Before jumping into the State of Play it’s important to look at how Sony and PlayStation as a brand have been operating over the past few months. In early February, Sony released their earnings report for Q3 FY2020, which was the three months ending December 31, 2020. This means that we will see just how well the PS5 launched despite is strained supply chain.

Overall sales look great for PlayStation, although not quite on the same level as some other gaming companies that have seen massive surges during 2020. Sales of their gaming and network services division were up vs the same time frame the year before from 632.1 billion yen to 883.2 billion yen.

Looking deeper into their gaming and network sales, for the last three quarters of the fiscal year, Sony saw approximately a 40% increase in sales which they attributed to an increase of sales for in game content as well as increase in hardware sales due to the PS5 launch. The PS4 still sold over a million units and the increased margins on that unit helped their bottom line.

However, their operating income wasn’t quite the same level of increase as they sales due to a few reasons including the increase of selling, general and administrative expenses or SGA related to the PS5 along with losses resulting from strategic price points for PS5 hardware that were set lower then manufacturing cost.

This does explain why Sony was very hesitant in 2020 about revealing the price of the PS5 as they likely wanted to see what Microsoft was going to do so that they could price their system as high as possible without hopefully incurring losses. Unfortunately, Microsoft had a very aggressive approach with both the Xbox Series S at a much lower entry price but also a very reasonable price for the Xbox Series X based on the internal components.

This is just a theory but it could also explain why it seemed like there was a lot more disc versions of the PS5 available because its unlikely that an optical drive cost a hundred dollars to Sony when they are purchasing in the bulk quantities across all their divisions. This would lead to a smaller loss on the systems with an optical drive, which explains why there was a significantly less amount of digital PS5’s available during the launch window. If this was the case then it was a very smart decision to still produce some but focus on the lower margin of loss PS5.

Speaking of the hardware sales, in Q3, Sony sold 4.5 million PS5’s and surprisingly still sold 1.4 million PS4’s. PS4 saw a massive decrease for the year before of six million in the same quarter but still selling over a million units is quite impressive for a seven year old system. As for the PS5, it clearly would have been able to sell much more as the demand outpaced the supply by a large margin. According to Jim Ryan in an interview with GQ, PS5 sales “more than we did PS4’s in 2013 and that was a high watermark for the PlayStation generation”

Finally for the rest of FY2020, Sony is revising their projections for the gaming and network segment upwards slightly based on higher than expected software sales, including add ons, higher than expected digital sales, peripheral sales and cost reductions.