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Instant Analysis: Sony Corp (ADR) Forms a New Division for All Things PlayStation

By Leo Sun – Jan 28, 2016 at 2:58PM

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The company just streamlined its PlayStation brand into a new business division.

Sony (SONY -1.64%) recently announced that it will combine Sony Computer Entertainment and Sony Network Entertainment into a new unit called Sony Interactive Entertainment (SIE).

Sony Computer Entertainment Global CEO Andrew House stated that the new unit would "become an even stronger entity, with a clear objective to further accelerate the growth of the PlayStation business" by "integrating the strengths of PlayStation's hardware, software, content, and network operations."

A new business for "everything PlayStation"
Shawn Layden, president of Sony Computer Entertainment America, stated that SIE "will serve as the headquarters for everything PlayStation" and let the company place a "bigger emphasis on developing pioneering platforms like PS4 and PlayStation VR, world-class games from our World Wide Studios development teams, and innovative network services such as PlayStation Vue."

This move makes strategic sense, since the PlayStation has evolved from being a single console into a digital ecosystem that sells games, music, streaming videos, and cloud-based games. Sony has also tethered the PlayStation brand to new Xperia smartphones and tablets, which can be used to stream PS4 games over a local network. The PS Now cloud gaming platform suggests that the entire PlayStation brand could soon become a service instead of a physical console.

Therefore, the PlayStation is no longer just competing against the Xbox One. PlayStation Vue is challenging pay TV companies, the PlayStation Store's video rentals now compete against platforms like iTunes, and the PlayStation VR will face off against the Oculus Rift for the hardcore gaming audience this year.

The bottom line
In the second quarter of 2015, Sony's Game and Networking Services unit was its fastest growing business. Sales rose 16.5% annually and accounted for 19% of the top line. Operating income also grew 9.6% and accounted for 27% of operating profits.

According to market tracker Vgchartz, Sony has sold 36.1 million PS4s to date, compared to just 19.5 million Xbox Ones and 12.5 million Wii Us. Those impressive numbers are helping Sony offset some less impressive growth in its mobile and movie divisions. With all the PlayStation brands merged under a single unit, that growth will likely continue.

Leo Sun has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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