Sony shares on the slide: are video games too cheap? 

Weak quarterly figures have sent Sony's share price plummeting. According to a report by CNBC, the Japanese company has lost 10 billion US dollars in share value since presenting its annual report. Among other things, Sony has revised its sales target for the Playstation 5 downwards.

Low profit margins

However, analyst Atul Goyal told CNBC that the main reason for investors being spooked was the low profit margins in the games business. Last quarter, the games business only achieved a margin of 6 per cent, writes CNBC. In the December quarter of 2022, it was still 9 per cent. "Sony's sales are at a record high," Goyal said. But margins are almost the lowest they have been in a decade. "That's just not acceptable."

Increased production costs

Goyal believes the blame for the falling margins lies with the increased production costs for video games. This is a phenomenon that has preoccupied the industry for years: As technical demands increase, so do the production costs for modern video games. Development times of five years or more are no longer an exception in the blockbuster sector. A hacker attack on the Sony subsidiary Insomniac, for example, revealed that the development of "Marvel's Spider-Man 2" is said to have cost 300 million US dollars.

Prices have risen recently

The games industry is trying to counteract these higher costs with higher prices. For example, Sony raised the prices for its blockbuster games from 60 to 70 US dollars and from 70 to 80 euros at the launch of the Playstation 5. In an interview with the Telegraph, then Playstation boss Jim Ryan described the new prices as "fair" - not only because of the high production costs, but also because of the long-term entertainment that video games offer compared to other media.

Sony is not the only company to have raised the prices of its blockbuster games; competitor Microsoft has also increased its prices in the USA to 80 euros. "The price reflects the content, scale and technical complexity of these titles," said Microsoft, explaining the move. Previously, game prices had remained comparatively stable for years, although production costs had multiplied.

To the article: www.heise.de