Is Sony's PlayStation 4 Flopping in Japan?

After posting solid Japanese launch numbers, the most recent sales data shows PlayStation 4 turning in a dismal performance. Is the system doomed to failure in Japan?

Mar 22, 2014 at 1:16PM

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The Sony (NYSE:SNE) PlayStation 4 has been hailed as the surefire favorite to win this round of the console wars. There's still considerable debate as to whether the system will be able to surpass the sales of the PlayStation 3, but the new console's sales in North America and Europe have generated optimistic projections. Even prior to the PS4's recent Japanese launch, the system already enjoyed a considerable lead over the Xbox One from Microsoft (NASDAQ:MSFT).

Sony's console has also surpassed the lifetime sales of the Wii U, despite the fact that the Nintendo (NASDAQOTH:NTDOY) system launched a year earlier. Recent sales data out of Japan suggests that the console is failing to catch on, however.

No reason for optimism
The PlayStation 4 quickly sold out of its Japanese launch allotment, prompting optimism that the Japanese console market could be revived. Sony Japan and Asia President Hiroshi Kawano had previously stated that the success of the new console in Western territories was making Japanese developers want to create games for the platform. Things were supposedly looking up for the future of home console hardware in the territory. Recently released sales data showing the PS4's sales performance in its third week on the Japanese market suggests an entirely different and much bleaker outlook, however.

Unflattering comparisons
According to tracking data from Media Create, the PS4 sold approximately 35,000 units from March 3 to March 9. For comparison, Sony's PS Vita handheld sold approximately 33,000 units in the period and Nintendo's 3DS handheld sold 35,000 units. Each of these platforms has been on the market for years, and the fact that the PS4 is posting such low numbers so close to its launch should be very worrying for Sony and the console industry at large.

Even Nintendo's struggling Wii U managed to move approximately 120,000 units in its third Japanese sales week. Such a comparison is somewhat misleading as it debuted during the biggest month for gaming sales in Japan, but it doesn't change the fact that the 35,000 units in a week is a terrible performance for the PlayStation 4.

The death of console gaming in Japan
Japanese developers and publishers have moved away from the console gaming as production budgets have climbed ever higher and Western audiences have increasingly rejected Japanese offerings. This initially meant developing more games for dedicated handheld gaming consoles, but now support is largely gravitating toward mobile platforms.

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The PlayStation 4 launched in Japan without games that appealed to the Japanese audience. Sony bundled its console with a copy of Knack and Sega ported a version of its latest "Yakuza" game franchise to the new platform, but these efforts have clearly failed to generate the interest necessary to establish PS4 as a healthy platform in the territory. This doesn't look to change in the near future. There is a clear shortage of upcoming games on the platform that will move Japanese gamers to rush out and invest in new hardware.

Is the PlayStation 4's stumble good news for Microsoft?
The PlayStation 4's lack of success in Japan represents somewhat mixed news for Microsoft, but is a worrying sign for the broader console industry. The fact that PS4's sales momentum dropped off so quickly means that the Xbox One will have a better chance of pulling off a comeback and achieving global sales leadership. The Xbox One was designed with Western markets in mind, and it's clear that winning the console war is a matter of winning North America and Europe. On the other hand, the PS4's slow Japanese start and the global irrelevance of Nintendo's Wii U all but assures that the console market will contract in this cycle. It's now debatable whether Microsoft should even bother to release the Xbox One in Japan.

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Disparate markets threaten Sony's gaming business
A lack of support from Japanese third parties and the sorry state of Sony's Japanese game development wing means that the PlayStation 4 is unlikely to reach the sales of its predecessor in the region. This is particularly problematic for Sony as sales of the PlayStation 3 are going to wind up well behind what the PlayStation 2 accomplished. The Japanese have shown a lack of interest in dedicated home consoles and Sony's PS Vita is a flop in most Western territories. This division of market tastes makes the hardware game a much less attractive prospect. 

Which gaming company will emerge as a winner?
Sony, Microsoft, and Nintendo are all facing challenges in the industry, but David Gardner thinks one gaming company is primed for big growth. David has proved the naysayers wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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