Sony gives us a glimpse of a post-console PlayStation

The Big Story

Sony gives us a glimpse of a post-console PlayStation

We're six months into the next generation of console hardware, and Sony is riding high. The PlayStation business is doing better than ever with record sales and profit, and the company's new PlayStation 5 console has sold more units since launch, at 7.8 million, than its predecessor did back in 2013, despite severely restricted supply.

But what's different today than with the PS4 launch nearly a decade ago is that hardware sales are no longer the most important metric for judging success. In a pair of presentations released online last week — one a corporate strategy overview, the other an investor day presentation — the company gave us a clear look at where it sees growth for PlayStation and the console business as a whole.

Sony's documents show that hardware is taking a back seat, not just for PlayStation but also the games business overall. The secret, like with so many tech companies today, lies in software and services.

• Sony now touts 47.6 million PlayStation Plus subscribers and 3.2 million PlayStation Now subscribers, making its subscriptions platforms a combined multibillion-dollar annual business.
• The presentation itself admits the "importance of the console business model is reducing," with Sony citing a growth in software, services and peripherals from 52% of overall Sony Interactive Entertainment revenue in 2013 to 80% in 2020.
• Still, Sony says it expects to break even on the standard edition PS5, which so far has been sold at a loss. Sony is also targeting more than 50% market share in the console business by 2025, up from the PS4's 45% market share.

But the PS5 platform is still important to Sony. In fact, it's the foundation for how the company intends to grow its audience and, eventually, migrate that audience to new platforms.

• Sony says engagement is higher on the PS5 than the PS4, with more than 8.6 million monthly active users on the new device compared to 7.1 million on the old. Players have also logged almost double the monthly average playtime hours each month since the November launch.
• PS5 players are also spending more money, and increasingly on digital-only items and free-to-play. PS5 owners are spending 231% more on add-ons, like in-game microtransactions and downloadable game content, and 15% less on full games, for an average overall increase in spending of 15%.
• The disc-less PS5 is also generating an overall spending increase of 8% compared to the version with a disc drive, thanks to players spending 61% more on add-ons and reducing full-game purchasing by just 17%. And free-to-play gaming now accounts for 25% of all PlayStation Store spend, up from just 5% in 2016.
• The PlayStation platform is much more diverse, now with at least 47% of the player base consisting of women compared with 18% during the PS1 era.

Sony says the future of PlayStation is all about expanding into new territory, beyond the console and into new media formats and device categories.

• Cloud gaming, mobile and virtual reality are where Sony sees massive growth potential. The company is now exploring bringing its original franchises to smartphones and the PSVR platform, while also promising day-and-date releases for some of its biggest titles (like Horizon Forbidden West) on its PS Now cloud platform.
• It was once unthinkable for a PlayStation exclusive to land elsewhere, but Sony says it's increasing its focus in porting titles to Steam and other storefronts after Horizon Zero Dawn made a 250% return on investment. Days Gone launched on May 18, and Uncharted 4: A Thief's End is up next, the presentation revealed for the first time.
• Film and television crossovers are another big growth area for Sony. There's an in-the-works The Last of Us adaptation at HBO under the new PlayStation Productions arm and an upcoming Uncharted film finally off the ground, with more TV and film adaptations in the works and a new Netflix streaming deal.

Sony's vision for PlayStation sounds like a post-console future, in which the console doesn't fade but instead pulls up and amplifies other parts of the business until it's just one of many equitable segments. It is in many ways like Microsoft's roadmap for the Xbox back in 2013, which the company never fully capitalized on due to strategic missteps, messaging failures and its lack of in-house studios.

This time around, it's Sony that wants to remind us that it's not just about video games played on consoles anymore. It's about being at the center of all entertainment, no matter the screen.

Overheard

• "Everyone should try and do their best job of competing… and at the end of the day, end users and regulators are the ones who are going to keep us in check." —Microsoft CEO Satya Nadella responded to a question from Axios last week on whether he thought the console game market's 30% cut for digital storefronts will change. The commission rate featured heavily in the Epic v. Apple antitrust trial, where Apple argued it was an industry standard practice.
• "Our story is political. A story about a modern revolution must be." —Far Cry 6's narrative director Navid Khavari broke the silence on Monday surrounding Ubisoft's new Cuba-inspired entry in the open world shooter series, acknowledging in a blog post his company's repeatedly clumsy handling of political themes.
• "We cannot go into the details of where we are with that. But there is a process. We're in the middle of [it] [and] the decision will be announced when it's ready to be announced." —CD Projekt Red's Michał Nowakowski, its senior vice president of business development, spoke on a call with investors on Monday about when Sony might relist Cyberpunk 2077 in the PlayStation Store. The removal factored into a severe drop in profits in its latest quarterly earnings.

A MESSAGE FROM AMAZON

A recent report studying voluntary increases to wages by businesses found that when Amazon raised its pay to $15 in 2018, it led to a 4.7% increase in wages for employees at other companies in the same market. The study also found no significant job losses in the community after the wage increase.

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Lootbox

• On Protocol: A new, potentially more powerful version of the Nintendo Switch could arrive soon, but the company may not even need the next big thing to keep winning.
• Stadia lost the Google Duo creator to Clubhouse. Justin Uberti, a Google employee of nearly 15 years and the creator of the Duo video chat app and WebRTC standard, left Google's cloud gaming service for a gig at Clubhouse, according to 9to5Google.
• Nvidia launched new Ti variants of its RTX 3070 and 3080 GPUs on Tuesday. Graphics cards are still near-impossible to buy without paying exorbitant prices, but Nvidia is barreling ahead with newer, more powerful versions of its consumer chips, The Verge reports.
• Borderlands 3 is at the center of another cross-play debacle. Gearbox Software CEO Randy Pitchford revealed on Twitter last Thursday that Borderlands 3 will be enabling cross-play soon, but not for PlayStation owners. He failed to elaborate on the reason, leaving many to speculate about a potential dispute between Sony and publisher 2K Games.
• Twitch warned of increasing DMCA complaints from the music industry. Music publishers are increasingly scanning creators' recorded video clips for unauthorized use of copyrighted music in the background, Kotaku reports.
• Horizon Forbidden West dazzled in a new gameplay video with 14 minutes of impressive footage. But there's still no release date, which is bad news for any fans hoping to pick back up as protagonist Aloy in 2021.
• Valve failed to overturn the Steam Controller patent verdict. Valve was ordered earlier this year to pay $4 million to third-party controller maker SCUF Gaming and its parent company Ironburg Inventions for patent infringement. Now, its attempts to have the jury verdict thrown out were unsuccessful, reports The Esports Observer.
• Kotaku has a new editor-in-chief. Patricia Hernandez now has the job, The Washington Post reports, after former head editor Stephen Totilo left for Axios back in February. Hernandez is a former Kotaku staffer who is departing her role as culture editor at Polygon to lead the site she first joined as a freelancer in 2011.

LOOK OUT FOR

The problem with your Final Fantasy VII Remake upgrade

On June 10, Square Enix will release an upgraded version of last year's role-playing hit Final Fantasy VII Remake for the PS5, though with a number of headache-inducing qualifiers for those who already own the game. It represents one of the first attempts to try and serve DLC-style content across the PlayStation's two existing console platforms.

Current owners of the game get a free graphical upgrade, but not the update's standalone Yuffie story content. That's sold separately for existing owners, unless you happened to purchase the original game on disc and bought a discless PS5. In that unfortunate case, you're out of luck. The same is true if you claimed the PS Plus version of the game. Confused yet? So are we.