Yesterday, we were talking about $70 game price hikes. Today, we’re seeing some economic validation in why that’s happening. For gaming studio Sony, news surrounding it’s PlayStation 5 console isn’t great this morning.
We’ll explain.
Sony’s stock dumped $10 billion last week after the massive tech company cut its sales forecast for PlayStation 5. The PlayStation 5 is a centerpiece in Sony’s financial bliss, however, now it’s contributing to at least a little gloom.
Many analyst believed that the original sales predictions were too high, but the company experiencing declining margins isn’t helpful.
Going inside the numbers: Sony originally predicted 25 million PlayStation 5 units would move from the shelves. That’s now down to 21 million.
And with that, share value descended.
Another issue seems to be the operating margin in the gaming business from a general perspective. In December, CNBC calculated that number at 6%. In December of 2022, that number came in at 9%.
The circumstances are becoming more and more frustrating for a gaming company that’s consistently boasted glowing financials.
“Their rev (revenue) on digital sales, add-on-content, digital-downloads are at all time highs… And yet their margins are at decade-lows. This is just not acceptable,” Atul Goyal, equity analyst at Jefferies, said in an email to CNBC.
This places Sony at 20+ year lows.
The core belief is that the gaming economic environment is driven by rising software production costs. New games have massive budgets as a way to compete. Its a compounding issue. Your game won’t sell if the graphics and storyline and audio isn’t on point.