Nightengale
Member
So, a few days ago, Sony had its Investor Relations Day 2014, where each division talked about their business overview, financial expectations and short-to-mid-term strategy moving forward for Sony as a whole. We've had threads talking about Sony in general, but not so much focusing on what SCEI and SEN are doing specifically, so I figured I start a thread on it :
Anyway, for those who wants to read the slides or listen to Andrew House's presentation/Q&A directly, here's the links:
http://www.irwebcasting.com/20141125/4/b81075ec7f/mov/main/index.html
http://www.sony.net/SonyInfo/IR/info/irday2014electronics/GandNS_E.pdf
Anyway, there's a few interesting tidbits:
Regional Sales:
The contribution from Americas/Europe+ME are pretty well-balanced.
Japan/Asia is what it is, but it's noted that Asia is showing significant growth as a market.
Financial Performance:
Profit increase due to higher PS4 sales and higher profit margin from Vita2K models.
Software side is roughly flat, with negative impact from 'delayathons' which are offset from all that PS+ $$$.
And they're making investments in PSN/infrastructure/network.
Anyway, probably the most interesting part of the presentation brings us to Andrew House's presentation of their :
SCEI/SEN Mid-Term Business Strategy:
Strategy I : Retain & Expand Engaged Playstation User Base
a. Hardware :
- Add New Features (SharePlay,etc)
- Expand Ecosystem (Morpheus)
- Reduce Cost ( Higher profit margin + price cuts)
b. Software & Content
- Strengthen Engagement of Core Audience w/Core Titles
- Acquire Casuals with Family-friendly Content
c. Services
- Increase customer base beyond hardware limits with stuff like :
- Playstation Now (increase the availability, content and consumer proposition like sub model)
- Playstation Vue (to revolutionise TV exp.combining live TV+DVR with cloud-based TV)
d. Market Opportunities
- New Markets : China & Latin America
- Evolution of Mature Markets :
eg. Middle East (4x faster adoption of PS4 than any other consoles)
Germany (PC market transitioning to console, now Sony's 2nd biggest European market for first time in history)
Strategy II : Increase ARPPU (average revenue per paying user) and drive ancillary revenue
ARPPU as the new core metric of business success
- SCEI is moving away from the generic software/hardware tie ratio as a core business success metric, and instead looking at average revenue per paying user.
How does SCEI intend to increase ARPPU?
a. PS+
- Paywall = $$$$. Paywalling Online MP = Increased PS+ subscription 4x since PS4 launch.
- Sony's strategy with PS+:
a. increasing presence of online titles to drive subscription (no details on what's the approach to this. Develop more MP games? More MP-game partnerships like Destiny? )
b. Improve IGC offerings
c. Prioritised Alpha/Beta, etc.
d. Enhance community features of PS+ (looking into making PS+ more appealing to non-gamers)
b. Ancillary Revenue from TV, Music, Video, stuff.
- Curated Music Playlist based on your game library (presumably Music Unlimited feature)
- TVTVTV (stuff like Powers)
- More 3rd-party video/music apps like Netflix, etc.
Financial Target:
FY2017:
- Increase revenue by approximately 10~20% over the next 3 years.
- Increase current operating margin of 2.7% to 5-6% over the next 3 years
What I was able to take away from this all is that, in general, Playstation has a surprisingly conservative overview of their business growth :
- Business growth in short-to-mid-term will be largely driven from their existing pillars, which are hardware/games.
- Key focus is increasing engagement with their console userbase, and acquire a broader userbase with stuff like different portfolio of games, and stuff.
- PSNow/Vue are closer to being more ancillary parts of the business, and in the short-term is not expected to be any sort of real profit generator. The main aim for these services is to look into expanding the brand/service/offerings to people outside the console-buying audience.
- The broad idea is as described, 'Bigger, Broader, Better.' By making their existing things better/bigger, they expand the revenue stream from their current userbase and continue to gain more of their core user base. On the side, they have 'broader' business goals with ancillary/experiments like Vue/Now/Morpheus which are their aim to make the Playstation brand broader than what they currently are right now, to engage audiences that historically never bought consoles, etc.
Edit : Added Q&A stuff.
