There is a trick to financial reporting that I’m going to show you. A recent op-ed in Bloomberg covering Sony’s successful quarter opens with a peculiar line.
“Sony Corp. reported profit that outpaced estimates on strong demand for its games products, but offered a measured forecast for the fiscal year due to uncertainty from the coronavirus pandemic.”
In basic English, what Sony is saying is they have exceeded their estimates thanks to the success of their gaming sector, but overall profits may be down for the year. Owing in large part to how the coronavirus impacted their various other sectors.
Delving into this further, at the bottom of the article, it discusses how the company’s image sensor sector saw earnings decline from 235.6 Billion Yen in 2019 to 130 billion yen this year. A 55% drop in year over year earnings that are unlikely to be made up by their gaming division.
Though the rest of the company may be ailing, the gaming division has seen impressive performance gains for the quarter ending in June. During the period, Sony’s operating profit (gains minus expenses) reached 228 billion yen. How much of that was earned by the gaming division was not specified.
During the quarter PlayStation Plus saw an additional 3.4 million subscribers bringing the total to a whopping 44.9 million active users.
Later in the article Bloomberg references a source that wished to remain anonymous, but did divulge some details on Sony’s plans for unveiling pricing and options for the console later this month.
“An official at the PlayStation unit, who asked not to be identified because the plan is not yet public, said Sony’s next announcement regarding the PlayStation 5 is tentatively scheduled for this month. The company intends to release two versions of the console, one with a Blu-ray disc drive and one without, though it has yet to disclose the pricing for either model.”
The report proceeds to reference Macquarie Capital analyst Damian Thong, who predicts the PS5 will see strong initial sales owing to its backward compatibility with all PS4 titles. He further speculates the disk-based PS5 will be priced at $500, and the digital version will be priced at $400.
Despite his accreditation, his estimate for the digital-only pricing is likely off. Rather than $400, the digital version of the PS5 will probably cost $450. Yes, a blu ray player costs around a hundred dollars, but they come with other circuits and components. A blu ray drive, the component that wouldn’t be included with the digital version of the console, costs around $50. More if you want one that can write and read disks.
Sony’s growth and performance for the fiscal year are good. There is no denying that, but there is some context to it. The entire gaming industry was predicted to see a 9.3% year over year growth, even with the coronavirus lockdowns, as reported by Reuters.
Furthermore, the lockdowns have driven soaring rates of engagement in the video game sector. Resulting in some of the strongest performances for companies like Activision/Blizzard and EA during the period, according to the BBC. By May, the industry had confirmed compound growth at 9.22%. With no indication, the trend would slow down.
Meaning Sony benefited more from trends and conditions than they did from the quality of their service or products. The future is unsure, but 2020 has been a good year for the company, even if it will miss its yearly projections.
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