Sony: Live Service Is Not The Way To Go

Core Viewpoint - Sony's Q1 '24 earnings were decent, but the gaming segment's strategy, particularly the push into live service games, requires reevaluation due to mixed results and a recent game failure [3][8] Financial Performance - Sony's Q1 revenues reached ¥3011.65 billion, a 1.6% year-over-year increase, while GAAP EPS was ¥189.43 [4] - In dollar terms, revenues were $20.51 billion, reflecting a 0.56% year-over-year decrease but beating estimates by $1.52 billion; EPS was $1.28, exceeding expectations by $0.30 [4] - The company raised its FY24 revenue guidance to ¥12.610 trillion from ¥12.310 trillion and increased the operating profit forecast to ¥1.310 trillion from ¥1.275 trillion [4] Segment Performance - The Gaming & Network Services (G&NS) segment saw a 12% increase in revenues, while Music grew by 22.5%, Pictures by 5%, Electronics & Solutions by 5.5%, and Imaging by 23% [4] - Hardware sales in the gaming segment dipped by approximately 5% year-over-year, but software sales performed strongly, driven by successful titles like Helldivers 2 and Ghost of Tsushima on PC [5] Live Service Strategy - Sony's heavy investment in live service games has faced challenges, with the cancellation of anticipated titles and mixed success from recent releases [6] - The unexpected success of Helldivers 2 provided a temporary boost, but the failure of the recent game Concord indicates potential issues in the live service strategy [6] - The gaming industry is showing signs of fatigue towards live service games, necessitating innovation to regain player interest [8] Other Segments and Future Outlook - The Music segment is performing well and is expected to continue its growth trajectory, which may offset challenges in the gaming segment [7] - The PS Plus price increase did not significantly impact subscriber numbers, indicating strong value perception among users [7] - The upcoming release of God of War Ragnarök on PC is anticipated to boost sales and mitigate the impact of recent gaming failures [7]