PlayStation Ditched Hideo Kojima’s ‘Physint’ on Budget Concerns, Missed Deadlines

Sony Group Corp.’s PlayStation pulled out of an upcoming game by the well-known designer Hideo Kojima because of concerns over budget, potential profitability and exclusivity, according to people familiar with the project.

One major factor behind the decision was the commercial performance of Kojima’s previous two games, Death Stranding and its sequel, which didn’t meet PlayStation’s revenue expectations, said the people, who asked not to be identified discussing information that’s not public.

But the new project has also missed deadlines and was on track to be well over budget despite being years away from release, the people said. In addition, PlayStation was reluctant to invest hundreds of millions of dollars in another game that wouldn’t remain permanently exclusive to the company’s own hardware. Both Death Stranding games were “timed” PlayStation exclusives that were later released on other platforms. Kojima’s closely held studio, Kojima Productions, retained ownership of the franchises.

The new game, Physint, hasn’t yet been shown publicly but excited fans when it was announced two years ago with its promise of returning to the “espionage action” genre Kojima pioneered with Metal Gear Solid, the series that propelled him to industry stardom. Kojima surprised fans this week when he announced he would be publishing Physint with PlayStation’s biggest rival, Microsoft Corp.’s Xbox.

On Wednesday night, Kojima wrote on social media that over the summer his company had “unexpectedly received notice” that PlayStation was pulling out of funding the game. “Physint is an important project both to me personally and to Kojima Productions,” he wrote. “Determined to keep the project alive, we have spent the last three months searching tirelessly for a new partner.”

PlayStation also addressed the split on social media, saying it had made the “difficult decision to step away.” A representative for PlayStation declined to comment further. A representative for Kojima Productions did not respond to a request for comment. Microsoft said it was “honored” that Kojima chose Xbox and that the two teams plan to collaborate beyond games on films and television, too.

Sony, which has long been a titan of the video-game industry thanks to its lucrative console business, is grappling with several crises this year. The AI-driven memory crunch has led to shortages and higher prices for PlayStation hardware, driving the company to look for more ways to maximize profits and generate more revenue per user. The Japanese company also recently announced plans to discontinue physical versions of PlayStation games, leading to an enormous outcry among gamers.

Sony’s software development has also struggled, in part due to an initiative to make more than a dozen “live-service” games, or those that can be monetized long after they come out through updates and microtransactions. The failure of many of these games, including Concord, a high-profile flop that was pulled from stores two weeks after it was released, has led PlayStation to enact stricter production milestones, according to people familiar with the business. As a result, the company has canceled several games.

The decision to part ways with Kojima is a significant move for PlayStation that may have ripple effects.

Kojima’s relationship with PlayStation goes back to the 1990s, when his breakout title Metal Gear Solid, a PlayStation 1 exclusive, helped solidify the console as a graphical powerhouse. Decades later, after Kojima’s acrimonious departure from Konami Group Corp., he quickly announced a long-term partnership with PlayStation. Analysts and industry observers praised the move, noting that having Kojima’s name associated with the platform helped build prestige and sell consoles.

But many of the PlayStation executives who had close relationships with Kojima have left the company in recent years, according to people familiar with the business.

Xbox, which has been facing its own overhaul under new Chief Executive Officer Asha Sharma, saw Physint as a good investment opportunity for several reasons, according to people familiar with the company’s strategy.

One key factor is the PC platform, where the Death Stranding games have generated some revenue. Earlier this year, Sony decided it will no longer release single-player PlayStation games on PC, Bloomberg reported. Sony would therefore not benefit when Kojima Productions released a PC version of Physint on its own or with a different publisher, as it did for the first Death Stranding. But Xbox releases all of its games on PCs and plans to publish Physint on PC and Xbox, said the people.

The deal will also include film and television rights for both Physint and a second title from Kojima Productions, the experimental horror game OD. Sharma has said that expanding Xbox’s properties to linear media is a significant part of her strategy.

“Betting on Kojima-san is an easy call,” said an Xbox spokesperson. “We believe in his team’s ability to build AAA games with groundbreaking, new IP and we believe in OD, Physint, and our growing partnership.”