Sony is struggling to sell a product that was once in high demand

Towards the end of 2020, the only present many holiday shoppers wanted from Santa was the newly released PlayStation 5. They wanted it so bad that the skyrocketing demand attracted profit-hungry digital scalpers who digitally purchased the product en masse the second it went on sale.

Many shoppers were outraged that the PS5, which was limited in stock, sold out within seconds, and for the next two years, Sony  (SONY)  struggled to put the gaming console in the hands of its customers due to a shortage of a chip that was needed to produce the product.

Now it appears that the tables have turned. Sony has revealed in its most recent earnings report, which was released on Feb. 14, that it struggled to sell the PS5 in the previous quarter, which encompassed the critical months of the 2023 holiday season.

Sony only sold 8.2 million units of the PS5 in its fiscal third-quarter.

Sony also noted in the report that it believes that the gaming console has entered the “latter half” of its cycle, and there will be a “gradual decline in unit sales from next fiscal year onwards.” Because of this, the company expects unit sales for the console this fiscal year to be around 21 million units, which is a decline from the previous 25 million units it previously estimated.

So far this year, the company has sold 16.4 million units of the next-gen console.

Also, the company’s operating income for its game and network services decreased from ¥86.1 billion ($574.5 million) to ¥30.1 billion ($200.8 million) mainly due to the struggling sales of the PS5.

The company also plans to not release any major franchise video game titles during the next fiscal year such as “God of War Ragnarök” and “Marvelʼs Spider-Man” due to low PS5 sales.

A shopper with a Sony Playstation 5 at a Best Buy store on Black Friday in San Francisco, California, US, on Friday, Nov. 25, 2022. Bloomberg/Getty Images

The weak report comes after Sony executive Eric Lempel revealed in an interview with Barron’s last year in October that the company was expecting historical console sales during the holiday season after it fully restocked the PS5.

“We’ve had consoles a bit here and there over the last three holidays, but this is the first time we’re in full supply and we’re thrilled about that,” he said. “Our outlook on PlayStation 5 is really strong. We’re expecting one of the strongest seasons in our history in terms of console sales.”

Any hint of a decrease in demand for the PS5 was indicated in April last year when it was reported that scalpers who previously purchased the rare product in large quantities were struggling to sell it due to low demand. But this was believed to be due to Sony gradually increasing the supply of the gaming console that was rarely in stock for two years after its release date.

Sony’s PS5 isn’t the only gaming console that is struggling with sales. Sales of Nintendo’s  (NTDOY)  latest gaming console, the Nintendo Switch, also saw its hardware sales decrease by 7.8% year-on-year, selling 13.74 million units during its first three fiscal quarters, according to its latest earnings release. Its software sales for the Switch, which has sold nearly 140 million units since its debut in 2017, also declined by 4.7% year-on-year.

Microsoft  (MSFT)  however, is seeing success with its Xbox content and services as revenue for it increased by 61% during the final quarter last year, according to its latest earnings report.