Even with the PS5 shortage, Sony’s PlayStation had a record year

Sony’s video game business had its most profitable year ever, thanks to the Covid-19 pandemic turning everyone in the world into gamers. That was despite the global semiconductor shortage. …

Sony’s video game business had its most profitable year ever, thanks to the Covid-19 pandemic turning seemingly everyone in the world into gamers. That was despite an ongoing global semiconductor shortage that prevented the company from selling as many of its PS5 consoles as it wanted to.

The Japanese conglomerate generated a record ¥2,656 billion ($25 billion) in video-game revenue in the last fiscal year, which ended March 31, according to an earnings report (pdf) today. On that total, it profited ¥342 billion—another record for its PlayStation business. That was more than double its video-game profit from the prior fiscal year.

Some of that record-breaking profit was due to the PS5, which launched in November and has already sold 7.8 million units, despite Sony admitting its supply has not been able to keep up with demand. But the company attributed much of its profit not to console sales, but rather to an increase in game software and network services.

The power of microtransactions

The biggest PlayStation segment by revenue was, by far, “add-on” content—downloads and microtransactions gamers pay for within the games themselves. Call of Duty: Warzone, for instance, is free to play, but players often spend on extra outfits for their in-game characters to wear and special items for them to use. According to gaming analyst Daniel Ahmad, add-on content accounted for 34% ($8.6 billion) of Sony’s video game revenue in the last year.

Digital games were second, responsible for 21% ($5.1 billion) of revenue. Physical game sales predictably accounted for the least amount of revenue (just 5%), as gamers increasingly transition from discs to downloads.

Sony added that gameplay time was up 20% in March compared to March 2019. The increase in sales and engagement suggests that the pandemic didn’t just create new gamers, but that existing casual gamers became hardcore ones. And they’re all spending more on in-game content than they used to.

Now Sony aims to expand its gaming business into a broader entertainment empire. The company has already sold the film and TV rights to many of its game franchises, like The Last of Us and Uncharted. On the earnings call, Sony CFO Hiroki Totoki said the company will “aggressively invest” in its in-house game studios, as well as in games that are developed by third-party companies exclusively for the PS5. Sony’s goal is not only to sell games, but also to create global franchises that transcend the consoles they’re played on. The company is forecasting that PlayStation sales will increase again in the next fiscal year, but that profit will drop, due to this increased investment.

The company said it expects the shortage of semiconductors—which are key components of each PS5—to continue this year. Still, Sony hopes to sell more PS5s in the year following the console’s November launch than the 14.8 million PS4 units it sold in the year after that console launched in 2013. Even with supply limited, Sony should have no trouble meeting that goal given the rabid demand.

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