By using this site, you agree to our Privacy Policy and our Terms of Use. Close
PotentHerbs on 01 June 2024
Edit Thread
EpicRandy said:

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

There's no way Sony is stronger in the PS4 generation compared to the PS5. For one, they are able to sell their hardware, software, and subscription services at higher prices. The latter especially ensures the PS5 to be more sustainable than the PS4. Not to mention, Sony has already projected that the PS5 will be their most profitable console, so the temporary decrease in their profit margins doesn't seem to be a major worry over at Sony.

As for the points you cited, it can be interpreted in more ways than one: 

- Continued expansion of the installed base: 
Increase the userbase of the PlayStation 5. Not sure how this would relate to PC as I don't see why Sony would classify their software sales as an install base. They also didn't mention a hypothetical PC launcher in the mid term that would fit this description. 

- Drive consistent revenue from Content, Services, Peripherals:
While live service is going to be a major factor, I wouldn't underestimate how much more profitable PlayStation Plus can be as a supplementary service, as well as many of their peripherals that dominate the charts. 

- Thoughtful investments in key innovation areas: 
I'm not sure how you came to the conclusion that there would be no studio acquisitions for sure. Buying smaller developers/support studios is not a major risk. I feel like this is related more to something like Audeze or Gaikai, specialized acquisitions that can help out a subset of SIE.

- Expansion of franchise reach: 
Could also mean more PlayStation Production films, toys, merchandise, or even theme parks that Sony has recently mentioned. 

- Continued financial discipline: 
I don't take this as changing the console business model significantly. If Sony was going to change the status quo, they wouldn't have reiterated their stance on their single player exclusives, once again. It could mean more surefire projects, safer acquisitions, less hiring, etc.