Q&A Tidbits:
PS4 expected operating margins vs PS2 peak operating margins:
(Clarification: Its actually potentially a negative impact, moving from PS2 era royalty model to the current e-commerce model)
PS Vue Target Audience & Branding:
PS4 Console Life Cycle:
PSNows Future & Risk of Cannibalisation:
.Volatility of Game Business & Fluctuation of Profitability:
PSVita (In Japan!):
Music Unlimited Trivia:
Anyway, for those who wants to read the slides or listen to Andrew House's presentation/Q&A directly, here's the links:
http://www.irwebcasting.com/20141125/4/b81075ec7f/mov/main/index.html
http://www.sony.net/SonyInfo/IR/info/irday2014electronics/GandNS_E.pdf
Anyway, there's a few interesting tidbits:
Regional Sales:
The contribution from Americas/Europe+ME are pretty well-balanced.
Japan/Asia is what it is, but it's noted that Asia is showing significant growth as a market.
Financial Performance:
Profit increase due to higher PS4 sales and higher profit margin from Vita2K models.
Software side is roughly flat, with negative impact from 'delayathons' which are offset from all that PS+ $$$.
And they're making investments in PSN/infrastructure/network.
Anyway, probably the most interesting part of the presentation brings us to Andrew House's presentation of their :
SCEI/SEN Mid-Term Business Strategy:
Strategy I : Retain & Expand Engaged Playstation User Base
a. Hardware :
- Add New Features (SharePlay,etc)
- Expand Ecosystem (Morpheus)
- Reduce Cost ( Higher profit margin + price cuts)
b. Software & Content
- Strengthen Engagement of Core Audience w/Core Titles
- Acquire Casuals with Family-friendly Content
c. Services
- Increase customer base beyond hardware limits with stuff like :
- Playstation Now (increase the availability, content and consumer proposition like sub model)
- Playstation Vue (to revolutionise TV exp.combining live TV+DVR with cloud-based TV)
d. Market Opportunities
- New Markets : China & Latin America
- Evolution of Mature Markets :
eg. Middle East (4x faster adoption of PS4 than any other consoles)
Germany (PC market transitioning to console, now Sony's 2nd biggest European market for first time in history)
Strategy II : Increase ARPPU (average revenue per paying user) and drive ancillary revenue
ARPPU as the new core metric of business success
- SCEI is moving away from the generic software/hardware tie ratio as a core business success metric, and instead looking at average revenue per paying user.
How does SCEI intend to increase ARPPU?
a. PS+
- Paywall = $$$$. Paywalling Online MP = Increased PS+ subscription 4x since PS4 launch.
- Sony's strategy with PS+:
a. increasing presence of online titles to drive subscription (no details on what's the approach to this. Develop more MP games? More MP-game partnerships like Destiny? )
b. Improve IGC offerings
c. Prioritised Alpha/Beta, etc.
d. Enhance community features of PS+ (looking into making PS+ more appealing to non-gamers)
b. Ancillary Revenue from TV, Music, Video, stuff.
- Curated Music Playlist based on your game library (presumably Music Unlimited feature)
- TVTVTV (stuff like Powers)
- More 3rd-party video/music apps like Netflix, etc.
Financial Target:
FY2017:
- Increase revenue by approximately 10~20% over the next 3 years.
- Increase current operating margin of 2.7% to 5-6% over the next 3 years
What I was able to take away from this all is that, in general, Playstation has a surprisingly conservative overview of their business growth :
- Business growth in short-to-mid-term will be largely driven from their existing pillars, which are hardware/games.
- Key focus is increasing engagement with their console userbase, and acquire a broader userbase with stuff like different portfolio of games, and stuff.
- PSNow/Vue are closer to being more ancillary parts of the business, and in the short-term is not expected to be any sort of real profit generator. The main aim for these services is to look into expanding the brand/service/offerings to people outside the console-buying audience.
- The broad idea is as described, 'Bigger, Broader, Better.' By making their existing things better/bigger, they expand the revenue stream from their current userbase and continue to gain more of their core user base. On the side, they have 'broader' business goals with ancillary/experiments like Vue/Now/Morpheus which are their aim to make the Playstation brand broader than what they currently are right now, to engage audiences that historically never bought consoles, etc.
Edit : Added Q&A stuff.
Q&A Tidbits:
PS4 expected operating margins vs PS2 peak operating margins:
(Clarification: Its actually potentially a negative impact, moving from PS2 era royalty model to the current e-commerce model)
PS Vue Target Audience & Branding:
PS4 Console Life Cycle:
PSNows Future & Risk of Cannibalisation:
.Volatility of Game Business & Fluctuation of Profitability:
PSVita (In Japan!):
Music Unlimited Trivia:
Theres more MU subscribers on Playstation devices than there are on Android.
