@Nonstop-Madness said:
Their margins aren't slim solely because of their first party content. That part of their business is at best $2B a year; less than 8% of all revenue. GaaS, mobile etc. will help improve margins of that portion of the business but there's a lot more in play here.
It's lots of headwinds in several key areas of their business including PS5 hardware.
Totoki straight up says its been difficult reducing costs of the hardware and even says their BOM has *not* gone down with the Slim model. Selling a record number of PS5s at slim margins will drag things down.
They are also selling less games, and less first party games. 2B in revenue means nothing if your overall costs are 1.8 billion. (that's 10% margin, Sony is at 5%)
Sony's strength has always been the traditional console model of taking a loss/break even on hardware and sell a ton, then capitalize on install base by selling software. Margins on software are traditionally where the bulk of the profit is made, same reason why the Steam Deck is so cheap
Problem is what analysts have warned about for years, the cost of game production+ development time. It costs money to develop a game, but people also forget that it costs money to run a studio with payroll, insurance, leasing buildings, etc. Not only are you funding 200+ million, but you are paying payroll/insurance/rent for 5+ years of development.
Sony is known for giving their studios time to make amazing games, and that is commendable. Problem is, as Totoki said, is lack of structure, milestones, budget control. Horizon shouldn't cost 200m+ to make. Spiderman shouldn't blow trough 300m. That's just insanely bloated and you'd have to sell GTA5 numbers to make that time sink worth it for the company.
To make matters worse, Sony has been warned and saw the warning signs years ago. Why do you think Jim Ryan started withe PC investment? If they had done day and date from the beginning, they wouldn't be in as deep of a mess. Problem is the tail is wagging the dog, that is to say that they know the fans would revolt and they'd have a PR nightmare to deal with
I think if the fans or fanboys want Sony to continue to dominate, they need to embrace PC day and date. If they want to keep games exclusive, then expect to see more price increases, DLC, microtransactions, more remasters, less risk taking.
Or you can choose PC releases, smaller budgets (which means less cinematic movie games), smaller releases, embracing subscription services (not day one releases, but at least get more 3rd party day one games)
Log in to comment