Sony Explains The Difference Between Their Financial Strategy in the PS4 Era vs the PS2 Era
It’s a sign of changing times.
The PlayStation 2 era was great for Sony- as a company, they were at the top of the world at the turn of the millennium, commanding the kind of brand power and cachet that even companies like Apple and Google do not any more. This was also accompanied by some cutthroat financial strategies- Sony, for example, had some huge margins back in the PS2 days. Margins that they have said they are not going to replicate in the PS4 era, even as the company continues to struggle. And when they were asked to explain why, this is what they had to say:
“I think you’re specifically referring to the PlayStation 2 life cycle where we saw peak margins in the double digit range. You’ve also almost implicitly answered the question in the question itself. A lot of this is driven by a structural shift in the business away from purely physical media to a much more complex margin structure around network distribution.
“A point that I would highlight is that on the PlayStation 2 life cycle, because we were dealing only with third party physical sales it was a royalty base model and obviously now that shifted to more of an e-commerce-based retailer margin model, and that is having significantly some impact on the shift.
“I think as well that we are seeing some more complexity in the form of the way the consumers are purchasing content. We’ve moved from buying purely a single game sale to the purchase of add-on content, to the purchase of avatars, micropurchases that are associated with the game. We’re starting to see the emergence of free to play games, which are making their way to consoles for the first time.
“I would say in summary that based on many of these different shifts, this is leading us to take a somewhat more of a conservative view of the outlook for margins over the business. We feel that’s a reasonable way to approach the planning for this cycle,” their answer concluded.
I mean, it makes sense. The market has changed. Business models have shifted. It is good to see Sony recognize this and adjust its financial expectations accordingly, rather than stubbornly promise margins and revenue that it cannot possibly deliver.