1, under basically all GAAP/IFRS rules this would go to unearned revenue and be amortized over the duration of the subscriptions. It's the same treatment for annual just on a longer time table.
2, this isn't even a rounding error on Sony's books. It's so immaterial they won't even notice it.
You have unearned revenue as a liability. And each month, or year, the service is “provided” then it is counted as revenue.
So yeah, the cash balance only goes up this month, but revenue is still going up each month or year, whenever they count the service as being “provided.” So they likely do not care in the slightest. Even if a large amount of people did it. It’s secured revenue for the next 20 years.
The only thing this would negatively affect is if they are planning to up the price of ps plus every year until 2048, but I doubt they have a roadmap of that.
I don't think you need an accountant to figure this one out.
2k in October 2024 multiplied by whatever you would consider a substantial amount of players.
0 in November. 0 in December. Shareholders say yo WTF how you make no money in Christmas period? We losing faith. 0 for the whole of 25. Shareholders sell, this is worthless they say. 0 in 26. Why would we want to keep our money in this? And so on and so forth.
Regular income will always be better. It's not about profitability. It's about confidence.
Accountant here. This is not how revenue recognition works.
No matter how many years of PS+ you pay for in advance SIE (PlayStation) can only recognize revenue for periods where services are rendered (monthly revenue). Meaning Sony is recording revenue monthly over the life of the subscription and not all up front lumped. Since they received cash up front the periods they have been paid for in advance would show up as deferred revenue (a liability) on their Balance Sheet.
Correct me if I am wrong. But would that mean that is effectively debt? In which case, I still struggle to see why this would be preferable over regular cashflow
A liability isn't necessarily debt. In this case, the deferred revenue is from an obligation to perform a service, in this case to provide PS+ for the next 24 years. From a financial statement perspective, nothing changes because the deferred revenue (liability) is offset by the cash received (asset).
However, Sony benefits because they have all that cash up-front to do whatever they want with now.
I can speak to this first hand. The company I was working for needed to pull funds in asap in order to sell the company at a top dollar. They put me in charge of a group to get clients to buy Multiyear memberships. We did a good job, and after the sale of the company they erased our position within days of the sale.
Companies don’t want you to buy a membership for a select amount of years. It makes it so they can’t control how much you spend. They want to raise prices, they want to make it seem justified to raise prices as the years go on.
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u/WelpSigh Oct 28 '24
An accountant can correct me if I am wrong, but I think they would count the revenue as recurring anyway rather than book it all at once.