PS5 is the most profitable PlayStation console, Sony reveals
Sony have just revealed that PlayStation 5 is the company’s most profitable console generation so far. The news was dropped in this morning’s session of the Sony Group’s two-day Business Segment Meeting 2024.
The idea that the PS5 is not doing as well as previous PlayStation consoles is a commonly held opinion by gamers. This perception has been influenced by factors such as the PS5 console’s high sales price, previous issues with console shortages, plus the large number of PS5 titles that have received PS4 releases, allegedly giving PS4 owners less incentive to upgrade their hardware. However, figures provided by Sony this morning suggest that this is a misconception.
In the presentation on Sony Interactive Entertainment (SIE)’s Games and Network Services Section, a series of bar charts clearly revealed that PS5 has become Sony’s most profitable console generation so far in just three years (pictured below). In the console’s post-launch period from 2020 to 2023, Sony recorded PS5 sales of $106 billion (USD), with an operating profit of $10 billion.
In contrast, the 7-year period between 2013 and 2019, which is the PS4 generation, saw sales of $107 billion, with an operating profit of $9 billion. The PS5 has gained a much faster momentum than the previous Sony console.
PS5 has also increased its market penetration and is showing some strong sales growth. Although only around 7 million PS5 consoles were sold in the 2020 financial year, unit sales have increased year-on-year, with a staggering 56 million PS5 sold in FY2023 alone. The number of active consoles per month (i.e. those regularly used on the PlayStation Network) is also said to be increasing. Both PS4 and PS5 have around the same number of active consoles at approximately 49 million each. However, PS5 players are racking up more hours of gameplay- with 2.4 billion hours for PS5 compared to 1.4 billion hours for PS4.
The report also compares “Life-to-Date Spend” per console. Life-to-Date (LTD) Spend refers to the cumulative amount spent per active console on purchases such as controllers, digital and physical games, PlayStation Plus subscriptions and DLC in the first 4 years after the console’s launch. According to the data, LTD Spend for PS4 (2013-2016) was $580 but for PS5 (2020-2023) it was $731. There were some interesting differences in spending habits too. The LTD Spend on full length games for the PS5 was12% less than that on PS4.However, PS5 has seen a 176% increase in LTD Spend on additional game content (DLC). Spending on the PlayStation subscription service PS Plus was 57% higher in the PS5’s early years compared to the PS4’s. This might be because adjustments to the PS Plus service over the years have made purchasing a subscription more attractive to players.
The business presentation for investors showed that the PS5 appears to be performing well. After recovering from the PS5 shortage that occurred from around the end of 2022 and lasted into 2023, the console seems to be experiencing a steady increase in market penetration, as well as platform-related profits. However, it was also reported in the 3rd Quarter Consolidated Results for FY2023 that sales targets for the PS5 were lowered from 25 million units to 21 million units for that period. The PS5 will have been on sale for four years this November, so it is expected to enter the second half of its lifecycle as a console. Therefore, sales of PS5 consoles are likely to gradually decrease from that point onwards.
Against this backdrop, Sony’s policy for the FY2024-FY2026 period is to “drive sustainable and profitable growth and invest thoughtfully in the Future of Play.” Specifically, they seem to be focusing on continuing to expand the number of active PS5 consoles while earning consistent revenue from content, services and peripherals (controllers etc.). They also seem to be concentrating on managing costs more efficiently, as well as investing in key areas for growth and innovation.
Recently, on May 14, Sony Interactive Entertainment announced that they will adopt a new dual-CEO structure, effective from June 1, 2024. This presentation on PS5’s sales performance was actually made by Hideaki Nishino, who will become CEO of SIE’s platform business group, and Hermen Hulst, who will become CEO of its studio business group. It will be interesting to see how PS5 will grow under this new management structure.
Incidentally, the next State of Play is scheduled to be broadcast tomorrow (May 31) at 7AM (JST). It will reveal the latest information about 14 PS5/PS VR2 titles.
Written by. Verity Townsend based on the original Japanese article (original article’s publication date: 2024-05-30 11:05 17:25 JST)
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This is perception and not reality PS5 is still underperforming where PS4 has awhile ago and COVID gave it a false boost that will begin to trend downward. I will give a few notable examples and especially with something even Totoki mentioned when I watched the Global Investor conference itself.
1. PS5 is underselling 1 million compared to PS4 the same timeframe ago as per VGChartz.
2. If you look at your own data 50% of MAU is on PS4 when we are already past the halfway point on PS5. That is not a good sign that many are making it to PS5 but instead to Switch and PC. Switch has already outpaced PS4 at a record and will eclipse PS2. This is not good for long term profitability.
3. The LTD is mostly micro transactions from COD and Fortnite. Which is bad news because Microsoft now owns COD and will be using that COD ownership to get rid of must of the playerbase to GP with exclusive content like the Vault Pack from Fallout to get them into their ecosystem and away from Sony’s ecosystem.
4. Sony does not have much games out and the 3rd party relationship with Japanese developers are strained because of censorship policies and a focus on 3D premium games above Indie, to where many went to Nintendo or are going to Steam. Getting rid of Japan Studios which was the gravest sin on Sony because this comes at a point with low operating revenue and inconsistent ROI which Sony needs right now.
5. Totoki had mentioned that the sales moderated from 25 to 21 million due to COVID and has mentioned behind the scenes that PS5 is a failure due to the lack of ROI. For example Microsoft makes more money than Sony because they have different games of different budgets that even if one does poor it can make it’s money back and still be profitable, while Sony spends a wild amount of money and barely makes enough profit to be worth that return. Also Nintendo is way more conservative and spends less but has more products out there almost yearly and makes more than Microsoft and Sony itself almost combined.
You can talk about profits or MAU but the most important is the ROI and the value Sony has with its 3rd party Japanese relationships as a whole. If Sony was very profitable they would not be relying on porting games to PC and trying to hook everyone on the PSN requirement for the MAU which they later at had to back off on because of the fans being loud on PC. Sony is weak right now and the cracks are beginning to form under the foundation of lies in the part 7 years. Unless they become a Japanese company and relocate the HQ outside of California to Japan. Playstation will be shut down as a division and will go the way of SEGA or just offering services instead. It’s not something many would like to hear but it’s what needs to be said.