Video game business pays off for Sony (NYSE: SONY)

Japanese corporate juggernaut Sony (NYSE: SONY) built its global reputation in the 1970s-80s with consumer electronics products, such as the Trinitron TV and the Walkman cassette player.

So it’s only fitting that the current centerpiece of Sony’s consumer product portfolio, video games, are boosting the company’s financial performance.

The company, which also includes an entertainment division, posted a profit of 339.8 billion yen ($2.2 billion) in the quarter ended Sept. 30. That was up 69% from 201.2 billion yen a year earlier. Revenue gained 2.7% to 2.9 trillion yen.

Video games helped spark the increases. The division’s operating profit more than doubled to 138.9 billion yen.

Video game software and services sales increased. And while unit sales of PlayStation 5 consoles declined, profitability increased. PlayStation produces the most revenue of any Sony business.

The company’s strong showing in video games comes amid a slowdown in that industry from its boom during the Covid pandemic. The boom was fueled by people stuck at home, and the slowdown has come amid waning demand.

Sony’s top performing games include Astro Bot and Helldivers2. In Astro Bot, players control a small robot with that name.

The game was released in September and “has garnered high praise from the gamer community,” the company said in its earnings presentation this month. The game sold over 1.5 million copies in the nine weeks following its release, Sony said.

Helldivers2, also released this year, was “a huge hit” last quarter, Sony said. It’s a cooperative third-person shooter game. The success of Chinese video game Black Myth: Wukong also gave the company a boost in the latest quarter.

The new PlayStation

This month, Sony launched PlayStation 5 Pro, the most powerful PlayStation ever and also the most expensive, at $700. Its upgrades include quicker image renderings and improved details.

But Techradar reports that the device is already being discounted up to 5.8% in London.

Next year, Sony is set to receive seminal games such as Monster Hunter Wilds and Grand Theft Auto VI.

The video game industry appears to have a bright future. The global video game market will rise to $307.2 billion by 2029 from $188.7 billion in 2021, according to Fortune Business Insights. But Sony isn’t the only player vying for that business.

“While user migration from PS4 [Play Station 4] to PS5 is progressing well, rising game development costs and competition from other platforms such as Steam are becoming a concern for the business,” Morningstar analyst Kazunori Ito wrote in a commentary.

Other elements of Sony

There’s more to Sony, of course, than video games. “Over the past decade, it has transformed its business model to enable more solid and stable growth by reducing the volatility of the consumer electronics business and by aggressively investing in content for its entertainment businesses such as music, movies, and games,” Ito said.

Sony has made strong inroads in the music and movie businesses, including streaming, as you’re probably aware. The image sensor business is where Sony has its largest global market share – around 55%. Image sensors help create pictures on cameras and phones. The majority of Sony’s sales come from the mobile phone market.

So there are a lot of moving parts to look at when studying Sony. If you’re interested in its recent stock performance, shares have climbed 11% in the last six months. But they have eased 0.7% year to date and 7% since Sony released its earnings Nov. 8.