Will Sony’s PS4 Sales Fly or Falter?

This week, Sony (NYSE: SNE  ) released new details about its upcoming eighth-generation console, the Playstation 4 (PS4), which is scheduled to hit U.S. stores on Nov. 15. Sony answered many burning technical questions that gamers had been pondering, but one major question remains unanswered -- will Sony's new console fly or flop?

Source: Company website.

To answer that question, we should go back and review the lifetime sales of Sony's three previous Playstation consoles.

Console

Lifetime unit sales

Years manufactured

Playstation 1

102 million

1994-2006

Playstation 2

155 million

2000-2013

Playstation 3

75 million

2006 -

Playstation 4

---

2013 -

Source: Vgsales.wikia.com

By most accounts, Playstation 3 console sales have been disappointing, roughly matching the 77 million Xbox 360 units that Microsoft (NASDAQ: MSFT  ) sold between 2005 and 2013, and trailing the 100 million Wii units that Nintendo (NASDAQOTH: NTDOY  ) sold between 2006 and 2013.

With the Playstation 4 on the way, it looks doubtful that the Playstation 3 will ever match the total number of Playstation 1 or Playstation 2 units sold.

Hardware only tells half the story

Yet even though Sony sold fewer seventh-generation consoles than Microsoft or Nintendo, its software attach rate -- from which it actually generates revenue -- was far better than either rival. In other words, people purchased fewer consoles from Sony, but used them to play more games.

As a result, Sony held on to a 52.5% market share in the console industry in 2013, compared to the Xbox 360's 34.9% share and the Wii's 12.6% share.

In addition, even though sales of all three consoles fell throughout 2013 due to the anticipation for newer consoles, sales of the Playstation 3 declined the least.

Company

Console

YTD sales growth (YOY)

Sony

Playstation 3

(34%)

Microsoft

Xbox 360

(41%)

Nintendo

Wii

(73%)

Source: Vgchartz.com

Therefore, just like its predecessors, Sony is likely to keep the Playstation 3 alive for a few more years. Nintendo discontinued the Wii earlier this week, and if Microsoft follows the same transitional pattern as it used with the original Xbox and Xbox 360, the 360 could still have two or three more years of life left.

What should we expect from the Playstation 4?

That brings us to the Playstation 4 -- the product that could make or break Sony, a company that has been struggling to offset losses from televisions and consumer electronics with higher sales of video games and mobile devices.

On Oct. 30, Sony released a comprehensive list of details about its upcoming console. Here are four disappointing facts that I noticed:

  • No support for external hard drives

  • No ability to play audio CDs or MP3s

  • No ability to stream media across a home PC network

  • Not compatible with games from previous generation Playstation consoles

By comparison, the Xbox One will play CDs and stream media from home PCs. However, the Xbox One will also initially lack external hard drive support, support for MP3 files, and support for previous generation games. What's more baffling is that the Playstation 3 was able to do all of these things -- which makes the Playstation 4 a big step backwards in terms of being a media hub.

Yet it's part of a bigger plan for Sony -- by locking users out of their own media collections, Sony is trying to herd users into its own walled garden of cloud-based media services. It's similar to what Apple (NASDAQ: AAPL  ) did with the Apple TV -- but Apple was prudent enough to allow users to stream media from their own PCs as well as purchase content from the iTunes Store. Apple realized that locking out users completely from their own media collections could alienate plenty of users -- a risk that Sony looks like it's willing to take.

Do these improvements outweigh the drawbacks?

Despite those drawbacks, the Playstation 4 still features some improvements:

  • The ability to log on to your account from different consoles

  • Voice controls

  • Remote play (a second screen display) with the PS Vita

With the PS4, gamers will be able to log on to a friend's console without kicking off the first user. It's a step forward in cloud-based sharing, which will make it easier to share games and save files.

As for voice controls, I'm not convinced that they are all that important for console gaming, but apparently Sony and Microsoft do. The PS4 will feature voice controls, while the Xbox One will step it up a notch with both voice and gesture-based controls.

