Here's Why Amazon's Fire TV Shouldn't Scare Sony’s PlayStation 4

Amazon has just released Fire TV. Should Sony be scared? Should it also be scared of Microsoft's Xbox One?

Apr 27, 2014 at 8:00AM (NASDAQ:AMZN) has a chance to provide a console option for millions of households with its Fire TV. The console may not replace high-end devices, but it could steal market share from the dominant products. Are we at a point where Sony (NYSE:SNE) should start to get worried?

Sony has sold millions of its new console since November's launch of PlayStation 4. Its problem in keeping up supplies of the PlayStation 4, the plan to debut a streaming gaming service, and its Project Morpheus are reasons why it shouldn't be scared of Fire TV.

The supply problem
Sony announced recently that the PlayStation 4 has sold more than 7 million units globally. In addition, 20.5 million pieces of software for the system have been sold in retail stores. The company reiterated that it is having challenges in keeping up with the demand for the product. As for its future prospects, DFC Intelligence says the PlayStation 4 could hit 100 million units sold by 2020.

The streaming gaming service could provide upside
Sony's purchase of Gaikai gives it a company with an established cloud framework. Gaikai is an Internet gaming pioneer. Sony plans to use its framework to debut a streaming gaming service. The service will be available on PlayStation 4. With the development, Sony will have the opportunity to compete with Netflix, Amazon, and others in the streaming video sector. The worldwide video game marketplace will reach $111 billion by 2015 from $93 billion in 2013, according to Gartner. This brightens Sony's prospects.

Sony's Project Morpheus as a future growth driver
Despite the success of PlayStation 4, Sony is interested in improving the device. The company has revealed Project Morpheus, a new virtual reality technology for PlayStation 4. Sony teamed up with NASA for the project. DFC Intelligence predicts the worldwide game console market will hit $96 billion by 2018 from $68 billion in 2013. With the Project Morpheus initiative, Sony is preparing PlayStation 4 for future growth in sales.

Amazon's Fire TV is one of the most affordable video game consoles you can purchase. Though analysts say it is not as powerful as PlayStation 4, Amazon's ability to disrupt the console sector cannot be ignored. Needless to say, Amazon's push into the industry will put serious pressure on the sector. Amazon has a reason for entering the industry. Gartner predicts that upcoming video game consoles will help push sales in the segment to $55 billion in 2015.

Estimates vary as to how many Xbox Ones Microsoft (NASDAQ:MSFT) has shipped, but Bloomberg pegs the number at roughly 4.2 million as of early April. Though PlayStation 4 appears to be outselling Xbox One, Microsoft shouldn't be underestimated. The company's release of Titanfall came with a price cut. This made the price of Xbox One the same as the price for PlayStation 4. DFC Intelligence also predicts Xbox One sales could hit 100 million units by 2020.

Foolish takeaway
Amazon has been hiring experienced video game developers to improve Fire TV. However, this doesn't mean Sony's PlayStation 4 is about to be driven from the market. The momentum of sales for the product, Sony's plans to debut a streaming service, and the company's Project Morpeus will make sure PlayStation 4 survives the arrival of Fire TV.

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Mark Girland has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of and 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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