Giuseppe Nelva
Ryan was asked to comment on the Metaverse, and he mentioned that nobody really knows what the Metaverse will look like in the future but he does not believe that it will directly replace the existing ways in which people play games. It will appeal to some individuals and to some portions of the market but many will prefer enjoying games in the way that they have played them in the past 30+ years.
He thinks that the Metaverse may lead to some form of incrementally in the business, but nobody knows yet to what extent that will be meaningful. Sony considers it to be an opportunity for additional growth for now.
Ryan then mentioned that PlayStation Studios have a great track record of delivering great, narrative-driven, and graphically beautiful single-player games, but he admitted that Sony may have restricted itself to a rather narrow segment of the gaming market. By expanding to PC and mobile and live services, they have the opportunity to expand outside that narrow segment and be present everywhere in the gaming market. If executed right, with intelligence, and excellence, Ryan believes this is potentially an extremely large opportunity for significant growth in the number of people playing Sony’s games and spending money on them
If Sony is successful in making a portion of the 12 live services games expected to be active by March 2026 enjoy critical and commercial success, the impact will be “completely transformational” to the company’s business structure.
Ryan explained that gamers want great games. That’s the first and most overwhelming perspective. How they are delivered is “a rather secondary concern.” In that perspective, PlayStation Studios have never been in a stronger position than now and Sony expects that such a position of strength will only continue and grow.
Sony is in a “virtuous cycle” in which success has allowed investment which is generating more success, which is allowing for further investment, and in turn, will generate yet more success. The company feels that if they moved to a different model which involved putting its AAA games into a subscription service on day 1, there is a significant risk that the virtuous cycle would be compromised and potentially broken, and that is not in the best interest of the PlayStation gamer.
We also hear that right now Sony is investing a lot in partnership with independent and other third-party developers to secure a “considerable pipeline of attractive virtual reality content” at the launch of PlayStation VR2. That investment will continue to grow as the installed base of the headset grows.
Ryan then talked about acquisitions and explained that Sony is “not at all finished with its strategy to grow PlayStation Studios.” On top of that, they will have to spend a lot of management time and energy ensuring that the large number of studios acquired are properly integrated and managed.
To the extent that potential targets fit with Sony’s strategy and allow to accelerate the way in which the company delivers on its strategy, they will “certainly consider further M&A activities “(Mergers & Acquisitions) to add to its business portfolio.
Sony anticipates that the 15% ARPU (Average Revenue Per User) differential that the PS5 enjoys over the PS4 will increase over time. First of all, the quality of the games that Sony sees coming to PS5 is “only going to increase with time” and they “already have visibility of some wonderful and very exciting games that show a relatively great increase in quality” compared to what was seen during the same period in the lifetime of PS4.
Secondly, the move to a great percentage of live service games is likely to stimulate the increase in ARPU. Great live service games have an ARPU in the many hundred dollars compared to $60-70 of single-player games. Not all live service games manage that, but if Sony is successful in achieving this kind of results in a meaningful percentage of the 12 live service games that are being developed, that will move PlayStation’s overall ARPU to levels never seen before.
Lastly, Ryan explained that it’s too early to draw conclusions but the very initial market reaction to the new PlayStation Plus offering is “extremely positive.” If Sony executes well as it implements the service worldwide, the possibility of significantly growing the subscriber game is very real, especially as the sales of PS5 consoles start to accelerate.
On top of that, the potential of the service goes beyond the increase of the absolute number of subscribers. If many join the second or third tier of the service to access their “really attractive features and gaming propositions,” this won’t just grow the number of subscribers, but also the ARPU for each subscriber.
You can read more about the presentation that preceded the Q&A session in our dedicated article.
