Spider-Man: Sony’s superhero

Japan’s electronics giant Sony is on a roll, thanks to its games division. But it needs to diversify. Marina Gerner reports.


Spidey: web-slinging superhero

Sony has forecast a huge jump in profits for the second consecutive year. Demand for its games is heading for a new record. The Tokyo-based electronics and gaming group "can thank the web-slinging superhero for another impressive quarter", says Robyn Mak on Breakingviews.

Its hit game, Spider-Man, which was released on Sony's PlayStation console in September, sold 3.3 million copies in the first three days on the market. Sony's other big game brands include God of War and Fortnite. Now the company has raised its annual profit forecast to 870bn (£6bn), up 30% from itsJuly estimates.

Having more than 80 million people use your products "can be pretty profitable", says Jacky Wong in The Wall Street Journal. The contrast with Sony's Japanese games rival Nintendo is stark. Its operating profit rose 30% last quarter, but missed analysts' forecasts because sales of its Switch game console didn't take off as rapidly as expected.

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For both companies new releases of games on smartphones have "raised the spectre" of people spending more time playing games "on the ubiquitous smartphone rather than more luxurious but less convenient consoles", says Tim Culpan on Bloomberg. Still, if gamers are trading in console time for mobile time, it's not showing up in the numbers at Sony and Nintendo.

Meanwhile, Sony's shares may have outperformed Nintendo's by 30% this year, but the latter still trades at 21 times expected earnings while Sony trades at only 10.6 times. "With investors globally hesitant to pay up for growth right now, Sony looks like a better game to play."

Sony needs more than games

Sony's shares "are cheap", agrees Mak, but investors shouldn't expect a re-rating any time soon. That will only happen if new boss Kenichiro Yoshida can prove Sony is "more than a one-hit wonder". Sony's recent success has been driven by video games, music and films, notoriously "fickle and unpredictable" sectors.

The CEO "can do more to lift up the group", such as offering more services and content "to lock in users" when it launches the next-generation games console. That would yield "more stable and recurring revenue". More broadly, however, Sony "needs more than flighty superheroes".The company has shed its laptop, chemicals and batteries business, but is still in cameras and chips. The latter look promising. The group could "dominate... the fast-growing market for image sensors used in cars".

Management is now focusing on this area, says Kana Inagaki in the Financial Times. Sony said it would spend $5.3bn on image sensors over the next three years to capture the new market for autonomous vehicles.Sony already controls more than half of the imaging-sensor market for smartphones, as Makiko Yamazaki points out on Reuters. These new areas should help offset the ailing mobile-phone business, where losses are expected to triple this year.

Marina has a PhD in globalisation and the media from the London School of Economics, where she worked as a teaching assistant on the MSc Global Media. In 2014 she was invited to be a visiting scholar at Columbia University's sociology department in New York.

She has written for the Economists’ Intelligent Life magazine, the Financial Times, the Times Literary Supplement, and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany. She is trilingual and lives in London. She writes features and is the markets editor at MoneyWeek..