PS4 heading into end of its life cycle, PlayStation CEO says

The “slim” PlayStation 4, the PlayStation 4 Pro and the DualShock 4 controller.
Samit Sarkar/Polygon

The PlayStation 4 is still going strong, but as hardware sales begin to decline, Sony is focusing more on the online services and subscriptions that are tied to the platform, the company said today during its annual Investor Relations Day.

Three years ago, Andrew House, then-CEO of the PlayStation division, said that 2015 was “the beginning of a harvest period” for the PS4. (In a business sense, the “harvest period” refers to the phase of a product’s life cycle when a company reduces investment to reap maximum profits, although House noted that Sony still planned to invest for the future during that year.) Today, PlayStation CEO John Kodera said the PS4 is entering the final phase of its life cycle, according to Wall Street Journal reporter Takashi Mochizuki.

The PlayStation business has done very well for Sony since the PS4’s debut in November 2013, delivering steady increases in operating income and generating a cumulative cash flow of more than 700 billion yen ($6.31 billion) for the 2013-2017 fiscal years. Sony is projecting another improvement in PlayStation operating income for its 2018 fiscal year, which ends March 31, 2019, although the company expects the jump to be smaller than in recent years: an increase of just 7 percent to 190 billion yen.

Much of the negative impact dragging down that forecast comes from an expectation of lower hardware sales and higher costs associated with those sales. Sony projects it will sell 16 million consoles during the current fiscal year, down from 19 million in the previous year. And Kodera said today that although PlayStation VR is growing, the virtual reality market’s growth hasn’t fulfilled the industry’s expectations.

However, Sony believes those negative trends will be buoyed by sales of software and add-on content, as well as “network services growth mainly with PS Plus paid subscribers.” Kodera said first-party titles are a major component of Sony’s software strategy going forward, with plans that include “franchising successful IPs and refreshing existing IPs” in addition to creating original games, reports Mochizuki. PlayStation Plus has been another major success for the company in the PS4 era, going from 20.8 million subscribers by April 2016 to 34.2 million customers by April 2018.

All of this is part of a plan to “strengthen user engagement” across the PlayStation portfolio of hardware, software and services, according to Kodera’s presentation. He acknowledged challenges in the mobile games space — where Sony is “still in [the] investment phase” with its ForwardWorks studio because of delays in development — and with the streaming television service PlayStation Vue, for which the “market & future business model remains uncertain,” according to a slide from Kodera’s presentation.

Sony is currently projecting lower profits for its 2020 fiscal year: The company expects operating income to fall within a range of 130-170 billion yen. Kodera said that during the next three years — the period from now through the 2020 fiscal year, which ends March 31, 2021 — the PlayStation division will “crouch down once” to grow afterward, reports the Wall Street Journal’s Mochizuki. Perhaps that means we won’t see a new hardware generation until around that time.

Kodera said in his IR Day presentation that the PlayStation division’s aim is to “mitigate the impact of platform lifecycle compared to the past cycle and stabilize profit structure.” In other words, Sony hopes that it has built up PlayStation software and services to the point that they can outweigh the negative impact of declining hardware sales. That’s in contrast to the PlayStation 3 era, where profits were more closely tied to unit sales. In fact, Kodera’s final slide pointed to something that has become a trend across the video game industry as more of it moves online: focusing on user growth instead of hardware sales.

The evolution of how Sony measures PlayStation success, from 1994 to 2018 and beyond.

Sony had sold 79.8 million PS4 consoles by March 31, 2018, about four and one-third years after launching the system. (For comparison’s sake, it took Sony seven years to reach 80 million PlayStation 3 sales.) And Kodera reported today that there are now 80 million monthly active users on the PlayStation Network, up from 70 million a year ago. Kodera’s final slide pointed out the change in the PlayStation division’s business strategy: When the company launched the original PlayStation in 1994, it was hoping to sell 1 million consoles; now, it’s aiming for 100 million monthly active PSN users.

As for PS4 sales, they may have peaked, but that doesn’t mean the system is dead in the water. The life cycle for gaming consoles has been growing over time, with the longest period between PlayStation launches being the seven-year gap between the PS3 (November 2006) and PS4 (November 2013). Sony Interactive Entertainment America CEO Shawn Layden said earlier this month that the company won’t be making any hardware announcements at E3 2018, which makes sense: Especially considering the launch of the PlayStation 4 Pro in November 2016, there’s still plenty of life left in the PS4 and the network-based services around it.

Update (May 23): In an interview with members of the media today, PlayStation CEO John Kodera said that the PlayStation 5 — or whatever Sony’s next platform ends up being — is at least three years away. So don’t unplug your PS4 just yet.

Comments

What an unimpressive console generation, I keep thinking it’s going to get better, and then it’s over.

The Switch is amazing, totally unique, and has a few of the best games of the decade on it (exclusively).

