Sony blames easing of Covid constraints for fall in profit forecasts

Shenzhen Covid curbs

Sony has cut its profit predictions, blaming easing of the brakes on Covid and a shortage of attractive new games.

The Japanese giant said the end of Covid restrictions slowed games to stay at home and consumer interest had also declined due to the titles on offer.

Sony said business would soon get a boost, however, from a number of new games in the pipeline and as supply issues for the PlayStation 5 console were resolved.

“Last quarter was just a bump in the road for Sony,” said Serkan Toto, founder of the Consulting Kantan Games.

“Sony seems to be getting more and more PS5 into stores, especially in the US and Europe.”

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Operating profit at Sony’s key gaming unit fell 37% in the April-June quarter from a year ago, which chief financial officer Hiroki Totoki blamed on a lack of top titles and a return to normality in people’s lives in the midst of the Covid-19 pandemic.

“Growth in the global gaming market has slowed as exit opportunities have increased following a decline in Covid infections,” Totoki said.

Sony cut the full-year operating profit forecast for its games unit by 16%, citing an expected drop in sales of games from third-party developers as it booked costs from an earlier-than-expected shutdown of its deal for the developer ‘Halo’ Bungie.

Its group-wide operating profit forecast for the year to next March was cut 4 percent to 1.11 trillion yen ($8.37 billion).

Sony reported a 9.6 percent rise in first-quarter operating profit to 307 billion yen, beating analysts’ estimates, boosted by demand for its movies and TV shows.

The conglomerate has said it aims to sell 18 million of its blockbuster PS5 consoles this fiscal year as supply chain bottlenecks ease and ramp up production. It sold 11.5 million units in the year that ended in March.

“With the recovery from the impact of the blockade in Shanghai and the improvement in the supply of components, we are working to advance the supply for the year-end holiday season,” Totoki told a news conference.

Microsoft’s Xbox Pass Push

Sony sold 2.4 million PS5 units in the first quarter, only a slight increase from the same period a year earlier, while software sales fell 26% to 47 million units.

Sony competes with Microsoft Corpwhich is aggressively acquiring content to push to its Xbox Game Pass subscription service.

Sony’s rival, based in Redmond, Wash., this week reported a decline in gaming revenue in the fourth quarter, and upcoming high-profile game titles have been delayed.

PlayStation’s portfolio includes highly anticipated titles such as a remake of ‘The Last of Us’ in September and ‘God of War Ragnarok’, which will be released in November.

Sony shares closed flat on Friday ahead of earnings. The group’s shares have lost around a fifth of their value this year, compared with a 3% drop in the top benchmark Nikkei 225.

Reuters with additional editing by Sean O’Meara

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Sean O’Meara

Sean O’Meara is editor of Asia Financial. He has been a journalist for over 30 years, working on local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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