Sony President, COO and CFO Hiroki Totoki was asked about his assessment of the company’s PlayStation division. He did not mince words.
We’ll go straight to the big quote in our headline. As reported by Video Games Chronicle, he said this when asked about their gaming side in an earnings call:
“It’s been about four months [since I became Chairman] and I’m trying to demonstrate leadership and have as many meetings as possible with the management team.
I’ve also visited studios, and everyone is working really hard to fulfil their responsibility to try to optimize the business, and I understand that.
But overall growth and sustainable profitability for increasing margins… how will that translate to these goals? I don’t think people understand that deeply. I think that is the problem of the organization.”
I think we can all agree that this seems to be a harsh assessment, especially given how successful Sony has been in this console generation. But we should take his statement in their proper context.
Totoki is set to become the chairman of the PlayStation division, while also fulfilling his roles as Sony’s President, COO, and CFO. That may sound like a lot of jobs to take on, but he isn’t planning to stay on permanently, and there’s a particular reason he wants to take over.
He is assuming the post after the retirement of current PlayStation chair Jim Ryan. Jim was head of the division at a time when the company had taken a dominant position in the video game console business, clearly overtaking Xbox, and perhaps not quite matching Nintendo Switch on hardware and first party sales, but still ahead in other metrics.
But, all this talk of PlayStation’s success has been somewhat misleading. As we learned in leaked documents from the Insomniac ransomware attack, the company is not making their first party games in a sustainable manner, spending too much for too little sales of their titles. In fact, even their most successful first party games, like Marvel’s Spider-Man 2 with its now 10 million copies sold, still reflects a poor attach rate for what’s now at 50 million PlayStation 5 units sold and counting.
When news of Jim’s retirement and Hiroki’s pending entry into PlayStation was announced, we learned through the grapevine that the sentiment within Sony was that Jim had made some serious mistakes in managing the division lately. Interestingly, the main issue was not that Jim tried to block the Activision deal and failed. Rather, Jim lined up production of live service games that are taking too long to release, and they spent too much up front on mergers and acquisitions, such as Bungie, too much all at once.
Lastly, as noted in Sony’s report in today’s earnings call, they will miss their target to sell 25 million PlayStation 5 consoles by end of financial year March 2024. They sold 8.2 million consoles in the last quarter, and are now expecting to only sell 21 million by March 2024.
It certainly makes a difference when gamers only see the industry in terms of the games and game features they want to see on their favorite consoles, and not have to worry about the bigger picture of running a business. Unfortunately for PlayStation fans, they are about to get an unwanted education on this end, as Hiroki looks to streamline Sony’s business and get them back to profitability.
