Thursday, February 21, 2013

PlayStation 4 Is No Game Changer 2013

The PlayStation franchise is now almost 20 years old and its glory days are a thing of the past. Since PlayStation 3 came on the market in late 2006, Sony's gaming division has mostly incurred big losses—a $2 billion operating loss in the year ended March 2007, a $1.2 billion operating loss the following year and a $600 million operating loss in the year to March 2009. After that, gaming was rolled into a bigger unit with most of Sony's other consumer products—a sign, probably, of PlayStation's growing irrelevance.
The latest update holds some promise. It will be faster and have better graphics than its predecessors, of course. It will be connected to the cloud and mobile devices and come with social-networking features, naturally. The new device should also be cheaper to produce than its predecessors. Where PS3 ran on chips specifically designed for the Sony console, the new PlayStation will run on more generic hardware.
But there are reasons to be cautious.
Console gaming in general is declining. Since PS3 first hit the shelves more than six years ago, tablets and smartphones have become the must-have technology for a new generation. Mobile devices also offer cheap or free games to satisfy non-hardcore gamers. In the U.S., console sales declined every month through 2012, according to researcher NPD Group. U.S. sales of hardware, software and accessories fell 17% in January from a year earlier.
More important, too much about PS4 remains a mystery. For starters, pricing will be crucial. The high retail tag of PlayStation 3 of up to $600 put off some consumers, allowing cheaper consoles from Nintendo 7974.OK +1.26% and MicrosoftMSFT -1.08% to steal market share. There is also no specific sale date. Sony says the PS4 will be out in time for the 2013 holiday season. Given the pace of change in consumer technology, that is a long 10 months.
Sony's shares are up about 70% since November, as the falling yen boosts sentiment on Japan's consumer-electronics sector. A more favorable exchange rate will certainly help after eight straight quarters of red ink at Sony. An unseen game console of indeterminate price with a vague release date, however, is no reason to get excited.

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