Sony raises forecasts as PS5 is smash hit with gamers

Sony boosted its annual guidance for the second time in three months as a pandemic-driven gaming boom led to a blockbuster launch of its new PlayStation 5 console and an increase in digital downloads. 

The Japanese entertainment group confirmed on Wednesday that it had sold 4.5m units of the PS5 since its November 12 release, driving a 40 per cent year-on-year boost to its quarterly gaming revenue even as it wrestled with supply constraints.

The figure put it well ahead of an estimated 2.4m units of Xbox Series X sold by rival Microsoft since its November 10 release, according to market research company GamingSmart. Microsoft last week said the launch of the new console lifted gaming hardware sales by 86 per cent during the quarter.

For the October to December period, the strong performance of Sony’s PlayStation division lifted the company’s revenues and profits far above market expectations even though new consoles are lossmaking at launch and pressured by high marketing costs. 

Operating profit rose 20 per cent for the quarter from a year earlier to ¥359.2bn ($3.4bn), exceeding analysts’ forecasts of ¥188bn, according to S&P Global Market Intelligence.

Sony’s gaming division is heading for its best year after the company raised its group-wide operating profit forecast 34 per cent to ¥940bn for the 12 months ending in March.

Analysts say the robust results underscore a shift in consumer trends towards digital downloads and subscription services that was accelerated by the pandemic as more people spent time at home playing games. 

Quarterly sales on digital software increased 35 per cent from a year earlier, while “add-on content” revenue from spending on virtual items in free-to-play games jumped 47 per cent. Hiroki Totoki, Sony’s chief financial officer, also said 87 per cent of PS5 users had subscribed to its PlayStation Plus service. 

“It is really striking that add-on content was such a big contributor for Sony, and gamers are spending more money on items inside free-to-play games,” said Serkan Toto, a Tokyo-based analyst and games industry consultant.

At an online news conference, Mr Totoki said the company was on track to surpass 7.6m units of PS5 sales by the end of March. But he admitted the PS5 supply was also affected by the global shortage of chips caused by the boom in sales of gaming consoles, laptops and televisions.

“We are impacted in no small measure by the global chip shortage and it will be quite difficult if we want to increase capacity from here,” he said. 

In addition to games, Sony also lifted the outlook for its other divisions as the pandemic has boosted demand for all forms of entertainment, highlighted by the huge popularity in Japan of its animated film Demon Slayer: Mugen Train.

The group also raised its full-year operating profit forecast for its image sensor division 68 per cent to ¥136bn after it was granted a special licence from the US to supply Huawei, its second-biggest customer after Apple. Sales of Sony’s CMOS sensors used in smartphone cameras had been hit by US sanctions against the Chinese telecoms equipment group.