Sony Corp. Chief Executive Officer Kenichiro Yoshida for the first time laid out his full long-term vision for the Japanese entertainment and electronics giant, detailing plans for dealing with big changes in the game industry and an escalating trade war.
Yoshida, who took the helm a little over a year ago, addressed shareholders at the company’s investor day on Tuesday at Sony’s headquarters in Tokyo.
Here’s a look at what he and his lieutenants had to say about the company’s prospects.
The Evolution of Gaming
Faster internet speeds are making it possible to play games on remote servers without local hardware. That’s a threat to the PlayStation, which generates a third of Sony’s profits.
Still, without a clear timetable when (or if) a shift could happen, Yoshida is developing a successor to the PlayStation 4 while laying the ground-work to ensure Sony can thrive if consumers embrace cloud gaming.
Sony revealed the first video of a game running on its next-generation console, demonstrating load times about 10 times faster than on the PS4.
The beefier device is designed to help PS4 users switch easily, Yoshida said. The new device will come with remote play, which lets users play console games from their phones, tablets and PCs.
It seems to be Sony’s answer to the Nintendo Switch, which lets users play games away from a TV. PlayStation boss Jim Ryan said Sony will continue to invest in exclusive first-party games, but won’t alienate third-party publishers.
“By allowing 80% of the market to be taken by third parties, we define ourselves as the publisher-friendly platform,” he said. Sony is not “aggressively” investing in China for now because of uncertainty around the country’s censorship of video games, Ryan added.
That Microsoft Partnership Will be Key
Executives stressed that a wide-ranging partnership with Microsoft Corp. announced last week was preliminary but key to prepping for cloud gaming. Sony is approaching with an “open” mindset toward areas for collaboration, PlayStation deputy head John Kodera said.
Yoshida did highlight problems with cloud gaming, including finding an appropriate business model. “For someone who plays a game for 50 or 100 hours, what is the advantage of a monthly subscription service?” he asked.
Partnering with Microsoft could lower server costs for PlayStation Now, which currently runs on Sony’s servers. The company plans to grow the PlayStation Now service from 700,000 subscribers to 5 million over the medium term. Ryan said a “principal objective” will be expanding usage among PC gamers who do not own consoles.
About the Trade War and Sensors
Yoshida announced he was increasing total capital expenditure to 1.2 trillion yen ($10.9 billion) from 1 trillion yen for the three years ending March 2021, driven mostly by investments in camera sensors. The boost comes even as a U.S. ban on doing business with Huawei is raising fears of a hit to already-shrinking smartphone demand.
Sony generated 23% of its revenue from the U.S. and 9% in China, Yoshida said. The company also shed more light on its agreement with Microsoft to use its image sensors. Sony plans to embed artificial intelligence functionality within its chips. “Our signing of MOU with Microsoft is based on this approach,” Yoshida said.
Addressing Mobile and Asset Sales
Yoshida said the company and board will “look at our portfolio” but suggested that the mobile phone division isn’t on the selling block. “Smartphones are an entertainment product, but PCs are ultimately a productivity tool, which is why we sold that division,” he said.
The CEO stressed that finance and technology are a great fit as payments go digital.
“I often tell my employees, especially in the tech division, what it means for Sony to have a finance division.” Yoshida was responding to pressure from investors to shutter or sell under-performing or non-core businesses
Sony Wants to Lead in Entertainment
Yoshida proclaimed Sony the largest music company in the world and said profits from streaming will keep rising. Its operating margin is expected to rise by 6.5 percentage points this fiscal year compared with 2017, it said. Sony will focus on expanding via local artists in China, a growth market.
For film, the company mostly stuck to its prior message that more synergy means lower costs. The efforts are already saving about $135 million a year, it said. Sony also announced a production team focused on turning video games into movies.
That follows the success of the recent Pokemon movie, which could become the highest-grossing film based on a video game in history.