Sony plans to reposition the video console warhorse as a hub for a
network of streamed services, according to three senior officials,
offering social media, movies and music as well as games. The
executives spoke to Reuters on condition they not be named because
the matters are still in early stages of discussion.
The plans to coax more revenue from the PlayStation's network of
users are being developed by a new breed of managers brought in by
Chief Executive Kazuo Hirai. Analysts say if Sony gets it right, the
game and network business could earn about $1 billion in the fiscal
year from April 2016 - making it the most profitable part of the
company bar a financial services unit.
"Network services have been a long-running issue for Sony," said
Atsushi Osanai, associate professor at Waseda University's business
school. It's a field Apple Inc has dominated with iTunes, while
established movie and music services like Netflix Inc and Spotify
are expanding fast.
"In the past there was a time when they (Sony) were all over the
place and went after everything, but zeroing in first on game users
is effective," said Osanai. The company's next progress report will
come with its first-quarter earnings on July 31.
At 200 billion yen ($1.96 billion) last fiscal year, some 90 percent
of it from games, Sony Entertainment Network's revenue is small
compared with the 5 trillion yen at the company's broader
electronics business. The division lost 10 billion yen last year and
more losses are expected this year as it spends on servers and
systems for a surge in users, but the executives - and analysts -
expect it to ramp up quickly after that to double-digit margins.
The new thinking is far from Sony's first effort to kickstart a
revival. Yet the company that was once the symbol of Japan's
technology prowess has often failed in attempts to deliver
innovative hits to match successes of old, like the Walkman music
The managers lining up Sony's new strategy know a PlayStation
network won't fix mainstream loss-making businesses, like its TV
division - "a grim electronics portfolio", according to brokerage
Jefferies. It's also not the first time Sony has tried to develop
networked content services.
But under plain-speaking Kenichiro Yoshida, a former head of Sony's
Internet services unit now leading the charge as chief financial
officer since April, managers believe focusing on PlayStation to
develop a network is potentially Sony's best chance of securing a
money-making springboard for revival.
"These are crucial assets that offer the greatest potential upside,"
said one of the senior officials.
The network's base of 52 million active users is dwarfed by Apple's
iTunes with over 800 million, and now just about the same size as
fast-growing Netflix. But Sony Entertainment Network's peg to a hit
piece of hardware with a potentially captive audience can give the
service a future edge, executives say.
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Yoshida, 54, knows networks so far have been a black spot for Sony.
A PlayStation security breach in 2011 was a major setback to its
plans at the time for a looser network that was designed to allow a
range of Sony devices to be connected.
The CFO's message to executives is that things must change. "What's
made it tough for Sony in electronics is that we were never able to
take the lead role in the networking era," Yoshida told a gathering
of about 500 managers earlier this year, according to a person who
attended the meeting.
While the network plans take shape, this year Yoshida is also
overseeing restructuring across the company. Sony is axing thousands
of white-collar jobs, has ditched the Vaio personal computer brand,
and has placed the TV business in a separate subsidiary - to fend
High-tech components such as image sensors and batteries for
smartphones, and next-generation consumer gadgets such as wearables,
have been identified by Sony managers as key potential areas of
"Game and network services are a core part of Sony's electronics and
we are currently strengthening our network services by expanding
sales of the PlayStation 4 in a bid to raise revenue," said Mami
Imada, Sony's general manager of public relations, asked to comment
on future strategy for this article.
The latest iteration of the now 20-year-old console has outsold
rivals easily, attracting committed gamers rather than the casual
game playing audience that is migrating to smartphones and other
Even as Sony plans to extend the PlayStation's role, games are still
driving the network services division forward, accounting for 90
percent of revenue. From July 31, Sony is launching a streaming game
service, PS Now, the first ever for a console game maker, in the
Sony has sold 8.7 million PlayStation 4s against 5 million Microsoft
Corp Xbox Ones as of July 19, according to market research firm
VGChartz. Nintendo Ltd's Wii U console, released a year earlier than
its rivals, also trails with sales of 6.7 million.
(Additional reporting by Sophie Knight; Editing by Edmund Klamann
and Kenneth Maxwell)
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