Sony has announced its plans to increase research and development (R&D) spending in the gaming sector, with a focus on live service games like Fortnite and mixed reality. According to a report from Nikkei, Sony will invest $2.13 billion for this segment in fiscal 2023, which accounts for about 40 percent of the company’s total R&D spending. This is more than double the amount spent in 2020. The move is seen as a way to better compete in the growing cloud gaming and virtual reality (VR) markets, especially if Microsoft’s potential acquisition of Activision Blizzard goes through.
Traditionally, Sony has relied on story-led blockbuster titles such as God of War and Horizon Zero Dawn. However, live service games operate on a different model. Instead of developing a single game and moving on to the next, companies create titles that can be continuously updated over time. This generates revenue through new content like seasonal maps, skins, and weapons. Examples of successful live service games include Overwatch and League of Legends.
Sony has lagged behind its competitors in the live service games sector, having released only one such game in 2021. However, the company aims to have 12 live service games in its portfolio by March 2026. To achieve this, Sony plans to allocate 55 percent of its PS5 game development to live service games by March 2024, and increase that number to 60 percent by March 2026. The recent acquisition of Bungie is expected to further support this strategy.
In contrast, Microsoft is making moves to acquire Activision Blizzard, which would provide access to a robust portfolio of live service games, including World of Warcraft, Call of Duty, and Destiny 2. Microsoft also holds a significant lead in the live-streamed games market with Xbox Cloud Gaming, while Sony has only just begun testing PS5 game streaming.
Additionally, Sony intends to invest more in the metaverse by expanding its development in extended reality (VR, AR, mixed reality, etc.). To achieve this, the company aims to leverage the resources of the nine overseas game studios it either wholly or partially owns. This includes Epic Games, the creator of the Unreal Engine, which powers various augmented reality applications. This investment is influenced by the upcoming release of Apple’s Vision Pro headset and Sony’s recent launch of its own PSVR2 headset.
The increased investment in gaming highlights the significance of this sector to Sony’s overall portfolio. The company’s game and network services segment now dominates its earnings, surpassing other segments such as imaging, movies, and TVs. It also signifies Sony’s recognition of the shifting landscape of game development, where the traditional model is no longer the sole focus. This adaptation requires Sony to be more reliant on owning game-development studios.
In conclusion, Sony is gearing up to enhance its presence in the gaming industry through increased R&D spending. The company aims to strengthen its position in the live service games market and tap into the potential of mixed reality technologies. By investing heavily in these areas, Sony is positioning itself for future success and ensuring its competitiveness against rivals like Microsoft.
