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The gaming industry is advancing towards a more premium experience. Japanese console manufacturers have been focusing on enhancing their hardware with high-end displays and chips. Now, Sony and other companies are set to boost their earnings by offering higher-priced content.
Sony, a prominent entertainment group from Japan, is increasing the price of its PlayStation Plus subscription service by approximately a third, raising it to a maximum of $159.99 per year. This service allows gamers to test new titles, engage in multiplayer gaming, and stream games to PlayStation consoles and PCs.
This significant price increase reflects Sony’s confidence in users’ willingness to pay more for premium content. It also follows a broader industry trend, as Sony’s gaming rival Microsoft raised prices for its Xbox counterpart, the Game Pass service, in July.
Sony has been implementing a premium strategy for its hardware as well. Recently, it acquired Audeze, a US-based audiophile gear maker, enabling it to provide higher-quality audio functions for its PlayStation products.
The lifespan of gaming consoles has extended, with Nintendo’s current Switch model being on the market for over six years. This necessitates the introduction of supplementary features to differentiate products.
The timing of this price increase is crucial for Sony, as its recent earnings forecast fell short of expectations. The company is also affected by the slowdown in the global smartphone sector through its image sensor chips business, and sales of its flagship PlayStation 5 were weaker than anticipated in the previous quarter.
Despite these challenges, Sony’s shares experienced a 3% increase on Friday, contributing to a 25% gain for this year. The stock is currently trading at 17 times forward earnings, a quarter lower than its peer Nintendo. However, a conglomerate discount remains a factor in suppressing stock performance.
Cloud streaming and digital distribution of games offer significantly higher profit margins compared to the traditional hardware business model. In-game monetization is another lucrative area for expansion. Expanding in these areas will help offset any cyclical weaknesses in other segments of the industry.
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