Sony moves out of Japan following dismal PS4 sales

Sony shook up its gaming division early this morning, and it is moving the center of the PlayStation brand to the West.

In April, Sony will officially incorporate Sony Computer Entertainment and Sony Network Entertainment International into a single business, unit called Sony Interactive Entertainment LLC. This new corporation still reports to Sony in Japan, but it will have its headquarters in San Mateo, California, with “key global business operations” also located in Tokyo and London.

This is a major shift for the PlayStation division, and it signifies that Sony wants to redouble its efforts to generate as much revenue as possible from the core audience that has rushed to the PlayStation 4 this generation. Console gaming is a $30 billion business globally, according to Newzoo, and it’s also one of the few sectors (along with insurance) where Sony has a clear path to profitability.

Refocusing on the West makes sense for Sony, especially when you consider that Japan just doesn’t seem to be that much into console games anymore.

Macquarie Securities analyst David Gibson points out that Sony has sold approximately 36 million PS4s worldwide, but only 2 million of that total comes from Japan. By making this move, Sony is matching the shrinking interest of Japanese gamers. This is not to say that Sony will abandon Japan, but it is more likely going to consider that region in a secondary or even tertiary way.

Gaming analyst Serkan Toto agrees with Gibson:

“I think this is a reaction to the fact that only just over 2 million of the 36 million PS4s shipped worldwide were sold in Japan. That ratio is much worse than in previous life cycles. That’s a very disappointing performance in Sony’s home market, especially given the fact that absolutely nobody buys the Xbox One here and the Wii U didn’t do well in Japan either.”

Japan is now a mobile gaming oriented market. It is essentially second (though tied with the US) for spending on iOS and Android, trumped only by a surging Chinese player base. To put that into perspective, Japan has a population two-fifths the size of the US, which means that it has an average revenue per player several times larger than any other country when it comes to mobile spending. This leads to an environment where gamers in Japan are ignoring consoles to spend their free time and cash on their smartphones.

Meanwhile, PlayStation 4 is one of the fastest-selling console systems ever, despite its chilly reception in Japan. That’s primarily thanks to the US and Europe, and Sony wants to fuel that enthusiasm. With that goal in mind, Sony Interactive Entertainment has kept Andrew House as chief executive officer and has appointed former Sony Computer Entertainment America boss, Shawn Layden, as the head of Sony Worldwide Studios.