Sony chief to step in as PlayStation boss as profit margins shrink

Puff

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TOKYO -- Sony Group President Hiroki Totoki will perform double duty as head of the subsidiary in charge of PlayStation, the company said Thursday, after he sounded a warning on the video game segment's earnings downturn.

Totoki begins serving next month as chairman of California-based Sony Interactive Entertainment. Jim Ryan, SIE's current president and CEO, retires at the end of March. Totoki will then become "interim CEO," Sony said.
Sony has long given wide decision-making latitude to SIE's management team. By taking direct leadership of SIE, Totoki may be signaling tighter cost controls are ahead for a unit that has spent heavily on game development and acquisitions.

Totoki also holds Sony's purse strings as the Japanese group's chief financial officer. When presenting quarterly earnings last November, he sounded a note of urgency over the gaming segment's earnings slump.

"Our biggest regret is that we have made a significant downgrade to the operating income forecast" for the second straight quarter, Totoki said during the earnings call.

SIE is known for its strong independent streak. At one point, Sony sent in a finance executive close to current group Chairman Kenichiro Yoshida in a bid to improve collaboration.

SIE "seems like a place with extraterritorial rights from the perspective of Sony Group's head office," said Hideki Yasuda, an analyst at Toyo Securities who has long covered the video game industry. "The head office probably aims to strengthen its involvement at a time when the gaming business faces a worsening earning environment."

Sony Group's gaming segment is forecast to earn an operating profit of 270 billion yen ($1.8 billion) for the fiscal year ending in March, down roughly 20% from three years earlier. The operating profit margin is expected to fall by half to just over 6%.

Sales of the new PlayStation 5 have not grown as expected. Returns on investment has also lagged.

Since June 2021, Sony has purchased nine game developers. Invested capital stood at 1.03 trillion yen in the year to March, more than double the amount two years earlier, with rising game hardware inventories also a factor.

The return on invested capital is projected to be 12.5% this fiscal year, far below the 47.5% logged three years earlier.

The wider gaming industry faces a fast-shifting landscape. More players are moving away from consoles like PlayStation toward online games on personal computers or smartphones. In 2020, Sony rival Microsoft launched a cloud service where paid subscribers can play console games on their PCs or smartphones.

Content is becoming a bigger factor than hardware for creating value. Microsoft is closing a $69 billion deal to buy Activision Blizzard, the developer behind the hit Call of Duty series. New technologies like the metaverse and generative AI are expected to drive up game development costs, even as companies compete to acquire the best content creators.
 

JAHGamer

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That Hideki Yasuda guy is an idiot...he's Takashi Mochizuki's (Bloomberg) #1 source for all of the fake news he spreads. But I wonder if there is any truth to this, Sony has been making some awful acquisitions and investments these last few years.
 

ChorizoPicozo

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The entirety of Sony should support Play Station to ensure total world domination. How is LG Tvs synonymous with Gaming TVs or how is Samsung TVs dominating the market and mindshare?

And don't get me started with Sony Pictures, a complete clown show only saved thanks to the MCU Spiderman deal.

So, they better don't fuck around and find out. especially in the years of consideration and the rise of different business models.
 
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JAHGamer

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Since June 2021, Sony has purchased nine game developers. Invested capital stood at 1.03 trillion yen in the year to March, more than double the amount two years earlier, with rising game hardware inventories also a factor.
9 studio acquisitions and only Housemarque, Bluepoint, and Firesprite are any good.......
 

Swolf712

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That Hideki Yasuda guy is an idiot...he's Takashi Mochizuki's (Bloomberg) #1 source for all of the fake news he spreads. But I wonder if there is any truth to this, Sony has been making some awful acquisitions and investments these last few years.
Doubtful. They didn't even spend the entire acquisition budget they were allotted, and Sony Proper was actually talking about expanding the war chest in that regard.

This seems like an attempt to spin broader things within the company into "PlayStation is in trouble", to be honest.
 
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Puff

Puff

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That Hideki Yasuda guy is an idiot...he's Takashi Mochizuki's (Bloomberg) #1 source for all of the fake news he spreads. But I wonder if there is any truth to this, Sony has been making some awful acquisitions and investments these last few years.

This article seems to be nothing but speculation. But Jimbo has been making bad decisions lately. Maybe there's some truth to that. Maybe a little bit.
 

JAHGamer

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This Hudeki guy is a joke. The thread can be closed

he's Takashis butt buddy. They probably have lunches together
Doubtful. They didn't even spend the entire acquisition budget they were allotted, and Sony Proper was actually talking about expanding the war chest in that regard.

This seems like an attempt to spin broader things within the company into "PlayStation is in trouble", to be honest.
That's true but I think some of their investments haven't panned out they way they'd hoped.
 

AshHunter216

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The whole article is speculation from someone with a history of bad takes who does some Mr. fantastic reaching to spin any PlayStation news as negatively as possible.
 
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Swolf712

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he's Takashis butt buddy. They probably have lunches together

That's true but I think some of their investments haven't panned out they way they'd hoped.
It would be a bit premature to judge how those investments have panned out, no? They only just acquired them and their projects are still in development.
 
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Ludwig

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It would be a bit premature to judge how those investments have panned out, no? They only just acquired them and their projects are still in development.
You are right. Right now they are liabilities that is costing Sony hundreds of millions dollars.
 

Zzero

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It would be a bit premature to judge how those investments have panned out, no? They only just acquired them and their projects are still in development.
I agree except Nixxes, assuming they've been the ones behind the low quality ports recently.
 

Cool hand luke

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I can't believe they edited the article to remove these paragraphs
The colossal failure of the PlayStation 5 has resulted in the shameful resignation of its longtime CEO, Jim Ryan. Amid the record profits and surge in hardware sales overseen by Ryan during his tenure, Sony Group President Hiroki Totoki has been quoted as saying "enough is enough". While officially only interim CEO, an analyst at Bloomberg says he is here to stay:

"The walled garden model may have led Sony to dominate the console market and reap massive rewards, but on Xbox, you can subscribe to a service that offers access to over 100 high-quality games, all the benefits of Xbox Live Gold, and an EA Play membership for one low monthly price. This is the best value in gaming and Sony simply can't compete without following them into the pit," said Takashi.
 

Yobo

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Lowered profit because of increased headcount afforded by the yearly growing revenue and development goals of Sony is bad. Investing to grow is bad

But spending $70 billion (way beyond anything Xbox has profited in over 20 years) for a pie in the sky cloud ambition, then losing the rights to cloud streaming through regulation. That's good
 

nongkris

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I think post Jim Ryan era will define Sony for the entire generation. I would say they've made good investments if the companies they acquire aren't growing their operating income but just adding to the headcount.

It's always scary when finance people are brought in to lead things, even though it's only interim. As they are usually a fan of cost cutting and raising prices without any increase in quality. But we shall see.