As earnings season marches on, I’ll wrap up this week with my final recap of the big three gaming manufacturers.
Sony, the largest of the group by sales, has reported its fiscal year 2023 results. In this piece, I’ll cover mostly the annual financials to give a broad perspective of where the PlayStation division has been recently and will be soon.
If any of the data is quarterly, I’ll point that out.
That said, here’s the big headlines from PlayStation’s portion:
- Achieved record annual revenue above $29B.
- Reported double-digit operating profit growth.
- Biggest year of unit sales for a PlayStation device despite missing target.
- Breakout success of Helldivers 2 across both console and PC.
Underlying the record top-line and profit performance was a boost in third party sales, including downloadable content, headlined by the likes of surprise hit Helldivers 2 from Arrowhead Game Studios and Insomniac Games with Spider-Man 2, the former highlighting the benefit of adopting PC and the sizeable upside of live service risk.
Additionally, yen depreciation had a tangible impact on annual growth, as I’ll illustrate shortly. This currency effect is amplified for Japanese companies operating globally.
Throughout this time frame, PlayStation 5 hardware closed the lifetime sales gap with its predecessor and passed another milestone on the global best-seller list. On the software side, unit sales increased while shifting towards a digital split.
“During the PlayStation 4 generation, we were able to significantly grow profits in this segment thanks to rapid digitalization and the expansion of network services,” management wrote.
“In the PlayStation 5 generation, which has capitalized on the established PlayStation 4 user base, the trend is hard to see due to the impact of stay-at-home demand and acquisition-related expenses, but, since the launch of the PlayStation 5, we have continued to achieve a high level of, and more stable, profit growth.”
Read on for more detail around Sony’s latest numbers and predictions for the next year!
The above slides show Sony’s Game & Network Services (G&NS) division results for the year overall.
- Annual revenue increased 17% to $29.55B.
- This included $1.9B of currency impact.
- Operating profit rose 16% to $2.01B.
- This includes $267M of currency impact.
I’d point your attention to the above gallery, namely the operating income chart I compiled which illustrates the Helldivers 2 effect, and more broadly shows what happens when Sony’s live service effort pays off. Quite literally.
Until the final quarter of its fiscal year, operating profit was trending down 25%. After January to March, the year ended up as a double-digit increase!
Moving on to products categories within G&NS, here are select annual revenue and growth stats:
- Hardware was $8.39B, up 8%.
- Add-On Content hit $7.5B, up 26%.
- Digital Software at $5.89B, up 29%.
- Network Services reached $3.78B, up 17%.
On the strength of newer launches and evergreen titles, Add-On Content surpassed Hardware in Q4 alone, though the latter became the leading segment for the full year as PlayStation 5 reached the middle of its life cycle (yes, already!).
Within the console side of the business, it was a banner year for shipments even if Sony’s forecast was too ambitious (as I wrote since they first posted it). Hardware results were:
- PlayStation 5 shipped 4.5M units in the March quarter, down from 6.3M.
- This led to a fiscal year shipment total of 20.9M, compared to 2022’s 19.1M.
- Slightly below Sony’s 21M target, and well below its original guidance of 25M.
- Still, it’s above PlayStation 4’s 20M in the same year, which was its best.
Check out the image below for a full comparison of the last two Sony console generations, showing that PlayStation 5’s current 59.3M lifetime was less than a million off PlayStation 4 at 60.2M, much closer than other points in their launch-aligned history.
As for the broader industry, PlayStation 5 officially surpassed the lifetime unit total of Microsoft’s Xbox One, which launched in 2013 and ended at 58M. The next milestone will be Nintendo Entertainment System at 61.91M, which I’d imagine it might have already reached as I write this.
Here’s further insight into how software did for the G&NS segment during fiscal 2023.
- Unit sales reached 286.4M, up from 264.2M prior year.
- Sony-made titles made up 39.7M of that, down from 43.5M.
- Digital downloads comprised 70%, up from 67%.
The clear winners were a pair of sequels in October’s Spider-Man 2 and February’s Helldivers 2, the latter being PlayStation’s fastest-selling game ever amassing 2M units in 12 weeks. For context, 2022’s God of War Ragnarök sold 10M in 10 weeks.
Can’t forget about the likes of Blizzard’s Diablo IV and Capcom’s Street Fighter 6, plus the continued benefit of annualized sports and shooter titles, even on an off year with the lackluster Call of Duty: Modern Warfare 3.
Then, to a lesser extent, there was contribution from Square Enix’s Final Fantasy titles. In recent investor materials, Square Enix pointed out Final Fantasy 16 and Final Fantasy 7 Rebirth, both PlayStation exclusives, missed expectations (what else is new). With Square’s move to multi-platform, the days of third-party exclusives are clearly dwindling.
We also heard a bit from Sony on engagement, driven a lot by evergreen titles that dictate the market leader’s success here. As I mention in recent Circana U.S. sales recaps, tons of people play console primarily for experiences including Fortnite, Roblox, Minecraft and Grand Theft Auto V.
Sony reported that Monthly Active Users (MAUs) across PlayStation Network ended the year at 118M. While that’s no longer an all time high, which was achieved the prior quarter with 123M, it was still up 10M year-on-year.
The final stretch of fiscal 2023 was a fantastic one for Sony, pushing it to all-time revenue and generating higher income when it seemed like the year might be a down one for profitability.
A surprise multi-platform hit and PC’s contribution bumped up that profit growth, along with an all-time year for hardware shipments plus ongoing engagement in various legacy games.
Sony has recently backed off its live service push, to focus more on fewer titles in the space. A game like Helldivers 2 proves that all it takes is a single game capturing the zeitgeist to drive financial growth and keep an audience coming back for more.
It doesn’t hurt to have a simultaneous PC launch, a platform with a notoriously passionate user base. (Better or worse.)
I’ll quickly look ahead to Sony’s expectations for the coming year. Here’s the PlayStation forecast:
- Revenue will be down 2% to $29.1B.
- Operating profit to increase 7% to $2.15B.
- PlayStation 5 shipments of 19M, down almost 2 million.
“As we enter the second half of the console cycle, we expect the number of new PlayStation 5 units sold to gradually decline,” management wrote in its remarks.
“However, by steadily maintaining and expanding the consistently increasing number of active users and user engagement, while also strengthening control over business costs, we believe that we will be able to steadily increase sales and profits from the PS platform going forward.”
Overall, I’m guessing G&NS will achieve these goals, and perhaps even increase the console shipment guidance to 20M. I’m expecting a lot of consumers upgrading and new buyers for Grand Theft Auto VI, expected to launch in calendar 2025.
Executives also reiterated that its new sci-fi multiplayer IP Concord will be out in this same time frame, as it aggressively moves to improve margins and incorporate the PC market. Could there be others launching by the fiscal year end?
Speaking of executives, Sony announced the replacement for exiting PlayStation boss Jim Ryan. Or should I say replacements, and both are internal hires. Hermen Hulst (my prediction back when the Ryan news broke) and Hideaki Nishino be co-leaders, heading up new respective groups within Sony Interactive Entertainment.
With that done, this concludes my latest recap. I recommend checking out socials for more coverage of earnings season and everything across the games industry landscape. Thanks for reading, be well!
Note: Comparisons are year-over-year unless otherwise noted.
Exchange rate is based on reported average conversion: US $1 to ¥144.4.
Sources: Circana, Company Investor Relations Websites, Sony Interactive Entertainment.
-Dom