Meanwhile, Remote Play via the PS Vita could be interesting. For example, in a two player game, a second player could wirelessly use the handheld PS Vita as a second screen display for an independent perspective in the game. It's not terribly revolutionary, however -- Nintendo used a similar idea back in 2001 when it connected its handheld Game Boy Advance to the GameCube console for use as a second controller and display.

PS Vita Remote Play. Source: Company website.

On the downside, Sony noted that the ability of the PS Vita to function as a second screen could be limited by bandwidth -- meaning that it would work optimally on a home WiFi network, rather than a mobile one.

So why isn't there more excitement?

That brings us to the last point I noticed -- there just isn't that much excitement building up for the PS4 as there was with its predecessors.

Back in 2000, the Playstation 2 generated mass hype, especially with the claims that its proprietary "Emotion Engine" -- which was really just another buzzword for its faster CPU -- would be able to render incredibly lifelike graphics.

In the end, the Playstation 2's actual graphics were slightly inferior to its original tech demo, but no one cared -- the graphics were a huge step up from the blocky polygons of the original Playstation. The graphics on the Playstation 3 were also a major upgrade from the Playstation 2, especially in large sandbox environments -- all it took was a side by comparison of Grand Theft Auto: San Andreas and Grand Theft Auto IV to convince gamers that the next generation had arrived.

GTA: San Andreas for PS2 (left) vs. GTA IV for PS3 (right). Source: Gtanet.com

However, with the upgrade to the Playstation 4 and Xbox One, it's getting tougher to tell the difference, despite a big upgrade in processor speed and memory -- unless the games are played on larger, high-definition screens. Another factor that has dampened the "wow" factor is the evolution of PC gaming. Many gamers are now used to the more polished graphics of PC games in comparison to their console counterparts -- a fact that Valve is trying to capitalize on with the upcoming release of the Steam Box.

I believe that Sony and Microsoft are also aware of these challenges, and have added more cloud-based bells and whistles to make their consoles truly feel "next-gen." Whether or not this strategy attracts more gamers or alienates them, however, remains to be seen.

Stay tuned for more updates regarding the upcoming release of Sony's Playstation 4 and its launch titles!

The battle for your screen

The gaming companies aren't just battling each other -- they're battling against all your other viewing habits. Americans reportedly spend nearly 34 hours a week watching television, and that means the potential for profits in the space is enormous. The Motley Fool's top experts have created a new free report titled "Will Netflix Own the Future of Television?" The report not only outlines where the future of television is heading, but offers top ideas for how to profit. To get your free report, just click here!


Read/Post Comments (13) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 02, 2013, at 1:07 PM, psi01 wrote:

    i think one of the main reasons why it's not so popular is because they have no exciting games (at launch)...i don't see the need to spend 400 bucks on some indie titles...but i'am sure in the future they will have better games....plus the online service is HORRIBLE...getting hacked is not an option...but their charging now so maybe their online service will improve (lets hope)..i think alot of competition is coming from the xbox one...alot of ppl like the idea that they have one console that takes care of all there entertainment needs...but we will c what happens....from what i have read sony better pray this console does well for them...or bankruptcy is their other option

  • Report this Comment On November 02, 2013, at 4:10 PM, sapiento wrote:

    people in Japan will buy mostly only the PS4 so I am not too worried about whether they will sell enough or not. The problem with Nintendo is they went more family gaming and less hardcore gaming but Sony is still publishing great games coming up in spring.

  • Report this Comment On November 02, 2013, at 4:10 PM, cap69 wrote:

    "No support for external hard drives; No ability to play audio CDs or MP3s; No ability to stream media across a home PC network; Not compatible with games from previous generation Playstation consoles"

    A next generation console after 7 YEARS and this junk is what you get?? Unbelievable. It's more like they went 7 years back in time. So people have been preordering ps4 without knowing this crap list? Ooops!!

  • Report this Comment On November 02, 2013, at 4:43 PM, Allend406 wrote:

    When the 360 came out the xbox was dead didnt live on for 3 more years.

  • Report this Comment On November 02, 2013, at 4:59 PM, NeroSable wrote:

    @psi01 Doesn't have any games? now that is funny guess you just don't like them but they do have a good line of launch titles, the online is not "horrible" as you state, its very good online service nothing's wrong with it, sure it got "hacked" but that was only once, every online system can be hacked, hell through that year other companies were hacked not just Sony.

