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EpicRandy on 03 June 2024
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PotentHerbs said:
EpicRandy said:

By strength, I was speaking of their ROI, those have dropped significantly over the last 2 years, and as PS4 support fades. Yes, they charge more per title and hardware but cost inflation has been brutal. That's why despite record revenue for 2022/2023 their profits are still significantly down.

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If this refers to the doc in the OP they were referring to PS5 by years and mixing in PS4 2020+ profits, if not, please add a source and check if they didn't use the same trick of "PS5 gen". Also, they defined the most profitable in absolute terms instead of a ratio over their investment, but it's the latter that would give them strength to garner investment into PlayStation not the former. And define "major worry" Cause Sony is doing studio closure, and layoffs while also increasing PC support, I can understand those moves if they react to a situation they worry about, if not then that's a mess. 

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But they already have made significant changes, driving the most recent investment towards GAAS, and announcing more support for PC. Not to mention investments in GAAS are not surefire things they are high-risk high-rewards and there will probably be more failure than success there.

I don't see the problem with mixing PS4 profits with the PS5 when COVID was the main reason it did so well. You also have to take into account that Bungie was on the books for the last couple of years. Most importantly, launch aligned, the PS5 is more profitable than the PS4, even if you want to take away FY13/FY14/FY20/FY21. People are spending and engaging more on PS5 compared to PS4. All this talk about declining margins and the PS5's most profitable years are still ahead of it lol. I also wouldn't overlook the tremendous growth of PlayStation's first party or even PlayStation Productions when discussing ROI. 

I define major worry as PS5 sales completely nosediving from this point forward. As I've outlined in another thread, Sony having a prolonged generation will practically ensure the PS5 surpasses the PS4's lifetime sales. Its also unlikely a global pandemic will disrupt the supply chain when the PS6 launches, and the PS5 will be able to enjoy a healthier end of life than the PS4, and with that even healthier profits. 

Their PC support has been telegraphed for years now. Their live service initiative has been telegraphed for years now. These initiatives aren't happening because Sony is worried about their margins for the last year lol. 

I don't see the problem with mixing PS4 profits with the PS5[...]

It's not a problem, it's just a thing to take into account. This doc has both been prepared for shareholders and to be released publicly so it has been made so that for the public it tells the PR story of "everything is fine" but, for the investor, it tells the story of "We identified issues and we're addressing them".

Yes, launch align PS5 drives more revenue than PS4, but then with hit the initial issue again which is that his cost of operation is way higher than in the PS4 gen, to maintain the same ROI the install base needed to grow gen to gen and it's not the case here. Also, Covid made things more complicated, not only did they invest in acquisition and expansion, but salaries in IT also rose significantly during this time. I'm in IT, not gaming mind you but still, my salary rose more than 50% since 2019. So imagine if the same applies to some degree for gaming industry workers. The rising budget was already a burning issue now COVID put gasoline on it.

I define major worry as PS5 sales completely nosediving from this point forward.

This is a gamer point of view concern, This is not a concern in itself for Sony/PlayStation, even if it were to happen if Sony can maintain its revenue/ ROI through another segment of the market than this would not be a concern. A major worry for shareholder would be to see their ROI decrease without any short-term prospect of readjusting them and that's exactly what is happening now. 

Their PC support has been telegraphed for years now.

I don't think that's true, it has been discussed but Sony mostly resisted the idea preferring to keep things exclusive on the higher revenue PlayStation rather the losing 30% for the PC store. But now Sony faces the same conclusion MS faced in 2015-2016, that their console alone is not enough and they need to reach the consumer on PCs.

Their live service initiative has been telegraphed for years now.

This initiative was taken during 2020-2021 when Sony, like the rest of the industry, thought the market was going to expand substantially, that bet might not have been taken with the knowledge of 2022-2023, yet they have been taken and now they need to go by them.