Sony bets on service games for Playstation’s future

The news: Sony is going all-in on service games and is bringing more of its gaming intellectual property to TV and streaming services, it disclosed in an investor presentation.

• The company announced plans to develop 12 live service games by 2025 with the help of developer Bungie, which it recently acquired for $3.6 billion.
• It will also bring more of its console-exclusive titles to PC, where it can more closely compete with Microsoft’s Game Pass service.
• The development of shows based on the “God of War” and “Horizon” franchises with Amazon and Netflix, as well as a yet-to-be-placed “Gran Turismo” show, are the latest in a series of video game adaptations on streaming platforms.

Games as a service: The “live game” model has been a huge success for the video game industry, producing lucrative hits like “Fortnite,” “Apex Legends,” and Bungie’s “Destiny” series, which helped popularize the format.

• Sony has traditionally been resistant to service games, even as they’ve proved successful for competitors. In 2019, “traditional” game releases made up 88% of its PS5 business investments, while live games only made up 12%. It expects to boost that to 49% this year and to 55% by 2025.
• Service games keep players coming back over long periods of time but can also open up opportunities for Sony’s rumored advertising platform for free-to-play games, which make up 25% of Playstation Store spend.
• Sony’s “Add-ons” category, which can take the form of expansions to “traditional” games or updates and purchasables to service games, is also expected to grow from $15 billion this year to $24 billion by 2025.

Expanding on intellectual property: Gaming, thanks to the pandemic, is experiencing a popularity peak, which is coinciding with streaming services’ war to gain viewers by any means possible.

• One of those means is through adapting popular games for the screen. Several major video game franchise adaptations are in the works:
• HBO Max is making a show based on Sony-owned “The Last of Us”; Netflix has several video game adaptations like “Arcane”; Paramount+ has adapted Halo (which was created by Bungie); and Amazon is also working on an adaptation of (now Microsoft-owned) “Fallout.”

The big takeaway: Gaming brands are flexing their substantial audiences by adapting some of their most popular intellectual properties and pivoting toward service games.

• Gaming revenues continue to climb, and advertisers will likely flock to free-to-play and service games in the coming years to reach their growing audiences.