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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Is the consumer attention span getting longer? In recent years, shoppers have been waiting longer to replace their smartphones and cars. That trend is spreading to game console makers too: Ageing consoles, which traditionally meant a consistent decline in game company revenues, are still going strong for the likes of Sony and Nintendo. New developments in the industry will mean a further boost for the Japanese game companies.
Historically, the lifespan of a gaming console was roughly five years. The Nintendo Switch is now in its eighth year while Sony’s latest PlayStation is turning five years old. Just around the time when gaming hardware makers would see a sharp decline in sales, Sony’s profits rose 68 per cent and beat expectations in the latest quarter, with profit from its games business tripling in the quarter.
Sales of Sony’s subscription service to access games, network services and online content have also been growing. Cloud streaming and digital distribution of games offer much fatter margins than the traditional hardware business model.
This comes at a much-needed time for Sony, whose businesses including movies and financial services have been a drag on group revenue. Sales have been weak at its pictures segment on fewer series delivered in its television productions unit, partly because of production delays related to the previous strikes in Hollywood. Financial services segment sales have lagged behind, with a significant decline in revenue at its Sony Life unit. A growing net loss on investments have raised investor concerns.
The longevity of consoles is even better news for Nintendo, which makes more than 90 per cent of group revenue from games hardware and software.
One reason for this shift towards greater endurance for products is that graphics and performance of existing consoles have reached such an advanced level that having the latest console is less important. The games available for each generation of console is another factor. Unlike console makers, game developers have an incentive to make their products available for the older, existing consoles — which already have a large user base — to maximise the profits they make from each game.
The ultimate test will be what happened during this Christmas shopping season, the peak period for game console sales, with companies offering little in terms of new products. Sony’s upgraded version of its PlayStation 5, which offers better graphics, launched in November. But that is unlikely to be a big enough difference for many gamers.
Continued sales growth for consoles over the festive season, and for high-margin online content subscriptions, would be evidence of an attractive, new normal for the gaming industry.