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Sony cuts earnings forecasts after sluggish game business

  • 16% cut in yearly forecast for game units
  • Games operating profit declined 37% in the first quarter
  • Game software sales fell 26% to 47 million units
  • Lack of high-profile titles, reduced demand due to COVID easing – CFO

TOKYO (Reuters) – Sony Group Corp (6758.T) on Friday cut its profit forecast after a weak first quarter for its PlayStation business. COVID-19 restrictions prevent home gaming.

Sony, however, said the business will draw support from the upcoming games slate and to deal with supply chain obstacles that disrupted production of the hit PlayStation 5 console.

Serkan Toto, founder of the Kantan Games consultancy firm said:

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“Sony actually seems to have more and more PS5s on store shelves, especially in the US and Europe.”

Operating profit for Sony’s main gaming division fell 37% from a year ago in the April-June quarter. Chief Financial Officer Hiroki Totoki blamed this on the lack of his top title amid the COVID-19 pandemic and people’s return to normal life.

According to Totoki, “Growth of the entire game market is slowing down due to the increased opportunities to go out due to the decrease in the number of new coronavirus infections.

Sony has cut its full-year operating profit forecast for its games division by 16%. This is because the Halo creator’s deal with Bungie was completed earlier than expected, citing an expected decline in game sales from outside developers. .

The operating profit forecast for the entire group through March next year is down 4% to 1.11 trillion yen ($8.37 billion).

At a launch event in Tokyo, Japan, June 29, 2022, Sony Group’s new line of headphones and monitors, the Inzone line, is targeting the growing video game PC market. REUTERS/Kim Kyung-Hoon

Sony’s first-quarter operating profit rose 9.6% to 307 billion yen, beating analysts’ expectations, boosted by demand for movies and TV shows.

The conglomerate says it aims to sell 18 million units of the hit PS5 console this fiscal year as supply chain disruptions ease and production ramps up. It sold 11.5 million units in the year ended March.

“By recovering from the impact of the lockdown in Shanghai and improving parts supply, we are working to bring supplies forward for the year-end holiday season,” Totoki said in a news briefing.

Sony sold 2.4 million PS5 units in the first quarter, up only slightly from the same period last year, while software sales fell 26% to 47 million units.

Sony competes with Microsoft (MSFT.O). Microsoft (MSFT.O) is aggressively acquiring content to push to its Xbox Game Pass subscription service.

This week, Redmond, Wash.-based Sony rival reported declining fourth-quarter gaming revenue, with upcoming high-profile gaming titles lagging behind.

PlayStation’s pipeline includes highly anticipated titles such as the remake of The Last of Us in September and God of War Ragnarok due out in November.

Sony shares ended flat before the earnings results. The group’s stock has lost about a fifth of its value this year compared to the blue chip benchmark Nikkei 225 (.N225), which fell 3%.

(1 dollar = 132.6600 yen)

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Reported by Sam Nussey. Additional reporting by Nivedita Balu. Edited by Stephen Coates and Edmund Klamann

Our standards: Thomson Reuters Trust Principles.

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