Unexpected PlayStation Announcement Sends Sony Stock Soaring

Highlights

Sony's controversial decision to raise the prices of PlayStation Plus subscriptions has resulted in an immediate boost to the company's stock.

The projected price increase is expected to have a substantial impact on Sony's annual net sales and operating profit. Although Sony is currently reaping the benefits of this price hike, analysts caution that in the long run, it may result in reduced revenue as gamers consider canceling their subscriptions or transitioning to more affordable tiers.

Sony's decision to increase the prices of PlayStation Plus subscriptions has sparked controversy and displeasure among gamers. Despite the backlash, the company's stock is on the rise, indicating immediate benefits from the price hike.

In June 2022, Sony introduced a tiered PlayStation Plus subscription service, starting with the Essential tier priced at $59.99 per year. This tier offers the same benefits as the original PlayStation Plus service. For gamers wanting more games, classic titles from previous PlayStation consoles, and extra perks, the Extra and Premium tiers are available at higher prices. Unfortunately, gamers will now have to pay approximately 30% more for their yearly subscription going forward.

Following the recent announcement of the PlayStation Plus price hike, Sony's stock has experienced a surge of approximately 3.4%, as reported by Bloomberg. This increase in price is predicted to boost Sony's annual net sales by 100 billion yen, roughly equivalent to $688 million. Moreover, Sony's operating profit is projected to rise by $378 million, taking into account the increased subscription fee for annual memberships. Sony justifies the price hike by stating that it will enable the company to continue delivering high-caliber games on a monthly basis through PS Plus. Nevertheless, numerous gamers on social media and online forums believe that Sony's intention is solely to maximize its revenue, given that PS Plus is essential for online play in most game titles.

While Sony may be experiencing short-term benefits from the controversial PS Plus price increase, analysts caution that these gains may not be sustainable. The increased pricing could prompt gamers to cancel their subscriptions or downgrade to the Essential tier. Bloomberg has also spoken to CLSA analyst Amit Garg, who predicts that this price hike could set a precedent for future increases from Sony, Microsoft, and other subscription service providers. However, it remains uncertain how the PS Plus price increase will impact competing services like Microsoft's Xbox Game Pass in the long run.

In the short term, Sony's rising stock provides significant advantages for shareholders. However, gamers are considering the value of their PS Plus subscriptions, potentially resulting in reduced revenue over time. Additionally, some players are unhappy with Sony's selection of free PS Plus games for September 2023, particularly the poorly-received Saints Row reboot from the now-closed Volition studio. This situation casts Sony in a negative light, and rectifying the situation may necessitate the introduction of new benefits to rebuild goodwill.

PS Plus will continue to introduce new games every month across all three membership levels. The inclusion of first-party day one releases with PS Plus could address the concerns raised by players regarding the price increase, but it is ultimately Sony's decision. At present, PS Plus does not seem to be planning to implement the day one release benefit that Xbox Game Pass offers.