Sony’s PlayStation Business Hits a Wall

Current-generation console sales have plunged more quickly than anticipated, as potential customers apparently hold off on purchases ahead of this year’s reveal. That’s the consistent messaging we’ve heard from multiple companies in the game console market, including AMD, GameStop, and now Sony itself. Hardware sales are down across the industry by larger amounts than we saw at this point in the previous console cycle.

That’s the takeaway from Sony’s most recent quarterly earnings conference call. Sony’s gaming division revenue fell 20 percent year-on-year, primarily due to the impact of decreased hardware sales. Software was a more complicated situation — revenue was down, yes, but while third-party sales were down, first-party sales were up (but not enough to meet expectations). Growth in PlayStation Plus subscribers was also positive, up 2.5M to 38.8M over the past 12 months, and helped to offset some of the software decline.

Sony is adjusting its Q4 2019 forecast downwards by $459M, or about three percent. Sony’s fiscal year Q3 took place from October – December, so we’re currently in Q4 FY 2019 and Q1 CY 2020 as far as the Japanese company is concerned. Calendars are weird.

Looking Ahead to the PS5

Sony isn’t willing to talk about the PS5 yet (not on its earnings calls, anyway), but the company does expect game revenue to surge in the back half of the year as the new console comes to market. The situation around sales predictions for the Xbox Series X and PS5 is quite different than it was at this point in the previous console cycle. By early 2013, we’d had several years of explosive smartphone popularity. Tablets had hit the market to significant acclaim. Micro-consoles like Ouya hadn’t failed yet. All in all, a lot of people were asking if the era of console gaming was over, to be replaced by mobile games and streaming services.

Seven years later, the verdict on mobile replacing console is definitely “No,” and streaming services haven’t managed the trick either, though Google and Nvidia are both taking a crack at it. Sony is heading into the PS5 era as the definitive winner of the sales race against Microsoft and the overall revenue competition. Microsoft has arguably spent a lot of the past seven years unifying its ecosystem between the Xbox and PC, and this seems as though it will continue with the Xbox Series X.

My own minor bet, as far as the PS5 is concerned, is that Sony will find a way to make the Final Fantasy VII Remake a PS5 near-launch title. While FF7 was not a PS1 launch title — the console hit shelves on December 3, 1994, while FF7 debuted January 31, 1997 — it became one of the most definitive PS1 titles ever made and the highest-selling Final Fantasy game ever. After repeated delays, Sony is releasing the first section of Final Fantasy VII’s remake on the PS4 (as promised) a matter of months before they debut the PS5.

Square Enix’s president has already made comments implying that the game will be playable on both generations of hardware, but it seems incredibly unlikely that Sony wouldn’t push the company to build a version that could showcase the graphics on the PS5 in the same way the original did for the PS1.

Granted, that could be willful fanboy projection on my part. I’ve been downright excited at the rumors of a PC release for this one.

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