Sony has predicted it will experience a decline in its video game business along with the downward trend of PS5 sales. This has prompted major publishers such as Square Enix to reconsider expanding major launches beyond the PS console.
Sony and Square Enix Rethink Game Business Strategies
PS5 Sales are Decreasing
Following the announcement of Hermen Hulst and Hideaki Nishino's appointment as the company's new CEOs, Sony disclosed its latest financial earnings report, noting that it sold 20.8 million PS5 units in the fiscal year ending March 31, 2024. While this was recorded as the highest number of PS5s sold in a single fiscal year since its launch in 2020, it fell short of the revised forecasted target of 21 million units.
Additionally, despite the milestone, Sony predicted a 67.7 billion Yen (approximately 433.67 million USD) decline in its video game business. As well as, an expected sales revenue of 12.3 trillion Yen (approximately 78.6 billion USD) for the rest of the year through March 2025, amid the decreasing demand for the PS5. Sony executives indicated that downward sales of the PS5 potentially sets the stage for an updated edition during this year's holiday period.
There were 4.5 million PS5 units sold during the first quarter of 2024, bringing its lifetime total to 59.3 million. However, active users on its PlayStation Network declined to 118 million in the same period. Sony forecasted a decrease in PS5 sales for the current fiscal year, dropping to 18 million units by March 2025.
"On the hardware side, it seems the 20.8 million units PS5 sold last fiscal will mark the overall peak of the device," Tokyo-based industry consultant Dr. Serkan Toto told VGC. "And Sony should send some champagne to Sweden: Without Helldivers II, the PlayStation numbers would have looked a lot worse last quarter."
PlayStation Will Expand to PC Through 'Two-Pronged' Approach
In response to these challenges, Sony announced plans to include more PC releases, particularly for live-service games. For instance, Helldivers 2, which has become PlayStation's fastest-selling game with 12 million copies sold across PC and PS5, owes much of its success to its PC player base. Additionally noting that "as a multi-platform title, it also contributed significantly" to Sony's sales and profit last quarter.
Announcing its financial results, Sony pledged to enhance PlayStation Studios' output and increase PC releases. SIE chairman Hiroki Totoki emphasized a "two-pronged approach" of expanding into PCs and enhancing first-party software titles developed in-house.
"The business model up to and including the PlayStation 3 was focused on increasing the number of software units sold in relation to newly sold hardware for each console generation," Sony said according to Game Developer. "After a transition period during the PS4 generation, the PS5 model has shifted to one where playtime on the platform has increased due to expansion of the user community beyond console generations."
Despite the waning sales of the PS5, Sony regarded that the company can increase sales and profits by capitalizing on the consistently increasing number of active users and user engagement. Sony also pledged to enhance and grow sales of first-party titles from their in-house studios, which we have been actively strengthening in recent years, "and by doing so, we plan to achieve a new record high in profits in this segment during the 5th Mid-Range Plan," Sony said.
"Under the theme of console and beyond, [we] aim to drive profit growth of the Sony Group by expanding the console base of PlayStation consoles, providing richer gaming experiences and growing our business through the two-pronged approach of expanding into PCs," Sony added.
Square Enix's Major PS-Exclusive Could Go Multiplatform
Square Enix's latest financial report indicated that profits were down nearly 70% from the previous year, partly due to approximately 141 million USD in losses from canceled unannounced game projects that did not align with its new strategy. As reported by Bloomberg, Square Enix placed higher expectations for both Final Fantasy titles (FF16 & FF7 Rebirth) released recently. As a result, company president Takashi Kiryu said that Square Enix is making 17 billion Yen (approximately 109.1 million USD) less than projected in operating income, prompting a change of strategy.
As Sony and its partners like Square Enix navigate these changes, the potential for more PlayStation exclusives to become multiplatform titles seems increasingly likely, potentially tapping into the broader PC gaming market. Square Enix's new approach will include "aggressively pursuing a multiplatform strategy," including its flagship titles, as well as a revamp of its "internal development process to bring more capabilities in-house' instead of outsourcing to third parties."
Source:
Earnings call: Sony Group Corporation reports record FY 2023 results
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