Sony sets up a PlayStation mobile gaming division in a major push beyond consoles

Sony set up a dedicated PlayStation mobile gaming unit in a major push to diversify beyond consoles.

The Japanese gaming giant launched PlayStation Studios Mobile Division on Monday and said it will run independently of the console business.

Sony also said on Monday it acquired Helsinki- and Berlin-based mobile game developer Savage Game Studios.

The move comes after a tough second quarter for Sony's gaming division, and the company's downgrading of its full-year profit forecast for the business as the Covid-induced boom — during which people were stuck at home playing video games — begins to fade.

Sony also continues to face supply chain issues and cannot meet the demand for its flagship PlayStation 5 console.

Sony has dominated the console market for several years, thanks to the PlayStation. But the company is now looking to diversify. This year, the Japanese gaming giant said it plans to release around 50% of games on PC and mobile by 2025, up from about a quarter currently.

"For that to happen, Sony needs to make big bets on mobile gaming," Serkan Toto, CEO of Tokyo-based game industry consultancy Kantan Games, told CNBC.

And the opportunity is big. Consoles account for about 27% of the $196.8 billion games market, whereas mobile makes up more than half of revenues, according to Newzoo.

The purchase of Savage Game Studios continues Sony's recent acquisition drive as it looks to boost the development of titles across platforms.

"PlayStation Studios must continue to expand and diversify our offering beyond console, bringing incredible new games to more people than ever before," said Hermen Hulst, head of PlayStation studios. "Acquiring the talented team at Savage Game Studios is another strategic step towards that goal."

Sony said that Savage Game Studios is working on an "unannounced new AAA mobile live service action game." A "triple A" game is an informal industry classification usually for a blockbuster type of title. A live service game is usually a title where developers continually update and add content to extend its lifetime and generate revenue over a longer period of time.

The success of Call of Duty Mobile and Diablo Immortal on mobile, both of which were originally designed for console and PC, show there is demand for well-known titles on smaller screens "if executed well," according to Daniel Ahmad, senior analyst at Niko Partners.

Sony's mobile strategy is likely to lean on its massive library of intellectual property (IP) but also with a focus on developing specific games for smaller devices, Kantan Games' Toto said.

"Sony is very likely to not only bring existing PlayStation IPs to mobile but also encourage studios to develop new franchises for smart devices from scratch," Toto said.

Sony is the latest console maker to make a big step into mobile gaming. Microsoft's Xbox gaming unit has also begun making early moves into mobile. Nintendo has, for the last three years, also been focusing a lot of effort on the smaller screen gaming format.

Globally, Sony will compete with companies it hadn't really before, particularly Chinese giants Tencent and NetEase — two of the world's largest mobile gaming players.

But Toto said Sony's chances of success are still high.

"The mobile gaming market is overcrowded. There are over 1 million games in app stores nowadays. But players such as Sony, even if they are new entrants, can still make it just because of their fire power," Toto told CNBC.

"There are not many companies like Sony out there, with such strong branding, a whole range of high-performing studios and a treasure trove of valuable IPs."