Sony Shares Declined by 10 Billion Dollars: So Why?

The technology giant’s forecast for this year PlayStation 5 Sony’s shares lost $10 billion in value last week after it lowered its sales forecast and announced that there would be no PlayStation 5 exclusive games from first-party studios this year.

According to financial analysts, this announcement hides a bigger problem. According to Jefferies stock analyst Atul Goyal, although Sony’s reduction of its forecast for 25 million PS5 sales in the next fiscal year to 21 million may cause the company’s stocks to fall, this move is just a symptom of a larger problem at the technology giant.

Goyal said that this decline in Sony’s shares was due to the decline in the company’s gaming operating margin rather than the console sales forecast. For those who don’t know, operating margin refers to the profit an organization makes after all operating costs are covered.

Sony Wants to Reduce Development Costs of PS5 Games

According to CNBC Sony‘s operating margin in the gaming industry was just under 6% last quarter. This is significantly less than 9% in 2022. Goyal also added that before the start of 2022, Sony’s margins were around 12 and 13% over the previous four years. The analyst described this decline in margins as an “extremely disappointing” trend.

What’s particularly interesting is that digital sales and additional content revenues are at an “all-time high.” This means that although Sony operates a profitable gaming division, it is also costing the company a large amount of investment.

This declining margin is due to an increase in game production costs, which has a “significant impact” on potential profits, according to Serkan Toto, CEO of Tokyo-based gaming consultancy Kantan Games.

Shawn Layden, former president of Sony Interactive Entertainment Worldwide Studios, said in 2020 that the PS5 era would lead to an even more costly development process.

So what do you think about this issue? What do you think the future of Sony will be? You can share your thoughts with us in the comments section below.