Sony and Nintendo Face Chillier Postpandemic World

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Japanese gaming giants expect slowing profit growth just as Microsoft, other rivals plow cash into games

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There is some good news for gamers: It will probably soon be easier to get a PlayStation 5, which has been notoriously difficult to buy due to component shortages. Sony said Tuesday it expects to ship 18 million PS5 videogame consoles in the fiscal year ending March next year. That is lower than its previous forecast, but a significant increase from the 11.5 million units sold last fiscal year. Sony said it has sold 19.3 million units since the PS5 was launched in late 2020.

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Nintendo also made a splashy announcement: The company said it will split its stock into 10. That is a big surprise given that analysts and pundits have long urged the company to do so as it would supposedly allow more individual investors to own the stock. Japanese individual investors only owned around 5.7% of the household name as of September, since it takes around $43,000 to own a minimum lot of Nintendo shares. While the split has no actual financial impact, it might lift sentiment, at least in the short term.

The future outlook is murkier. Both Sony and Nintendo reported disappointing results for last quarter and provided lower earnings guidance for this fiscal year than analysts’ forecasts on S&P Global Market Intelligence. They are usually conservative, but the forecasts may also provide some clues.

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While selling more PS5 will bring in higher revenue, Sony expects lower operating profit. Partly that is accounting for costs related to its $3.6 billion acquisition of game maker Bungie, but it also reflects the lower margins of selling hardwares versus games. Sony will probably need to spend more on acquisitions or game development to fend off the challenge from Microsoft, which is flashing its checkbook with its recent $75 billion acquisition of Activision.

Nintendo expects to sell 21 million units of its Switch console for the fiscal year ending next March—lower than the 23 million units it shipped last fiscal year. Launched in 2017, the Switch is entering its twilight years, so Nintendo will probably need to come up with a new strategy soon.

Sony and Nintendo will need to play nimbly indeed to keep up their momentum in the postpandemic levels.

Write to Jacky Wong at [email protected]

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Credit: www.Businesshala.com /

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