2 weeks ago, Sony aired its latest PlayStation Showcase. It was a very eventful 40 minutes, featuring new looks at some of Sony’s most hotly anticipated titles and major surprises including Spider-Man 2, Wolverine, and Star Wars: Knights of the Old Republic. The presentation reaffirmed that Sony’s strategy for PlayStation hasn’t changed from what worked so well on PlayStation 4: a focus on producing high-quality, high-budget first-party titles.
The model worked wonderfully for Sony with the PlayStation 4. While its success has to be partially attributed in part to Microsoft’s disastrous Xbox One reveal, Sony’s exclusives deserve the credit for increasing the PlayStation’s lead. With some of the most critically-acclaimed games of the last generation only available on PlayStation, the console was difficult for video game fans to ignore.
The Xbox’s first-party slate was, in comparison, slim pickings. A string of cancelled projects and reduced interest in the types of games Microsoft excelled at making held the Xbox One back all generation. Everything went PlayStation’s way as interest in single-player action-adventures soared while enthusiasm for shooters not named Call of Duty waned. Sony has a handful of multiplayer projects in the works, but the PlayStation Showcase affirmed that Sony understands single-player titles are just as key to the success of the PlayStation 5 as they were for the PS4.
The model is already propelling the PlayStation 5 to a strong position in the new generation. Both Sony and Microsoft are selling out of their next gen consoles as fast as they can produce them, but interest in the PlayStation 5 seems considerably higher going by what resellers sell them for on eBay compared to the Xbox Series X. Which makes sense, considering the PlayStation is already home to titles exclusive to that platform like Demon Souls, Returnal, Ratchet & Clank: Rift Apart, and even pack-in title Astro’s Playroom.
The most high-profile figure in gaming questioning the Sony model is, ironically, the man responsible for the PlayStation 4’s success. In an interview with Bloomberg, Shawn Laden, former Chairman of SIE Worldwide Studios, declared that the rising cost of AAA video games is unsustainable. He shared that the budgets for recent big PlayStation 4 titles reached 9 figures, and predicted that by the end of the generation, PlayStation 5 titles will cost as much as $200 million to produce. He claims the number will only grow exponentially from there.
I find Laden’s view a bit reductive. Given his expertise on the subject, I assume he’s correct that games will get more expensive to make with each technological leap forward. But publishers won’t just stand by if budgets balloon to the level he predicts. They’ll find ways to stay profitable, whether it be through new forms of monetization, scope reduction, or other cost-saving measures.
For Sony, though, the production budget of its first-party lineup is somewhat beside the point. PlayStation 4’s biggest titles were extremely profitable, sure, but they didn’t have to be. The revenue Sony generates from sales of its first-party catalog isn’t nearly as important as how its success drove interest in PlayStation.
Sony and Microsoft often sell their consoles at a loss in order to get them into consumers’ hands because, for their purposes, the console isn’t the product: the customer is. Sony and Microsoft receive a 30% set cut of the revenue generated by anything sold in their digital stores. That’s where most of PlayStation’s earnings come from.
In its financial report at the end of its fiscal year, Sony reported that PlayStation 5 sales played a significant role in its revenue, but its record profits primarily came from game software sales. That number includes sales of first-party titles, of course, but most of is attributed to the 30% it gets for every third-party game sold through the PSN store. To quote games analyst Daniel Ahmad, “Sony’s first party is not just profitable for them, but it also acts as a way to sell PlayStation consoles, bring more people into the ecosystem and solidify PlayStation as a top brand in gaming.”
Microsoft has de-prioritized selling Xbox’s with its Play Anywhere program and focus on its Game Pass subscription service, but Sony’s primary goal remains the same as it’s been for four previous generations: get as many PlayStations out into the wild as possible. Sony uses its beloved first-party library and the pedigree of its studios to get players into their ecosystem. From there the profits come pouring in.
Even if Sony felt compelled to invest double the amount it does now into its lineup, the games would still do their job as long as they maintain their standard of high quality. Based on what we saw during the PlayStation Showcase, the company will have little problem on that front. Sony recognizes that regardless of how expensive Spider-Man 2 and Wolverine are to produce, the PlayStation library paired with fresh announcements of future titles will keep the console thriving.