Sony has managed the impressive feat of making considerably more money from its gaming business while selling 35 per cent fewer PlayStation 5 consoles.
The Japanese electronics outfit reported shipping 2.6 million PS5 consoles during the quarter ending 30 September, compared with four million during the same period last year. This is hardly the sort of performance that would normally have shareholders opening the champagne.
Yet Sony’s gaming division reported an 83 per cent increase in operating profit to ¥220.1 billion (€1.24 billion), while revenue rose nine per cent to ¥1.21 trillion (€6.8 billion). Things looked equally cheerful for the parent company, which reported a 45 per cent rise in operating profit to ¥622.3 billion (€3.5 billion). Revenue increased 10 per cent to ¥3.43 trillion (€19.3 billion), helped by stronger games and film sales.
The figures comfortably beat analysts’ expectations, although the gaming business becomes a little less miraculous when someone bothers to read the small print. Sony’s results benefited from some particularly nasty charges it took during the corresponding quarter last year. These included a ¥31.5 billion (€177 million) impairment against Bungie’s assets and another ¥18.3 billion (€103 million) to correct previously capitalised game development costs.
Together, those charges explain roughly half of the gaming division’s ¥99.7 billion (€561 million) year-on-year operating profit increase. Currency markets also helped. Sony attributed ¥73 billion (€411 million) of its ¥95.3 billion (€536 million) increase in gaming revenue to exchange rate movements.
This still leaves Sony with a healthier gaming business, although the 83 per cent profit increase looks rather less spectacular once last year’s problems and the weaker yen are taken into consideration. What should worry console manufacturers is that Sony appears to be making more money from customers who already own its hardware. Full-game software sales reached 88.2 million copies, up from 80.3 million a year earlier, while sales of Sony’s own titles increased from 6.3 million to 8.2 million.
Game software revenue increased nearly 13 per cent, and network services revenue rose about 19 per cent. The latter includes PlayStation Plus subscriptions and advertising, which continue generating revenue long after Sony has collected the money for the console itself.
Digital downloads represented 78 per cent of full-game software sales, up from 72 per cent in the same quarter last year. The physical game market is becoming an increasingly small part of the PlayStation business, which suits a company that gets to control its own digital shop.
Sony’s figures suggest that selling fewer consoles is becoming less of an immediate financial headache as its existing customers spend more on software and subscriptions. Hardware revenue fell only five per cent despite the much steeper decline in console shipments. The figures reflect changes in the value and mix of hardware sales, although Sony has not provided enough detail to determine exactly how much of the difference came from pricing.
The company reported 127 million monthly active PlayStation users at the end of September, compared with 119 million a year earlier. Its audience is growing even as new console shipments slow.
Sony’s film division provided another substantial boost, with revenue jumping 48 per cent following the success of Spider-Man: Brand New Day. The film helped Sony lift its full-year operating profit forecast by nine per cent. The company now expects annual operating profit of ¥1.87 trillion (€10.5 billion), while the gaming division’s profit forecast has been increased to ¥700 billion (€3.94 billion).
Sony is expecting another boost from the arrival of Grand Theft Auto VI on 19 November. The game is widely expected to drive hardware and software sales, although the company also faces soaring memory prices. The memory shortage has made console manufacturing increasingly expensive as semiconductor suppliers focus on the more profitable data centre market.
Sony said in July that it had secured enough memory to meet its planned hardware sales for the financial year. Whether that protection extends to its profit margins will become clearer during the Christmas quarter.
