The PlayStation 4 Could Be Sony’s Last Video Game Console

Sony's PlayStation 4 has sold well, but the company might never release a follow-up.

Apr 26, 2014 at 11:30AM

By just about any measure, Sony's (NYSE:SNE) PlayStation 4 has been a runaway success. Worldwide, the video game console has sold more than 7 million units since being released last fall -- about 40% more than Microsoft's (NASDAQ:MSFT) competing Xbox One -- and Sony has struggled to keep it in stock.

Yet, despite its success, the PlayStation 4 could be the last of its kind. In a recent interview with Re/code, Sony Worldwide Studios President Shuhei Yoshida explained the company's desire to move away from a business model dependent on hardware.

PlayStation Now is Sony's future
PlayStation Now, Sony's cloud-based video game streaming service, is set to launch this summer. When it debuts, the service will enable PlayStation 4 owners to play older games released for the PlayStation 1, 2, and 3.

Sony's PlayStation 4 lacks the hardware and software necessary to play these games -- it isn't natively backward compatible. But by using Sony's distant servers and the power of the Internet, gamers will be able to play these older games on their new consoles. PlayStation 4 games won't be available for the service, at least at launch, though it's clear Sony eventually intends to add them.

Yoshida told Re/code specifically that Sony intends to shift toward a "service-orientated" business. That is to say, rather than sell expensive pieces of hardware (the PlayStation 4 retails for $399) and physical, disc-based games, Sony would work to make the PlayStation centered around gaming as a service.

Yoshida didn't specifically rule out the existence of a PlayStation 5, saying the company would consider such hardware if game creators eventually found it to be necessary. But if PlayStation Now goes according to plan, it won't be necessary -- with the games being played on remote servers, powerful local hardware isn't needed. In fact, Sony plans to eventually expand PlayStation Now to other Internet-connected devices, including smart TVs, smartphones, and tablets.

Microsoft has its own cloud solution
Microsoft, meanwhile, has consistently boasted about the power of its own cloud solution, while concurrently playing down the potential of Sony's competing service.

At its recent Build developers conference, Microsoft offered up an impressive tech demo demonstrating the power of its cloud technology. By taking advantage of its Azure cloud servers, game creators will be able to improve the graphical capabilities of their Xbox One games -- some of the graphics processing can be shifted to the cloud, freeing up the Xbox One's local hardware for other tasks.

In time, this sort of hybrid solution could morph into something much more akin to Sony's PlayStation Now, but at least publicly, Microsoft isn't particularly impressed with pure cloud gaming. Following Sony's PlayStation Now announcement back in January, Microsoft's Phil Spencer remarked that local consoles would still be important "for a long time."

Gaming as a service
Perhaps, but PlayStation Now's public debut is only a few months away, and the service is in private beta testing. Participants are contractually obligated not to divulge specifics, but that hasn't stopped a few leaks from surfacing. So far, reports have been fairly positive, with gamers reporting a solid playing experience.

If PlayStation Now is a success, it could be immensely beneficial to Sony -- shifting from a hardware/software business model to a cloud-based service model would open up a number of opportunities while simultaneously limiting risks.

Sony would no longer need to worry about designing, building, and shipping a new low-margin PlayStation every few years, and it could cut could out traditional retail middlemen. Regular subscription revenue would likely prove more stable than seasonal software demand.

So far, it's been a great year for Sony's PlayStation business, but with the company moving beyond its traditional business model, its long-term potential doesn't reside in the number of consoles sold.

Sony's service businesses stretch beyond gaming
The PlayStation 4 is a great video game console, but it could also soon be an ideal tool for cord-cutters, particularly as Sony looks to develop its own original programming. As more consumers cut the cord, it seems obvious that cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. 

 

Sam Mattera 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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