The PlayStation division’s operating profit was nearly halved due to unfavorable market conditions and increased game development spending.
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Sony’s recent Results of fiscal year Q1’22 show steep declines in its billion-dollar gaming segment and highlight the tumultuous market that could inhibit continued growth. Games & Network Services, which includes the powerful PlayStation brand, saw substantial declines in total revenue when converting from yen to USD based on foreign exchange market rates provided by the company.
According to the data, PlayStation’s net sales revenue fell to $4.67 billion in the first quarter of 2022, down $890 million or 17% year-over-year.
Q1’22 operating profit was $408 million, representing a year-over-year decline of $52 million or 46%.
There are several causes for these falls. The stiff competition of the previous year is significant. Like us explained with Capcom’s results, which also fell 50%, Sony had set a high in FY20 and FY21 due to coronavirus spending benefits as consumers sheltered in place, alongside more favorable conversion rates. Consumers are also affected by inflation and are apparently spending less money on video games.
Sony claims first-party and third-party game sales declined in Q1 22, as evidenced by hard data provided by the company. First-party games were down 4.1 million units and third-party games were down 12.4 million units.
Microtransaction spending in PlayStation’s add-ons segment was also down nearly half a billion dollars year-over-year. Add-ons carve out the lion’s share of PlayStation revenue every quarter/year due to the sheer volume of microtransaction spending opportunities in high-powered and mega-popular F2P games like Fortnite, Apex Legends, and Warzone.
Revenue from video game and add-on content sales also fell 27% to $2.33 billion, but hardware sales were up 13% year-over-year to $1.04 billion. , reflecting strong PlayStation 5 adoption as well as Sony’s improved earnings. margins on each console sold.
Unfavorable exchange rates primarily affected PlayStation’s USD conversions. The exchange rates between the yen and the USD increased from 109.5 in Q1’21 to 129.4 in Q1’22, representing an 18% increase in the value of the USD against the yen. The US dollar has more purchasing power in Japan during the comparative period.
Sony is also spending more money on game development and acquisitions. The company is planning a bunch of live games and wants to release 12 live service titles by 2025. It also recently bought Haven, a new studio led by Assassin’s Creed vet Jade Raymond, and Bungie, the developer of Destiny and legacy Halo games.
Below, we also have data on Sony’s growing Other segment, which includes PC gaming revenue, and Network Services, which includes PlayStation Plus.