If you take all the cash that came into Sony's bank account in a single fiscal year, and remove all the cash that left Sony's bank account that fiscal year, then the number you have left at the end is Free Cash Flow, not profit.
Profit isn't measured as the amount of money that is actually going in and out of a bank account. I don't know how else to explain it.
As I said, profit is the difference between the money earned that year and the amount spent that year.
These are the different strategies I was talking about. Sony's games cost way more but they also publish fewer games.
Sony is much more interested in acquisitions lately, while Nintendo prefers internal investment and funding partnerships. Each are playing to their strengths.
But to go back to my original point, what I was trying to explain is that we shouldn't always see lower profits or profit margins as a deliberate reinvestment strategy.
The margins PlayStation had when Totoki took over were not purposefully made low to "save" on dividends and taxes. The low margins were a challenge to overcome.
Totoki has now done a great job of improving the profit margins for PlayStation, but that's not because they have lowered investments and are now just putting money in a bank account.
Yes, to have lower profits doesn't mean more reinvestment.
But in the traditional case of Sony vs Nintendo (not last fiscal year, when Sony had more profits), Sony had way bigger revenue but less profits because that money was reinvested in both internal products & services (more plus more expensive games under development, hardware, accesories, signing exclusives and games for PS+ etc), growing their teams (hirings, acquisitions) or in external investments (stuff like Unreal Engine or FromSoft) etc.
Meaning, if desired (as Totoki recently did) could just cancel/not greenlight a few games (or reduce the scope/budget of a few games), not signing a few PS+ games, make less investments or hire less new people and make some cuts or cost optimizations here and there to improve their profitability.
One of the main costs SIE had in recent handful years were acquisition related costs from the acquisitions made in the recent years. That is: retention bonuses, sometimes buying a new and bigger office for them, hiring many new people for them, integration programs with trainings and meetings to teach them how to work in the new company, many dedicated meetings to share data and expertise between both sides, compensations for people fired to reduce redundancies, relocation costs for moving some people instead of firing them due to the redundancies and other things.
These acquisition related costs normally take a few (depending on the case 2, 3 or even 5 years). According to Totoki, last year they were easing out and in the current year they will be mostly over.
The problem with saying "Nintendo is ok with how they are" is that it makes sound like Nintendo isn't also investing aggressively to grow more. They wouldn't spend over $3 billion on an acquisition like Bungie, but they want that virtuous cycle as much as Sony does.
Nintendo (including non-gaming stuff) traditionally generated way less revenue than Sony but more profit. And this wasn't just for selling their hardware and games overpriced. It also was because they reinvested way less:
It was because they produced less 1st & 2nd party games and each one was way cheaper, signed way less and cheaper exclusives (it isn't the same to sign FFXVI, FFVIIR, Forspoken plus many AAAs etc than mostly a pixel remasters and 2DHD stuff plus smaller games and late downports), made less investment in R&D/new tech (Sony fills many patents every year), hired and acquired less people (SIE doubled their manpower during the Jim Ryan era), made less investments in external companies (as Sony did in Epic, Fromsoft, Kadokawa etc) and so on.
Yes, Nintendo also makes games, hardware and had some acquisitions, signs deals etc. but not at the scale of Sony. They are fine with the way they do it because it works very well for them specially in the Switch 1 generation where they mostly had a handheld market monopoly.
. In fact it's been trending downward.
