Sony's PS4 Debuts to Strong European Sales

The Sony (NYSE: SNE  )  PlayStation 4 console has now launched in North America and most of Europe, two of its three primary regions, and seems to be off to a solid start. Arriving approximately seven years after the PlayStation 3, it is safe to say that demand has been building for quite a while. With Japan not getting the PlayStation 4 until February 2014 and the viability of the console market in that territory looking increasingly questionable, growth in Europe has become more important than ever. Is Sony on track to deliver a bona fide hit and ensure that its console business remains healthy?

Pent-up demand
Early sales reports suggest that Sony's new console is off to a sterling European start. Of course, it is still far too early to tell if the enthusiasm surrounding the device will be sustainable. The fact that demand for new hardware appears to be high should be only mildly reassuring for industry analysts who have tracked data that suggests a deteriorating market. Considering that the Microsoft (NASDAQ: MSFT  )  Xbox 360 launched in 2005 and that a hardware generation has never dragged on so long, explosive demand was something of a given.

Both the PlayStation 4 and the Xbox One have debuted in Europe to considerable fanfare. Microsoft's console launched approximately a week earlier than Sony's device, which is not enough to establish any significant sales lead but at least provides a small buffer and an opportunity for distinction. In the UK, the Xbox One managed to get off to a commendable start. Early reports suggesting that the One had unseated the PlayStation Portable as the UK's fastest selling gaming hardware proved to be inaccurate, however.

The Xbox One is believed to have sold approximately 150,000 units in its first weekly tracking period, falling short of the 185,000 unit figure that the PSP achieved in 2005. It also came in below the 165,000 unit PlayStation 3 launch, notable because the high-priced PS3 struggled to connect in the territory.

Raising the bar
Sony's PlayStation 4, now the fastest selling console in UK history, posted sales of approximately 250,000 units in its first tracking period. That Sony's device outsold Microsoft's console by a considerable margin in the UK represents something of a turnaround. The previous generation saw the UK market go decisively for the Xbox 360, with the PlayStation 3 outselling it in most other European territories.

PlayStation 4's early momentum lead over the Xbox One can likely be attributed to two primary factors. First, despite the fact that Microsoft partnered with Electronic Arts to bundle FIFA 14 with the One in European territories, PlayStation 4 retails at a substantially cheaper price and is broadly perceived to offer better value as a gaming platform. Second, the Xbox One is certain to go down as having one of the most tumultuous reveal-to-release cycles in gaming history.

Nintendo's ongoing foibles
Ceding ground to Sony in one of its most successful territories is bad news for Microsoft, but it could be a lot worse. The Xbox One could be posting numbers similar to those of the Nintendo (NASDAQOTH: NTDOY  )  Wii U. Despite a relatively strong performance from its 3DS handheld in Europe, Nintendo's console business is falling apart in the region.

Nintendo's last quarterly report showed that it actually sold negative units in the territory. Approximately 20,000 Wii U's were shipped back to Nintendo by European retailers, strongly suggesting that they have come to view the hardware as toxic and that the device is mostly dead in Europe. Reports suggest that both the Xbox One and the PlayStation 4 have now outsold the Wii U in the UK in spite of the fact that the latter had a year-long head start.

News that PS4 game Knack has outsold Nintendo's Super Mario 3D World should help put the software picture in perspective. Super Mario 3D World has long been touted as one of several games that could help to save the ailing Wii U. The game debuted to critical acclaim, proving that Nintendo could still deliver its signature magic despite its stated difficulty with HD development. That Knack, a title which garnered middling reviews and lacks the iconic qualities inherent to the "Mario" series, has outpaced the Wii U's flagship holiday title demonstrates the extent of Nintendo's failings in the UK.

Can the PS4 succeed globally?
While other divisions of Sony remain suspect, it appears that its gaming branch is moving in a positive direction. The $8 million dollar loss posted by its gaming business in the last quarter can be attributed to the slowing PS3 business and the costs inherent in manufacturing and marketing a new console. The PlayStation 4's strong European debut shows that the company still has the chance to grow its gaming business. Now, eyes turn to Japan in hopes of determining the global picture and whether the territory's console market can be revived.

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