With revenues of 4.3 trillion Japanese yen or $27.4 billion, a year-over-year increase of 17 percent in the entertainment company's native currency, and around 21 million PlayStation 5 consoles shipped, Sony's gaming segment performed well in its fiscal year 2023 - on paper, at least. Looking closer, signs of slowing growth for Sony's games business are evident. For example, the 20.8 million consoles shipped still fell short of the forecast of 21 million. This number was already significantly downgraded from the original target of 25 million set in April 2023 according to an earnings call in February 2024, which also mentioned the PlayStation 5 being in the latter half of its lifecycle. For the upcoming fiscal year, the company expects a drop in gaming-related revenue by 68 billion Yen or $440 million due to the lack of major exclusive titles and waning interest in the current iteration of the PlayStation 5.
However, Sony could still come out on top of the most lucrative gaming companies next year, since only Tencent achieved comparable results. The Chinese company came in second this past fiscal year with $25 billion in games revenue. International and domestic games revenue accounted for about 29 percent of Tencent's total revenue.
Despite following through on the most expensive takeover in the video game cosmos by far, Microsoft failed to live up to Sony's and Tencent's revenues. The company behind Xbox, one of the best-known brands in the games sector, reported sales of around $15.5 billion in the gaming segment in its last annual report, down $700 million year-over-year. This might change in the tech company's current fiscal year, which started in July 2023.
If the revenue generated by Activision Blizzard, which Microsoft finalized its acquisition of this past October, between July 2022 and June 2023 is any indicator, it could muscle past its Chinese rival Tencent. This also depends on whether Xbox's plans for its Game Pass subscription service pan out. Drastic cost-cutting by closing critically acclaimed studios like Tango Gameworks, whose latest games Hi-Fi Rush and Ghostwire: Tokyo reportedly attracted upwards of one million players each, suggests that the subscription-to-purchase pipeline doesn't yet work as envisioned.
Microsoft is not the only company with a major stake in gaming that's closing studios or cutting down its workforce: Between January 2023 and May 2024, around 20,000 people in the games industry were laid off according to the crowd-sourced database Game Industry Layoffs. So while Xbox Game Pass lagging behind expectations is one factor to consider, the state of the games industry as a whole, missing projections and having overestimated growth potentials driven by the coronavirus pandemic, continues to be fragile.
