Sony's new media empire
Entertainment emerges as Sony's primary income source, transitioning the consumer electronics firm to a media juggernaut
The SuperJoost Playlist is a weekly take on gaming, tech, and entertainment by business professor and author, Joost van Dreunen.
As a knowledge worker in a late-stage capitalist economy, it is restorative to work the land on the weekends.
I’m not talking about actual farming, of course, but just its simulation. Hauling my big red tractor around is cool. And I admit to being encouraged by phrases like “Don’t wish for it. Work for it!” and “If you want a rainbow, you need to put up with the rain.”
But lately, I’m starting to feel that it merely offers an incomplete glamorization of agriculture.
Growing up in the Netherlands meant riding a bike (a lot) and being always near or in a stretch of farmland. I can smell the manure just thinking about it. When it comes to farming, one of the Dutch paradoxes is that more than half of the country is dedicated to agriculture, despite only contributing 2 percent of GDP and being one the most densely populated countries in the world with 508 people per square kilometer compared to 36 in the US. The Netherlands is Europe’s biggest exporter of meat and the second-largest agricultural exporter in the world after the U.S. But farming is a critical piece of the economy.
Farming’s role has changed, however. Now that the EU has restricted nitrogen emissions, a potent contributor to climate change, the Netherlands is trying to negotiate how to continue building infrastructure and other necessities at the expense of farming. Having pledged to cut its emissions to half by 2030, the Dutch government is trying to convince farmers to reduce livestock and its use of crop fertilizers. Farmers, understandably, don’t like that very much. They dislike it so much, in fact, that they took to the streets last summer to protest and treated the country to flaming bales of hay, manure dumped on streets and highways, blockades at supermarkets, and showing up at the private residence of the Dutch minister of agriculture. No one liked that.
Preciously little of what’s happening in the real world has so far made it into farm sims. Farming games paint a kinder, more naive universe. Instead, there is a “Government Subsidy Mod” available for Farming Simulator 22 to “get some subsidies for your farm to help you along in a bad year” up to a whopping $100 million per year. Not surprisingly, the subsidy mod is also the most popular download.
But I’m a realist. What I’d love to see is an agricultural protesting mod. Where can I download a piece of software to drive around town centers and yell “No farm. No food.” to passersby and block their entry to the grocery store? I want to drive my aforementioned big red tractor and congest traffic, damnit. Let’s go fling cow poo at city folk. As a virtual farmer, I want to exercise my right to protest against an overly intrusive government that has no legitimate right to set limitations on my carbon footprint.
Sometimes art needs to imitate life a bit better.
On to this week’s update.
BIG READ: Sony’s new media empire
The success of The Last of Us is, according to analysts, more than just a successful adaptation of a gaming franchise; it is the culmination of Sony’s gradual transition to becoming a media company.
For years I’ve characterized the Japanese powerhouse predominantly as a consumer electronics manufacturer. Different from Microsoft, which develops operating and application software, and Nintendo, which considers itself a toymaker, Sony has long focused on building high-quality media devices. The difference in DNA helps to better understand each firm’s strategic decision-making.
In Sony’s case, to help sell its headphones and television sets it ensures there is ample content available that showcases the full capability (e.g., Blu-Ray) of its devices. To get people to buy your TVs, it makes sense to own a film production arm. Building all that hardware, however, is costly and slow. Despite publicly denying that it lowered its expectations of the very expensive PSVR 2, it is no secret that the virtual reality market hasn’t really taken off just yet. Sony currently maintains its dominant position in console gaming with a 2-to-1 ratio for installed devices compared to its main rival Microsoft. In its most recent earnings report, the combined revenue for digital software, add-on content, and network services was $5 billion. It outsold hardware sales at $4.7 billion, which was up +122 percent. You can see where this is going.
More broadly, Sony's combined operating income for games, music, and pictures accounts for roughly 48 percent of its total. The remainder is made up of Imaging and Sensing Solutions, Entertainment Technology, and Financial Services. But that’s expected to change. Over time the entertainment business has grown to become more than just a useful complementary asset and will account for over 60 percent of revenue by 2026 according to some estimates.
It offers some insight into Sony’s future.
