PREVIEW - Sony banks on PlayStation 4 to win holiday console battle in recovery campaign

SAN FRANCISCO Thu Nov 14, 2013 6:35pm IST

A visitor looks at Sony Corp's new PlayStation 4 game console at the Tokyo Game Show in Chiba, east of Tokyo, September 19, 2013. REUTERS/Yuya Shino/Files

A visitor looks at Sony Corp's new PlayStation 4 game console at the Tokyo Game Show in Chiba, east of Tokyo, September 19, 2013.

Credit: Reuters/Yuya Shino/Files

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SAN FRANCISCO (Reuters) - Sony Corp (6758.T) hopes its PlayStation 4 video game console, to be released on Friday, can win a sales battle brewing with Microsoft Corp (MSFT.O) and build a platform for recovery at the Japanese firm's loss-making consumer electronics operations.

Launching the PS4 a week before Microsoft's Xbox One console hits stores, Sony has marketed the device aggressively in a TV and social media advertising blitz that the company believes will pay off in the United States' year-end holiday season.

The stakes are high for Sony, which last month reported worse-than-expected earnings and cut its full-year profit forecast as its consumer business sagged in the face of stiff competition. While Sony's counting on the console to kickstart a revival, the broader video games industry has seen sluggish sales in recent years, hurt by the rise of free games on mobile devices and social networks like Facebook Inc (FB.O).

Jack Tretton, the president and chief executive of Sony Computer Entertainment America, said in an interview he's confident the new version of one the company's most successful products through recent lean times will keep consumers buying its consoles over the next few years.

"To have a lot of pressure on us to deliver and not have the goods would be very stressful, but to have the company counting on us and then have the goods to deliver makes it a very pleasant experience this week and beyond," Tretton said.

Both the PS4, priced at $399 in the U.S., and the XBox One, retailing for $499, offer improved graphics for realistic effects, processors that allow faster game play and a slew of exclusive video games.

Tretton reaffirmed the company's aim to sell 5 million PS4 machines by the end of its fiscal year ending March 31. Sony has received more than 1 million advance orders for the console, while Microsoft has revealed only that advance orders for the Xbox One exceeded those of its predecessor, the 360, eight years ago.

After Friday's North America launch, the PS4 will go on sale in other regions including Europe, Australia and South America from November 29 - all in time for the busy pre-Christmas season. The device will be released in Japan in February.

"There's a lot of risk when literally tens to hundreds of millions of dollars have been sunk into research and development and marketing," Jesse Divnich, an analyst at video game market research firm EEDAR. "But the PS4 is going to be a catalyst for the company going forward."

It took the company four years to recoup investment on the previous iteration, the PlayStation 3, and the company has vowed it will cut manufacturing expenses to turn a profit on the new device sooner.

But as the PS4 consoles were produced outside Japan, the weaker yen raised costs and Sony's games division is expected to be in the red in the fiscal year through March 2014, Sony's Chief Financial Officer Masaru Kato said in August. In the previous fiscal year, the division made a profit of 1.7 billion yen.

RISING TIDE

Over the next 12 months, EEDAR's Divnich expects 15 million to 17 million PlayStation 4 and Xbox One consoles to be sold combined. The Xbox 360, launched in 2005, and the PlayStation 3, released the following year, have each racked up lifetime sales of about 80 million consoles.

Players in the games industry, from console makers to specialist retailers, remain optimistic that the competition between Sony and Microsoft will stimulate sales.

"It's a rising tide that lifts all boats," said Sony's Tretton.

Video game retailer GameStop (GME.N) is hosting events ahead of both console launches in over 4,200 stores.

After the first round of pre-orders in June, GameStop had to ask both Microsoft and Sony for more allocations to keep up with strong demand and open more reservations for the new consoles, Bob Puzon, GameStop's senior vice president of merchandising said without providing specifics on units.

"This one is truly neck-and-neck and trying to determine who's going to win is really tough," Puzon said.

(Reporting by Malathi Nayak; Additional reporting by Edmund Klamann, Reiji Murai and Sophie Knight in TOKYO; Editing by Kenneth Maxwell)

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