Reported this morning, Sony Corp has cut the production of its upcoming console by four million units. This reduces their sales forecast to 11 million units for the financial year. This follows reports of production issues around their custom built chip integral to the new hardware.
So far, this year’s not been so bad for Sony. Like other gaming orientated businesses, it’s done very well from the pandemic. More people are staying at home, and naturally pickling up PlayStations for some light lock-down relief. Starting the year with a pessimistic view of sales throughout 2020, the pandemic led to a revision of their position. Sony has since seen the fastest ever adoption to their PlayStation Plus subscription service. Together with record breaking sales form exclusives, such as the Last of Us Part 2 and Ghost of Tsushima, things have turned out well.
All eyes are on Sony for tomorrow’s big reveal
But this latest challenge comes as an unwanted headache as Sony now face very competitive pricing from Xbox, who revealed an entry point of $299 for their next gen Xbox Series S. With the digital only PS5 expected to retail around $400*, lower sales forecasts could add additional pressure at point of sale.
Citygroup analysts including Kota Ezawa wrote in response to Sony’s revised targets;
“If the news is accurate, we would view the reduction as negative”.
Perhaps this contributed to the erased gains from Sony’s shares on Tuesday to the tune of 2.4%, the lowest decline since July this year. But either through share depreciation, or lower sales volume, Sony’s profit margin will clearly be at risk. The result is the same, and Sony will be looking to recuperate revenue elsewhere.
With just 24 hours to go until the big reveal, all eyes are now on the Japanese gaming power house, and the crucial price of the much anticipated PS5 range. But with this significant reduction in volume the question now seems to be whether we’ll be disappointed with price, or availability. Pre-order button spamming at the ready…
* according to Bloomberg Intelligence analyst Masahiro Wakasugi
“Video games are great. I should know, I’ve played some.”
Olly S, July 2020