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PlayStation's problem: third-party royalties... or PS+ revenue?

It's a red pill/blue pill issue, really.

[The GameDiscoverCo game discovery newsletter is written by ‘how people find your game’ expert & company founder Simon Carless, and is a regular look at how people discover and buy video games in the 2020s.]

Well, it’s definitely a new week here in the Discoveryverse(TM). We hope you spotted our San Diego Comic Con announcement that Phase 6 of our cinematic universe will conclude with a ‘Gabe vs. Tim(s): Platforms Of Madness’ signature event? Excellent.

Oh, and a little milestone. We’ve reached 12,000 free subscribers to this newsletter, and are approaching 1,000 in the Plus paid sub - including comps & group subs. Given this a) isn’t a light read b) is a B2C newsletter, we’re delighted with these results!

PlayStation’s biz model: did they just choose a pill?

A screenshot from the Matrix. Morpheus offers Neo the Red and Blue Pills.
Image via Warner Bros. Pictures

We already devoted a newsletter to Sony’s multiplatform future - and its prioritization of first-party GaaS (Games as a Service) revenue - a few weeks back. But with Sony’s latest financials coming out late last week, we can take a broader look at their biz.

Derek Strickland over at TweakTown has done his customary good job on multi-year graphs for wider context. But a YoY 2% revenue drop and 37% profit drop isn’t a good look for PlayStation as a division. There’s good detail shown here on ecosystem:

A chart showing PlayStation hardware and software sales.

Sure, you can argue that ‘full game software’ is an outdated metric to use in today’s IAP or F2P-centric market? But either way, it’s a poor performance vs. Q1 fiscal 2021, when Sony at least had Returnal and Ratchet & Clank: Rift Apart launching.

So, if I was in PlayStation management, and the stock market was seeing this view of my company, I’d probably… be encouraging my third-party partners to launch more full-priced games for my 30% cut? (While prepping HQ first party titles myself!)

But that’s running into an issue that NPD’s Mat Piscatella vocalized a few weeks back. AAAA PC/console releases are either a) being delayed or b) being commissioned less:

Of course, underlying all of this stress is the COVID pandemic. There’s a ‘lockdown hangover’ from all that game playing in 2020 and 2021 - you can see it in Microsoft’s results too, where Xbox was the poorest YoY performer of any Microsoft division. (Sony’s CFO Hiroshi Totoki agreed post-COVID issues were an issue for PlayStation.)

And there’s the PS5 hardware supply issues. As DomsPlaying noted on Twitter last week: “PlayStation 5 lifetime shipments are now at 21.7M, after selling 2.4M in the quarter ending June 2022. Compare that to PS4, which was 25.4M after 7 quarters on market, and it's clear how much supply is impacting current gen.”

The ‘only on PS5 can we provide these unique experiences’ pitch was a little outdated, even when Sony started pitching it. But the continuing pandemic hardware supply issues have put another nail in that coffin. Why? Sony needs PS4 players to keep playing the hardware for years longer than they originally intended.

PlayStation Plus Game Catalog: it’s for old(er) games, silly…

Key art for the PlayStation Plus game catalogue.

So, to the ‘either/or’ discussion. As you can see above, PlayStation Plus users are fairly stagnant - at around 47 million. And the current financial reporting doesn’t split out the PS+ tiers. Thus - even if there are upgrades to PS+ Extra/Premium in subsequent quarters, it won’t show clearly.

So, to boost numbers? PlayStation could go ‘full-on Xbox’, devoting an entire, more prominent blade of their OS to PlayStation Plus. They could sign small, medium, and even large third party titles for ‘Day 1 PlayStation Plus Extra/Premium’ deals.

But, following Sony’s dev conferences held in the U.S. and the U.K. recently, that’s not what GameDiscoverCo is hearing. We wondered if Stray’s PS+ Extra & Premium appearance was part of a greater trend. But Sony seems to be saying it was a one-off, and its PS+ ‘Game Catalog’ is looking for 12-18 month old games, first and foremost.

Backing this up, August 2022 has a range of Yakuza games hitting ‘Game Catalog’ - the latest of which launched in 2020. That title is also in the base PS+ layer for August, alongside the Tony Hawk’s Pro Skater 1 & 2 remake, which launched in September 2020 on PS4/PS5. Perhaps you’re seeing a pattern here? (It is called ‘Catalog’, after all.)

So, we’re not saying there won’t be a ‘Day 1 on PS+ Premium’ indie game cadre at some point in the future. Sony’s still taking pitches for that. Personally, we think they’re missing a trick by not doing it. Titles like Lawnmower Sim (!) or Tunic were perfect Day 1 Xbox Game Pass games & wouldn’t sell oodles standalone.

But perhaps Sony is stuck in the quandary - ‘if we put great new third-party games in PS+, people will buy even less new third-party games’? To which I’d say… if there are less third-party AAA titles coming out in the future, where are all the catalog AAA titles to put in your Catalog(ue) coming from? (There is no clear answer here, btw.)

[We’re GameDiscoverCo, an agency based around one simple issue: how do players find, buy and enjoy your premium PC or console game? We run the newsletter you’re reading, and provide consulting services for publishers, funds, and other smart game industry folks.]

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