    @cap69 The Xbox One is also not backwards compatible, the only way to play Xbox 360 games on an Xbox One is to buy them on the store and the cloud will take the rest, the PS4 is entirely different system than the PS3, the PS3 is based on the Cell Processor and the PS4 is more PC based now just like the Xbox One but slightly better hardware in the PS4, and the Audio thing they might release a patch later on who knows at least the didn't try and screw over the customers like Microsoft wanted to.

    As for the article, the PS3 has sold around 78 million units.

  • Report this Comment On November 02, 2013, at 5:33 PM, fubar2k19 wrote:

    I read these articles for one reason to see how inaccurate they are. The PS3 surpassed the XBox 360 in worldwide sales in late May 2013. The 75 million sales figure is from February 2013.

    http://www.vgchartz.com/article/250980/playstation-3-lifetim...

    As of today the PS3 has sold 80.29 million units and the XBox 360 has sold 78.84 million units. They have sold nearly 2 million more units but have been on the market 1 less year.

    http://www.vgchartz.com/analysis/platform_totals/

  • Report this Comment On November 02, 2013, at 7:50 PM, midgardsormr wrote:

    Wow, Leo. If you are going to cite vgchartz.com for the YTD sales growth (YOY) for consoles you should also cite vgchartz.com for console total sales.

    If you did, you would see that PS3 has OVERTAKEN Xbox 360 in worldwide life-to-date sales. (80.29 million PS3s vs 78.84 x360s)

    Why you used the old 75 million (probably from wikipedia) statistic is beyond me.

  • Report this Comment On November 03, 2013, at 1:13 AM, TMFSunLion wrote:

    @midgardsormr, fubar2k19 -- Thanks for the comments, I'll use those newer statistics in future articles.

    @youngliz -- You are right, the Xbox has a definite advantage over the PS in terms of online play, I also know plenty of people who purchased a PS3 for use as a Blu-Ray player.

  • Report this Comment On November 03, 2013, at 1:17 AM, TMFSunLion wrote:

    @ Allend406 -- The Xbox 360 was introduced in 2005. The original Xbox, despite becoming much less relevant, was formally discontinued in Japan in 2006, Europe in 2007, and North America in 2008 -- so it indeed lasted nearly 3 more years after the 360 was released.

  • Report this Comment On November 03, 2013, at 1:21 AM, youngliz wrote:

    PS3 overtaking Xbox in 2013? Not good for PS4 sales considering people just blew hundreds of dollars on the PS3. There is no mention in this article about the fact that more Xbox users play online compared to PS3 users. I have a feeling most PS3 sales were done due to the fact that people could use them as blueray movie players.

  • Report this Comment On November 03, 2013, at 9:29 AM, Dcelella wrote:

    @youngliz

    PS3 sales will continue in markets that cannot afford current generation consoles, much like the PS2 did after the PS3 was released.

    PS2 sales actually outperformed those of PS3 for many years and were a significant source of income for Sony's gaming division.

  • Report this Comment On November 03, 2013, at 3:35 PM, Stealth2k wrote:

    "By most accounts, Playstation 3 console sales have been disappointing,"

    glad to know this site isnt only as stupid on Nintendo but on sony too

  • Report this Comment On November 16, 2013, at 5:31 PM, Irondiesel58 wrote:

    I find it hard to believe that PS3 owners bought more games for their system then the xbox simply goinh on the idea that if you want to play the game nonlinear it has to be on the xbox. It's. Also why muly ps3 became a doorstop. I built a friends list on xbox live or over 30 players and to play together it has to be on live. There were a few stand out ps3 games but it's. Just not the same as if your friend is playing a game and gets stuck you can log into his game and fight on with him. I know Sony now has a pay nonlinear service but unproven. Microsoft has had live running as smooth as glass for ten years and now just put a ton of power into it to make it even better. I'd like to know the US vs. Japan numbers for the Ps 3 cause I just don't see it competing in the US.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2708917, ~/Articles/ArticleHandler.aspx, 9/24/2014 12:49:30 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement