Sony plans to boost game R&D spending this year as competition ramps up

Sony plans to boost R&D spending in gaming and focus that extra money on Fortnite-style live service games and mixed reality, Nikkei has reported. It will invest $2.13 billion for the segment in fiscal 2023, accounting for about 40 percent of R&D spending company wide — over double what it spent in 2020. The aim is to better compete in cloud gaming and VR, particularly if Microsoft's Activision Blizzard acquisition goes through. 

Sony has traditionally relied on relied on story-led blockbuster titles like God of War and Horizon Zero Dawn, but live service games use a different model. Instead of developing one game and moving on to the next, companies build titles that can be updated over time, generating revenue with new content like seasonal maps, skins and weapons. Overwatch and League of Legends are examples of those. 

The company lags behind rivals in that area — it had just one live service game in 2021, but plans to have 12 in its portfolio by March 2026. To that end, it plans to spend 55 percent of PS5 game development on live service games by March 2024, and 60 percent by March 2026. It plans to use its Bungie acquisition to further that aim, according to the report. 

Meanwhile, Microsoft is trying to acquire Activision Blizzard, which would give it access to a powerful portfolio of live service games (World of Warcraft, Call of Duty, Destiny 2, etc.). Microsoft also holds a considerable lead in live-streamed games with Xbox Cloud Gaming, while Sony has only started testing PS5 game streaming. 

At the same time, Sony wants to invest more in the so-called metaverse by boosting development in extended reality (VR, AR, mixed reality etc.). To do so, it aims to combine the resources of nine overseas game studios it owns in whole or in part, including Epic Games, whose Unreal Engine helps power augmented reality apps. That's in light of the upcoming release of Apple's Vision Pro headset, and Sony's recent launch of its own PSVR2 headset. 

The increased investment shows the importance of gaming to Sony's overall portfolio. Its game & network services segment now makes up a large part of the company's earnings, far and above segments like imaging, movies, TVs and more. It also shows Sony recognizing that it must adapt to the reality that game development is shifting away from the traditional model — meaning it will be a lot more dependent on owning game-development studios.

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