During Sony's quarterly financial conference call for investors and analysts, CFO and COO Hiroki Totoki talked about the PlayStation Business and announced a revision to the PS5 sales prediction for the full fiscal year.
During his prepared remarks, shared at the beginning of the livestreamed conference, Totoki-san mentioned that PS5 sales during the holiday quarter (between October and December 2023) fell short of Sony's forecast. Due to this, the company is lowering its prediction of PS5 unit shipments for the full fiscal year to approximately 21 million units.
This is a whopping 4 million units reduction from the previous 25 million units target, which the company's executives had defined as very ambitious multiple times.
We also hear that play hours in Q3 2023 on PlayStation platforms were up 13% year-on-year. The number of PlayStation Plus Subscribers (which hasn't been disclosed by Sony in the past few quarters) has dropped year-on-year, yet, sales for the service still increased 11% year-on-year as more users shifted to higher-priced tiers.
Speaking of the next fiscal year (between April 2024 and March 2025), Totoki-san mentioned that the PS5 is entering the latter half of its life cycle, so Sony aims to optimize sales with a greater emphasis on balance with profits. Due to that, the company expects a gradual decline in unit sales going forward.
Sony expects third-party game sales to continue increasing due to the expansion of the PS5 installed base (Incidentally, if you'd like to purchase a PS5, you can do so on Amazon) and the high level of user engagement.
The number of PlayStation Plus subscribers should remain stable or drop slightly due to the price revisions implemented this fiscal year. Yet, Sony expects revenue to continue increasing gradually due to the continued shift of users to higher tiers.
Sony plans to continue producing high-quality first-party games and developing live service games, but Totoki-san mentioned that while major projects are currently in development, the company doesn't plan to release any new game from major existing franchises like God of War Ragnarok or Marvel's Spider-Man 2 during the fiscal year (which ends on March 2025).
The company expects profit from first-party games to decrease slightly due to the decrease in sales. Cumulative operating income for the whole segment in the next fiscal year is expected to increase slightly year-on-year. That being said, Sony is reviewing initiatives to further increase profitability ahead of the announcement of the official full fiscal year 2024 forecast that will come in May.
Totoki-san also mentioned that PS5 is using a chip built on a single-digit nanometer architecture (6nm). Unlike consoles from previous generations, it's very challenging to shrink that further, so it's difficult to achieve significant cost reductions.
Sales strategy for previous consoles used to include steep discounts, but Sony doesn't want to rely on that with the PS5. The company wants to make sure that the business is profitable and intends to focus on user engagement on top of console sales, striking a balance between these elements. The most critical part of the business plan is to keep the number of monthly active users high.
Totoki-san then mentioned that he has been chairman of PlayStation for about four months and he visited Bungie's studios and hasd as many meetings as possible. While everyone is working really hard to fulfill their responsibilities and optimize the business, he believes that people don't necessarily understand fully how to translate that hard work into overall growth, sustainable profitability, or increased margins.
He also believes this maybe be an issue with the organization, so he's trying to understand what is happening in the company and in the industry, and to explain it so that people can recognize these issues, with the goal of achieving a harmonized approach going forward.
That being said, Totoki-san added that people working at the studios are very good people and very creative. Yet, there's room for improvement when it comes to the business itself, including how to use money, the schedule of development, and accountability. He will continue to engage in dialogue with the studios to find the right way to proceed.
Totoki-san then mentioned that in the past, first-party games were only leveraged to sell more consoles. Nowadays, strong first-party content can help grow profitability with multiplatform releases including PC in addition to PS5. As a result, he'd like to be aggressive in improving Sony's margin performance.
If you'd like to read more about Sony's financial results and peruse an update on PS5 shipments, you can read our dedicated article from earlier today.
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