PlayStation had a blockbuster Q1 FY20 due to PS+ and digital game sales
Revenue up 32% and profits up by 68%
PlayStation, also known internally at Sony as the “Game & Network Services Segment,” has reported blockbuster numbers for Q1 FY20 due to dramatically higher demand for entertainment. While COVID-19 laid waste to physical goods sales and general electronics, with most countries on lockdown, consumers looked to home for new entertainment options, which translated to big business for PlayStation.
To my surprise, PS4 sales took a bigger than expected dip when the pandemic should have helped. The likely culprit is PS5, which is scheduled to be released in late 2020. Right around when the pandemic hit is when Sony shifted its attention towards its next-gen console and began to talk about it more deliberately and frequently. This was likely the key reason why PS4 came in softer than my predictions at 1.9 million versus 3.2 million in Q1 FY19. However, compared to the previous quarter, sales were up by 500K.
But the real story of the quarter is software (games) sold, the shift towards digital, and PS+ subscribers. In Q1, PS4 owners gobbled up 91 million new games, 18.5 million of which were first-party games (Naughty Dog, Santa Monica Studios, Insomniac Games, etc.). For comparison, those sales came in at 42.9 in Q1 FY19, which was an all-time high then, with 11.7 million being from first-party studios.
If you’ve ever wondered why there will be two PS5 models, one being an all-digital console, then the following should answer it. During Q1 FY20, 74% of games sold on PS4 were digital, up from 53% in Q1 FY19. With the pandemic making buying physical games a more difficult task and no digital-only PS4, expect these numbers to continue to dramatically increase over the next year, especially once PS5 arrives with its digital-only edition.
With increased game purchases also came a spike in PlayStation Plus subscribers; 44.9 million versus 36.2 million in Q1 FY19. Even more impressive is that PS+ subscribers were at 41.5 million in Q4 FY19, representing a gain of 3.4 million. Sony is also reporting a new metric that will be offered future quarterly earnings reports as well, PSN monthly active users, which hit 113 million. Presumably, this is the highest it’s ever been.
All of these numbers ultimately meant blockbuster financials from PlayStation. Revenue for Q1 FY20 came in at ¥606 billion ($5.7 billion), and profits were ¥124 billion ($1.17 billion) compared to ¥457 billion ($4.3 billion) and ¥73.8 billion ($698 million) respectively in Q1 FY19. The net result? Revenue was up 32% year-on-year, and profits were up 68% compared to Q1 FY19.
From Sony:
Q1 FY2020 (year-on-year)
Sales: 148.6 bln yen (32%) significant increase (FX Impact: -14.8 bln yen)
- (+) Significant increase in game software sales
- (+) Significant increase in sales for PlayStation®Plus (PS Plus)
- ( — ) Decrease in PlayStation®4 hardware sales
OI: 50.2 bln yen significant increase (FX Impact: -2.8 bln yen)
- (+) Significant increase in game software sales
- (+) Significant increase in PS Plus sales
- ( — ) Increase in costs
FY2020 Forecast (year-on-year)
Sales: 522.4 bln yen (26%) significant increase
- (+) Significant increase in game software sales
- (+) Significant increase in hardware sales due to PlayStation®5 (PS5TM) launch
OI: Essentially flat year-on-year
- (+) Significant increase in game software sales
- (+) Significant increase in PS Plus sales
- ( — ) Increase in SG&A expenses related to introduction of PS5
- ( — ) Increase in the costs of sales ratio for hardware
- FY20 Q1 sales increased 32% year-on-year to 606.1 billion yen and operating income increased 50.2 billion yen to 124.0 billion yen.
- FY20 sales are expected to increase 26% compared to FY19 to 2 trillion 500 billion yen primarily due to a significant increase in game software and hardware sales.
- Operating income is expected to be 240 billion yen, flat compared with FY19 because the benefit of the increase in sales and an increase in profit from PlayStation®Plus (“PS Plus”) are expected to be offset primarily by an increase in costs related to the introduction of the PlayStation®5 (“PS5TM”).
- Hardware, Software and Network Services all benefited in the current quarter from the positive impact of stay-at-home demand resulting from the spread of COVID-19.
- In the Software space, the in-house title The Last of Us Part II was a huge hit and non-in-house titles, including free to play titles, contributed significantly.
- Ghost of Tsushima, which we released on July 17, sold through 2.4 million units in the first three days since launch, making it the fastest selling in-house new game software IP for the PlayStation®4 (“PS4TM”).
- In the Network Services space, PS Plus subscribers have reached approximately 45 million as of the end of June and, at a time when the communication network environment was under pressure, the PlayStationTMNetwork (“PSN”) did not falter or experience any other issues and is continuing to deliver high-quality entertainment experiences.
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