As PS4 Sales Growth Slows, Sony Leans on Content to Growth Network

Clifton Dawson, CEO Clifton Dawson, CEO Analysis

Highlights

  1. Sony executive says the PlayStation 4 is entering the final phase of its lifecycle
  2. With lower future unit sales growth, corporate operating results may be negatively impacted
  3. Sony plans to reinforce content IP in order to increase engagement with the PlayStation Network.

Sony Corporation held its annual Corporate Strategy Meeting where company executives unveiled the corporate direction and mid-term strategy that charts the path forward for the Company over the next three years. Through the key themes of KANDO - to move people emotionally - Sony provided key updates of its PlayStation console business, virtual reality, and content strategy.

Outlook for Sony PlayStation Console Sales

As first reported by Takashi Mochizuki of the Wall Street Journal, Sony Interactive Entertainment CEO John Kodera said PlayStation 4 (PS4) is entering the final phase of its lifecycle, and future unit sales may be negatively affected. In fact, the below analysis of the company's unit sales shows slowing unit sales growth.

Our Analysis

Markets for traditional game consoles are currently contracting as consumer preferences shift and new competing technologies are introduced. Under these circumstances, some expect Sony to transition future PS4 demand to a new device line. However, Sony has provided no details on future versions (i.e. PS5) of the popular console gaming device.

Future declining PS4 sales performance may cause adverse operating results for Sony's Game & Network Services (G&NS), which is one of Sony Corporation's fastest growing and most profitable business units. The sales and profitability of G&NS segment mainly depend on the penetration of its gaming platforms and the continued expansion of the PlayStation Network, which currently has more than 80 million monthly active users and 34 million paying subscribers.

To grow the PlayStation Network (PSN), and thus the G&NS, Sony must increase user engagement by having more people use its products and services such as PlayStation VR. While unit sales of the PSVR have been strong, enhancements to the PSN must be achieved by strengthening its content library. Sony has laid out an aggressive content strategy, including strategies for animation and music IPs, and for utilizing IP for first-party titles.


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