Console Wars: Can Sony Corporation's PlayStation 4 Win China?

Sony has announced that it is launching the PlayStation 4 in China. