Sony’s PlayStation 5 is nearing the end of its life cycle according to a recent statement, leaving PlayStation fans disappointed yet again. This latest announcement continues Sony’s unwillingness to deliver enough exclusive games and content to justify the PlayStation 5’s $500 price tag.
With only 21 million PlayStation 5 consoles sold so far, Sony has cut its fiscal year sales forecast by 17%. “Looking ahead, PS5 will enter the latter stage of its life cycle,” Naomi Matsuouka, Sony senior vice president, said in a conference call, as reported earlier by Bloomberg. This is disappointing news for Sony shareholders, resulting in a $10 billion value decline. More concerning is the 6% operating margin for Sony’s gaming division, nearly the lowest in a decade per analyst Atul Goyal.
The CEO and founder of Tokyo-based games consultancy Kantan Games, Serkan Toto, stated that he thought hardware production costs had actually decreased because, by now, Sony would have better economies of scale and the PlayStation 5 is older than three years old. According to Toto, rising software production costs are a contributing factor in the recent squeeze on margins.
Production-wise, “Spiderman 2,” which was released last year and is made by Insomniac Games, a Sony-owned company, is said to have cost approximately $300 million. This information comes from an internal presentation that was made public following an attack by a ransomware group on the company.
“So these budgets seemed to have a significant impact on their gaming margin over time,” Toto said.
While PlayStation 5 digital game sales and PlayStation Plus subscriptions provide higher margins around 50%, the overall gaming division margin remains depressed compared to the 12-13% seen previously.
Sony’s unwillingness to discuss these low margins and lack of justification for them is disappointing. With tailwinds like digital game sales and subscription services at all-time highs, gaming division margins should not be at decade lows. The lack of transparency and accountability from Sony is leaving PlayStation fans dissatisfied.
The PS5 game lineup also continues to disappoint. Sony stated they have no big first party games planned for 2023 from their internal studios. While third party games like Final Fantasy VII Rebirth will release on PlayStation 5, exclusives drive console adoption. The reported lack of exclusives until late 2024 demonstrates Sony’s complacency with the PlayStation’s market position.
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Considering the PlayStation 4 sold over 100 million units with massive exclusives like God of War, Spider-Man, Uncharted 4, and Final Fantasy VII: Remake, the PS5 trajectory is worrying. Sony expects customers will continue buying the console into its sixth or seventh year, but interest is bound to decline without system-selling exclusive games.
Sony’s dominance last generation with the PlayStation 4 already seems to be diminishing based on these decisions. With only 21 million PlayStation 5s sold so far and first-party studios reportedly struggling to develop exclusives, Sony’s gaming division margins will continue declining. The company’s unwillingness to invest and take risks is disappointing for fans eager to see amazing new PlayStation exclusives.
Unless Sony changes course and announces some new system-selling exclusives, interest in the aging PlayStation 5 will continue to decline. While the console still arguably beats the competition on raw power and technical capabilities, amazing technology means little without fun games showcasing it. Sony expects customers will wait patiently for the next God of War, Spider-Man, Final Fantasy, or other AAA first-party title, but gaming enthusiasts may shift allegiance if Microsoft delivers more compelling content first. Considering gamers have to wait only a year until the PS exclusives end up on PC, many aren’t bothering to spend their money for something that will be better later on.
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Unless PlayStation leadership course-corrects and invests fully in their first-party studios again, the PlayStation 6 could struggle against Xbox and Nintendo’s compelling lineups. For the good of gaming innovation and healthy competition, let’s hope a declining PlayStation light’s a fire under Sony leadership to deliver better exclusive content next generation.
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Look at what they do make now. It’s a bunch of woke garbage, and it’s getting worse not better. My PS5 sits completely unused the games are so terrible. I’m officially done with console gaming, at least with PC gaming you can mod the garbage content, and there’s far more good and woke free content.
They said 2028 will be the end. It would be interesting if they reel it back to 2027. A ton of their studios have not shown anything yet!