I own a Switch, but next to Mario and Zelda (which would run on another system just fine) I feel less inclined to rate it better or worse than an x or Ps4. Sure its portable, but thats about it as an USP

Nintendo has great sofware. But 3rd party is still a mess. So far the only games on my list I REALLY want from it is Metroid.

I am going to pick up Hyrule warriors for the couch co-op at some point.

I highly recommend CRAWL. It’s not exclusive but it shines like crazy on the switch

A lot of us aren’t into indie games that look like they belong on the NES or SNES.

I could go for the easy "Well, a lot of us are", but I’ll add something instead: beyond their visuals, a lot of retro-looking games are fundamentally better than their inspirations, with quirkier, smarter designs, or mine specific and original ideas that games of past eras couldn’t afford to focus on.

It’s OK if you’re not interested in them! Just don’t dunk on them. They don’t need it and certainly don’t hurt sales of more luxurious productions.

I’m not trying to bag on them. If you like them great. There are many Switch owners (like me) that have become bored with the system outside of Zelda and Mario because we aren’t your average Nintendo fan…and very many times people will point to the indies or Nindies…but many of those people that are historically not Nintendo owners are often times not really interested in the "Nindies"(if they were they wouldn’t be bored with it because there are plenty of those games).

Yeah I get your point.

I love the switch, but I can’t deny that I’m ready for another big game to come out for it. It’s late enough to the party that any couch co-op game I would’ve bought for it is already on another system I own.

That being said, a new smash, Pokémon, and (hopefully not as completely hamfisted and terrible as the last one) a new Mario Party would all get me super jazzed.

Throw Bayonetta 3 and Pikmin on top of that and you’ve got yourself a party!

As someone with very little interest in Smash, the Switch’s future doesn’t look that exciting to me, but I am absolutely picking up Octopath traveler on day 1. Between that and recently finishing Xenoblade 2, maybe it will keep receiving a healthy dose of JRPG’s to keep me interested until Nintendo’s next non-Smash game.

I am into Indy games. Just not Shovelware or indies which have been released on PS4 6 months ago at a lower price. I would buy a game like Cave Story if the pricing wasn’t as ludicrous. Pricing def. has been a major impulse buy saviour, it’s preposterous at times.

I’m def going to buy Hollow Knight, Dead Cells, etc. on it, BUT the port has to live up, and not set me back half an AAA game. The Switch hasn’t been without issues on that front.

One thing I’ll say is that… indie games may not have hurt the AAA market, but they’ve definitely come to hurt each other. Saturation of actually worthless games, added to pricing ridiculousness, have turned digital storefronts into minefields. I understand cynicism from people who don’t know how to navigate them. It’s also why critical outlets are still necessary.

I think critical outlets have dropped the ball pretty hard on that front. You really have to find some obscure YouTube channel fore the right info.

I already know God of War is awesome form 100 different sides, no clue how this Garage game plays

Got my thoughts on them dropping the ball on the whole, certainly… And I never got into Youtube. Probably never will. I just stick to my old favorites, keep paying attention and I find it’s still possible to filter out the trash.

Try Owlboy, it’s the only thing new so far, but it’s awesome

PS4 disc should be coming by the end of the month! Super happy they could make it physical. Looking forward to it.

That’s why indie titles sell better on the Switch than any other console. Because "a lot of us" aren’t into them? Please. If you judge a game based entirely on looks (which you are doing with your statement), then you arne’t playing for fun anymore.

saying someone isn’t playing for fun just because they like more graphically impressive games is pretty ridiculous.

Up until this console generation that’s pretty much all that mattered across all games. some people have more fun when the game looks more realistic. some people have more fun when the gameplay mechanics are refined. you don’t get to judge what makes a game fun for anyone.

I agree with the "don’t get to judge" part but… pretty much all that mattered? You’re serious?

im not saying that the best looking games were the best, but basically starting with the 16-bit generation up through the start of the 360/ps3 generation pretty much all marketing and development was "LOOK HOW MUCH BETTER WE LOOK THAN THEY DO!"

i think it was the early indie movement that started to shift that focus, but you can’t deny that’s what used to sell games

Sure I get what you mean.

I still remember back when Sega had the commercials and ads saying their graphics were 2x as good as the SNES because they had a 32bit cpu despite the fact that both still used a 16bit gpu. those were the days

I won’t deny at all that this was a big thing, but my main memory is when N64 just standardized… 3D. That was not just graphics or power. It was a fundamentally new way to approach game space. Maybe that’s why my instant reaction earlier was to think that game design was always a decisive factor, but maybe not so much.

gameplay and mechanics were definitely important for staying power. I think that’s why so many people still talk so highly of Mario 64. a lot of the bigger games from that era have been completely forgotten because they chose to focus on graphics instead of gameplay.

I personally agree with a lot of people here in saying that gameplay is more important than graphics. I’ll still play through the original Deus Ex once or twice a year and it’s one of the ugliest games i can think of

It sort of lacks on the exclusives front, true. At least for me. And Nintendo seems to be more interested into porting WiiU games over now that Zelda and Mario got their entry.

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