Sony hopes to make new console profitable faster than PlayStation 3

LOS ANGELES Wed Jun 12, 2013 12:07pm IST

Andrew House, president and Group CEO of Sony Computer Entertainment, speaks during the unveiling of the PlayStation 4 launch event in New York, February 20, 2013. REUTERS/Brendan McDermid/Files

Andrew House, president and Group CEO of Sony Computer Entertainment, speaks during the unveiling of the PlayStation 4 launch event in New York, February 20, 2013.

Credit: Reuters/Brendan McDermid/Files

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LOS ANGELES (Reuters) - Struggling electronics giant Sony Corp(6758.T) aims to make a profit on its new video game console faster than it did with its PlayStation 3 console by managing costs and keeping its technology similar to that of personal computers.

Sony Computer Entertainment, the company's games division, took four years to make a profit on its last-generation PlayStation 3 console. For its new PlayStation 4, the company has said it wants to shorten that period of initial loss.

"We have taken some strategic decisions around cost structure, architecture of the system itself and key components, which are all radically different from decisions that we took around PlayStation 3," Andrew House, group CEO of Sony Computer Entertainment, said in an interview late on Tuesday.

For its new console, the company chose a technical architecture similar to that of a PC to manage costs and ramp up production easily, House said.

At the Electronic Arts Expo, the largest video game trade show in the world, in Los Angeles, the company announced on Monday that the next-generation PlayStation 4 console would be priced at $399, which is $100 less than its competitor Microsoft Corp's (MSFT.O) Xbox One console that will go on sale in November.

Sony is also integrating cloud gaming capabilities to let users stream and play video games hosted on servers.

Analysts have questioned the ability of cloud gaming services to deliver seamless gaming experiences, where users can play without latency or delays in game play.

"Our goal is to be not dragged into this but to take a leadership position and be a pioneer in this area because we think there some very significant benefits that accrue from having a first mover advantage," House said.

House could not talk about titles that will be available through streaming services, as Sony's cloud gaming plans are a work in progress.

CUT FORECASTS

Sony CEO Kaz Hirai has said that its gaming division, Sony Computer Entertainment, which barely made a profit last year, is one of three core businesses - in addition to cameras and mobile devices - that can deliver the growth the company badly needs.

But Sony has cut its sales targets for digital cameras, smartphones and tablets by 13 to 17 percent for the year to end-March 2015. It also cut its operating profit margin target for the gaming business to 2 percent in the year to March 2015, from an earlier outlook for 8 percent.

The new console will include exclusive original programming content and a wide array of game titles, including Assassin's Creed IV Black Flag and Kingdom Hearts III, to entice users in an expected battle with the new Xbox One in the Christmas holiday season.

House said it was too soon to provide PlayStation 4 sales projections as the product's features were only announced on Monday.

"Anecdotal evidence is showing that demand could exceed supply based on the level of interest we're getting from consumers right now," he said.

The Xbox 360 is currently the best-selling gaming console in the United States, but global sales are almost on par with the PlayStation 3.

Weak sales of Sony's handheld gaming device, the PlayStation Vita, and costs associated with launching the new PlayStation had prompted the company to lower the forecast of its gaming business, House said.

"Having said that we are very confident that if we manage the business smartly and get the value proposition right and are consumer friendly there are a wealth of new revenue opportunities that emerge from this business that give me very great confidence that (the video games division) certainly has a strong role to play in Sony's recovery." (Reporting by Malathi Nayak; editing by Patrick Graham)

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