Yesterday, after Sony’s quarterly financial conference call, a quote about PlayStation “moving away from a hardware-centric business model” by Senior Vice President Sadahiko Hayakawa caused all sorts of panic, for all the wrong reasons.
Hayakawa-san’s quote in the official English simultaneous translation was as follows:
“As I mentioned in the speech, in the gaming business, we’re moving away from a hardware-centric business more to a community-based engagement business, and that has been increasing.”
Looking at the Japanese livestream, the quote is a little more clear. After all, simultaneous interpretation is very challenging, and something is almost always lost in translation.
“As we mentioned in our speech today, in the game business, for example, we’re moving away from a hardware-centric business model and toward a platform businesss that grows the community and boosts engagement. In this way, we’re seeing increased stability for our earnings.”
While clearer and more complete, this quote, taken out of context, is being completely misinterpreted by websites, influencers, and users alike.
This is partly due to the fact that, very conveniently, the “as we mentioned in our speech today” has been omitted from most reports, likely intentionally. If you knew that the quote refers to a previous “speech,” you’d want to know what was said in that speech, and you would be less inclined to just accept the quote out of context.
Of course, in order to report what was said in the speech, those who wrote the content that is currently misleading the internet would need to have actually listened to it, but they didn’t, because they’re simply reporting from soundbites bounced off social media without really fact-checking.
Incidentally, the “speech” indicates the prepared remarks at the beginning of each financial conference call. You can find the official transcript on Sony’s investor relations website.
You’ll notice that nowhere in that speech is there any mention of moving away from hardware or even a hardware-centric model. I actually listened to the conference call live as I always do to craft our reports, and can confirm that no such thing was uttered during the prepared remarks.
Hayakawa-san is likely referring to what you can find on page 11 of the transcript (and in our report, as that’s actually news, unlike most of what’s making people panic).
Basically, what that says is that users have been spending more than they did in previous generations, so focusing on growing engagement instead of simply focusing on selling as many consoles as possible is economically more profitable.
Hayakawa-san simply made a mention in passing, while making examples about investment shifts in other business segments. He certainly had no intention to make a big announcement that would have shaken the gaming internet at its core.
What if I told you that this isn’t even new?
This very concept was expressed clearly by Chief Financial Officer Lin Tao exactly three months ago, during the previous financial conference call, as you can read in the report we published back then.
“[Hardware] units were the focus, but now it’s MAU. The management approach has changed and I think this is a major change in policy. It’s due to our CEO’s strong leadership, that our management is focusing on engagement and MAU and this is leding to profitability.”
It’s pretty much the same concept expressed yesterday, but with a slightly different wording.
So no, Sony isn’t moving away from hardware, and there’s no indication that they’re going to embrace a multiplatform strategy as radically as Microsoft did. What Sony’s executives have been saying since three months ago, is that they’re not going to focus anymore on selling as many consoles as they can, but instead they’re going to focus on the acquisition of engaged monthly active users, since their average spend is much higher than it used to be.
We shouldn’t forget that hardware sales are done at a loss for much of a console’s lifetime, so it’s entirely understandable that Sony may want to shift its economic focus to acquiring engaged users who are much more profitable.
This does not mean that they’re going to stop selling consoles, nor that they’re going to completely phase out console sales as an economic driver. Nothing of the sort was mentioned or even hinted at.
What was said today was simply a talk about economics delivered to specific financial media, and shouldn’t be read as some sort of announcement for public consumption.
This is a recurring problem with earnings conference calls, with soundbites and partial quotes reported out of context, often on social media, and then picked up by lazy reporters and influencers who don’t bother fact-checking before writing articles and making videos with the sole objective of stirring as much controversy as possible for clicks.
Earnings conference calls are targeted to a very specific audience that is trained to understand a very specific lingo and follows said conferences regularly from start to finish every quarter, so they are aware of the context.
Most gaming journalists or influencers aren’t familiar with the lingo and simply don’t bother following the conference calls regularly or even listening to one in its entirety.
This is especially true for Sony’s conference calls. They’re usually at 4:00 pm Japan time (an hour after the closing of the Tokyo Stock Exchange), which is deep into the night in the US and fairly early in the morning in Europe. Besides very few, including yours truly, I can guarantee that most gaming journalists and influencers don’t bother waking up early to listen to an hour of mostly boring business talks, only part of which are about games.
When they do wake up, hours later, they simply check social media for these juicy sound bites out of context, and then do their thing, often getting them wrong because they lack context and specific experience.
Ultimately, this is definitely a case of “don’t believe everything you hear on the internet.” Outlets that you can trust on this topic usually present extensive reports with plenty of context. If you see short articles focusing on single controversial quotes with little or no context, you should definitely take them with a grain of salt.
For now, you can rest easy. PlayStation hardware is very likely here to stay.
