Sony has shaken up its management structure again, as it moves to an improved emphasis on the PlayStation Network. Starting from April 1, Jim Ryan and John Kodera will swap positions. Ryan will move from his current position as Deputy President of Sony Interactive Entertainment (SIE) to president and CEO, while Kodera—the current CEO will be demoted to Deputy President.
Ryan will report directly to Sony’s group president and CEO, Kenichiro Yoshida, as the company makes room for the expansion of its video game division—Game & Network Services.
Yoshida noted in a statement:
Our Game & Network Services business has grown into the Sony Group’s largest business in terms of both sales and operating income. Furthermore, our business in this domain holds significant importance as our growth driver going forward.
The corporate shakeup is the second time the company’s gaming division has gotten a new boss in two years, and it comes on the backdrop of dwindling PlayStation 4 consoles and drop in profits.
Sony Stock Falls 8.1%
Sony’s stock fell 8.1 percent on Monday, after the company reported a decline in operating income in its gaming division by 14 percent for the holiday quarter.
The Japanese company also sold 8.1 million PS4 consoles, down from 9 million consoles sold in the same period in 2017. Over 40 million game titles were sold, and the number of PlayStation Plus subscribers is up, holding steady at 33.9 million.
The Power of the PS4
Sony’s gaming division is the largest contributor to the company’s operating income, generating more than 30 percent in the first three quarters of the fiscal year.
The Sony PS4 has also sold 90 million consoles so far, and is on the verge of surpassing the 100 million unit sales milestone by mid-2019 to become the best selling console of all time. It’s predecessor, the PlayStation 3 had 84 million lifetime sales, while the PS2 sold 155 million.
Ray Wang, principal analyst and founder at Silicon Valley-based Constellation Research, told CNBC via mail the Tokyo based company is operating in highly competitive markets with “declining unit sales and margin.”
He praised the company’s content division, which he sees as the “brightest spot” but believes Sony needs a “content, network, and tech strategy in order to create vertically integrated markets.”
Sony has lowered its sales outlook to 8.5 trillion yen for the fiscal year through March, compared with an 8.7 trillion yen forecast of 2018.
“There is more downside as we believe slowing growth in its games division signals a very likely PS5 launch for next fiscal year and the ensuing costs that come with the launch of a new platform,” Amir Anvarzadeh, an analyst at Asymmetric Advisors Pte explained.
According to the company’s report, weaker demand on camera chips, financial services, and dwindling smartphone sales were behind the sales revision.
The company’s smartphone division has been a thorn in its side, bleeding millions of dollars and the worst part—the company doesn’t expect it to get better soon. In the previous fiscal year, Smartphones losses were over $247 million (JP¥27.6 billion) and the current reports points towards another $97 million (JP¥10.8 billion) burnt on phones.
The company’s Xperia line, which controls about 1% of the global smartphone market, has been disappointing at best and its latest iterations—the Xperia XZ2 Premium are not expected to blow any of its competitors out of the water.
The mobile division is the company’s only unprofitable core business unit, and there have been calls for Sony to sell off the division. The company has repeatedly shot down those suggestions saying the division gave it a foothold in the market of connected devices, where the company’s famed semiconductor unit resides.
Sony’s semiconductor unit makes money from the supply of image sensors to smartphone manufacturers like Apple, Huawei, and Samsung.
The semiconductor unit generated 12% of the company’s revenue and 20% of its operating profit last quarter. The unit’s revenue rose 11% annually supported by high demand for its image sensors, but its operating profit plummeted 3% thanks to lower margins and high capital expenditure.
The company’s reputation in the image sensors market allows it to make profits from smartphones without actually selling any major smartphone. A recent partnership with Apple will see Sony include its long-range 3D cameras in the soon to be released iPhone XI.