Sony Group will boost research and development spending at its gaming unit by about 10 per cent to 300 billion yen ($2.2 billion) this financial year, the Nikkei reported on Thursday.
R&D spending at the games business behind the hit PlayStation 5 console will surpass R&D spending on electronics and semiconductors this year, the business daily said.
Sony did not immediately respond to a request for comment but its gaming business has set out ambitious plans to invest in live-service games, which offer continuous updated play, and it also plans to offer more PC and mobile games.
Its stock was up 4 per cent in Tokyo morning trade after a brokerage upgrade.
Rival Microsoft has turned to acquisitions to boost its subscription and cloud-based gaming services to better compete with market leader Sony.
On Wednesday the U.S. Federal Trade Commission said it was appealing a federal judge's ruling that Microsoft could go forward with its $69 billion purchase of Call of Duty maker Activision Blizzard.