Hiroki Totoki: Thank you. For gaming this year, profit margin, especially the operating margin was not really a wonderful situation. Well, partly because we are currently in a transition where the PS5 as a hardware units are expanding as a process. But what we need to manage is that PS4 and the previous general — unlike PS4 or previous generations, consoles — if you look at the console cycle, cost reduction within the cycle is very difficult to come by. And that is a big challenge. Because if you think about PS console device, unlike high specs computers. It’s affordable price, while with a very safe countable environment with a very great experience. That’s wonderful things about PlayStations. But compared to the past, in order the cost for building that experience, memories, chip sets, the prices of the cost of all those components are going up as a fact.
And how can we give in the station can put our product plans together to make it affordable so that without relying on steep discounts to reasonably sell them to continue our commercial journey on a sustainable basis. I personally think that’s important. And there is an opportunity in that, and that’s how I see it. And the other potential driver is the first-party title generation because in the past, as you all know, we wanted to popularize console. And title was something — and the first-party title may purpose was to make the hardware or the console popular, right? It is true, right? But there is a synergy to it. So if we have a strong first-party content, not only with our console, but also other platform like computers. And the first-party can be grown with multi-platforms and that can help operating profit to improve.
So that’s another one that we want to track with walk on. I personally think there are opportunities out there for improvement of margin. So I would like to go a great from improving our margin performance. Now to I&SS so far in the past, R&D and capital investment comes together but the sales is now recouping what we have invested. That’s basically what we had at a problem. Because workforce, we need to focus to minimize the operating loss. We need to also manage investment plans. So the cost and investment opportunities needs to be meeting at the right balance. But I&SS in the past, as you all know, sensors is first of all, mobile sensor, let’s say. Is it becoming a larger format. And also what’s driving the other things about the prices, like having more cameras and better.
So more cameras as well as a version format of the sensor, both requires having a bigger capacity, but a larger format as well as more cameras, small lenses and smartphone. Is that going to continue forever? Probably not maintained at the level of today, but having more functionalities to it, right? So having higher functionality is something that is now demanded. How can we build that high functionality? They think, without much redundancy in the process. That’s the question, right? Because if we can address that, I think the more profit margin is going to go up. Thank you.
Unidentified Company Representative: Time is running short. So I’d like to ask the questions to be please limit to 1 question per person. Next question, please. Morgan Stanley, MUFG Securities, Ono, please.
Masahiro Ono: Ono from Morgan Stanley. About Game. I have 1 question. Next fiscal year, a slight increase in profit you are expecting. And ¥270 billion this year and in the past, the peak was more than ¥300 billion. So the peak in FY ’21 with PS5, it’s very difficult to exceed the peak level of 300 in ’21. I may be asking a repeat the question. But MAU, ¥123 million is to be increased. And further, is it possible to exceed the peak in profit level, especially in the cycle, the fifth year is a peak of the hardware and 6-year is the peak of hardware and seventh year is the peak of the margin. That was a cycle, as I understand this in the past. So 6th year, next year will be the sixth year of the release and the software mainly is if it is third-party, I think it is regrettable. But how should we interpret this? Can you please explain?
Hiroki Totoki: Well, PS4 can be one big reference for us. Under COVID-19 — we had a COVID-19 period so we cannot accurate, say, fifth year, sixth year and seventh year for PS5, there may be some argument. Margin or the profit level. Absolute amount of profit is to be increased. And for that, it is challenging but I’d like to try and increase. At the time of — compared to PS5, market itself, including the third-party titles, the market is increasing for PS5. But the profitability of hardware is higher for PS4. So with loan cost will not decrease with the new console. So how we can hit the balance with the margin and continue to spread the — disseminate PS5 is important. And second point, this fiscal year and next fiscal year, the cost — acquisition cost of the past is also incurred.
So as the acquisition-related cost burden decreases, that will become a factor for increase in profit. So we have to think this in an integrated fashion. And in the era of PS5, we — I do not think that — I am not going to give up and renew the peak. So in the next mid-range plan, we would like to challenge and try to exceed the peak of the past.
Unidentified Company Representative: The next person will be the last person to ask the question. Ayada from JP Morgan.
Junya Ayada: This is Ayada from JPMorgan Securities. On Games, you have been saying ¥123 million of the MAU and you had a great hit with free title. And I understand that these are titles to which you invest. Well, regarding those games, I think new movies have been added or you have a collaboration with Disney, which are different expectations toward growth from the past. From your perspective, these third-party titles, what are your expectations toward those titles? And as an investor, what are your expectations? And the profitability for Games for next fiscal year, you didn’t mention about the add-ons. So what’s happening there?
Hiroki Totoki: Like you say, those titles are contributing significantly. That’s true. Collaboration with other companies is something that we can’t comment. Well, those companies are attractive companies to which we would like to invest, and that’s very — it’s a positive development for us. And that collaboration, we hope that, that will generate an upside for us. And add-on sales for next fiscal year, whether that is being reflected or not, well, the business plan hasn’t been fixed yet. So at this point in time, it’s hard for me to comment on that point. But the third-party titles will — if they grow, that will be very positive for us, and we hope to utilize that momentum — take advantage of that momentum.
Unidentified Company Representative: Since it’s time, we’d like to conclude the consolidated financial results announcement from Sony Group. Thank you very much.
