions and investments Profitability
(For the same reasons as they are avoiding bold/risky move, they stressing their recent bold/risky move to prove themselves quick)

• Agile and streamlined cost structure

• Further investments in efficiency

Last edited by EpicRandy - on 31 May 2024