Sony released its Corporate Report 2020 and it included some interesting information about the PlayStation business.
The report shared on the company’s investor relations site (via Resetera) reiterates via CEO Kenichiro Yoshida that PlayStation Plus has reached 45 million subscribers by the end of June 2020, and the company deems “important” to “maintain and expand this increased engagement” in the future.
We also hear about the plans for PS5 and cloud gaming.
“At the same time, we aim to further revolutionize the game experience for users by launching the PlayStation 5, scheduled for the 2020 holiday season, not only with higher resolution but higher data-processing speeds, three-dimensional audio support and a new controller that advances the players’ sensory experience. With the PlayStation Platform, we want to provide users with both an immersive game experience through the console and the benefit offered by cloud gaming of seamless gaming experiences that can be enjoyed anytime and anywhere.”
We then get a report on the performance of the Game & Network Services business, which includes PlayStation and PlayStation Network.
“G&NS is distinguished by stable recurring revenue streams, including sales of first-party titles, licensing royalties from third-party game software sales companies, and network revenues derived from PSN which account for the growing shares of the total G&NS revenue.
Additionally, earnings volatility, driven by the console cycle, has been decreasing in response to efforts to reduce the cyclical variability of expenses.”
Interestingly, there is a mention of the acquisition of software developers, even if it isn’t entirely clear whether this is about future acquisitions or simply the acquisitions that we already saw, like Insomniac Games. It appears to be an ongoing effort due to the wording.
We also hear about the “particular” importance of first-party games.
“G&NS limits fluctuations in its assets within a certain range by
outsourcing most hardware production and expensing many
new-console development costs. It invests in M&A, mainly
involving game software developers, and in R&D to strengthen
content IP.”[…]
“Game titles are the primary content IP for Game & Network Services. First-party titles, developed and sold by the platform owner, are particularly important as content IP for future value-creation and earnings.
In addition to improving the personnel and work environment in its own studios, Sony Interactive Entertainment (SIE) continues to invest in, or acquire, firms with abundant creativity and cutting-edge technologies to build up Worldwide Studios (WWS), an association of first-party title production studios. Most recently, in August 2019 it acquired Insomniac Games, a longtime Sony partner that has developed many hit titles.
As of May 31, 2020, WWS owns 14 studios and has become one of the world’s leading game-developer networks. With hit series like The Last of Us, God of War, and Uncharted, it is a strong engine for content IP production.
Third-party titles, meaning IP developed by game software developers outside the Sony Group, also play an important role in indirectly enhancing the appeal of the PlayStation Platform and its user community. Sony offers various forms of assistance, such as sharing its libraries and providing technical support to creators, including independent studios, to facilitate the best game-development environment possible.”
Interestingly, we hear that the turnover rate (basically the rate of employees that leave the company compared to the total in a given period) of employees at Sony Interactive Entertainment is 8%, which is half compared to the average of Silicon Valley.
Below you can see a summary sheet of the Playstation business. Interestingly the number of PS4 shipments has been adjusted to 112.1 million as of June 30.
Last, but not least, we hear about the strategy for the PlayStation business going now and going forward.
Interestingly, the firm expects competition from “online PC games and players from other industries” to intensify.
Sony plans to “accelerate the enhancement and rollout of its portfolio of exclusive PlayStation titles.”
On top of that, PlayStation will also explore expanding first-party games to PC, a process that already started with Horizon Zero Dawn.
Background to Strategies
The Game & Network Services segment is representative of Sony’s corporate direction of “getting closer to people,” specifically users and creators. The PlayStation Platform provides a development library and know-how that enable creators to achieve the speedy and cuttingedge expression of their creative vision. In additionto enhancing direct to consumer (DTC) services, Sony Interactive Entertainment (SIE) harnesses game play data and network service usage trends to get closer to what
motivates users.The PS4 has sold 112.1 million cumulative units, while the PSN has over 113 million monthly active users.
PS Plus, a paid subscription service, has steadily acquired users since the release of the PS4, surpassing 45.0 million paid subscribers.
These numbers reflect that PlayStation is one of the world’s leading game
ecosystems and network platforms. To further revolutionize the game experience for users, SIE will launch the PS5, which is scheduled for the winter holiday season of this calendar year.Competition from online PC games and players from other industries is expected to continue to intensify. The fundamental growth strategy will be to innovate and evolve the PlayStation Platform. To this end, SIE intends to make proactive investments to reinforce content IP, and work to raise brand value, foster communities and user engagement, while enhancing DTC services that get closer to users.
Strategic Direction
To reinforce content IP, SIE will accelerate the enhancement and rollout of its portfolio of exclusive PlayStation titles. As a result of cooperation with in-house development and partner companies, sellthrough of PS4 software titles continues to grow, and the intention is to further enhance the lineup with compelling content. Along with that, further growth
in recurring income will be achieved through various network service enhancements.Through introducing new technologies in speed, haptics and sound, we can further improve on the exclusive experience available on the PS4, and aim to make the PS5 a truly next-generation console by providing game experiences that were not possible before. Games for the PS5 that deliver this new gaming experience are being made by 1st, 2nd and 3rd party developers, and we plan to introduce a compelling line-up of titles to our users.
In executing these strategies, greater emphasis will be placed on user engagement. SIE plans to provide content for a variety of game genres and formats, and make advances in unique and immersive interactive
experiences such as VR. At the same time, SIE aims to create a better user experience, improve usability, and strengthen its use of data analysis. Making the best use of new and existing partnerships while driving growth will be important for achieving further expansions in scale.Through maintaining the momentum and ecosystem that PS4 built up until now, we will promote a smooth transition to the PS5.
SIE aims to achieve robust revenue growth by accelerating the virtuous cycle that has been established for the PlayStation Platform. This entails increasing active users and play time, enhancing network services and reinforcing content IP so that consumers select PlayStation as their platform of choice. Targeted outcomes include growth in active users, stronger retention and a shorter cash conversion cycle, from which expanded cash flow can be expected. We will explore expanding our 1st party titles to the PC platform, in order to promote further growth in our profitability.
If you want to read more about Sony’s financial performance, you can read our latest report.
Published: Aug 29, 2020 12:45 pm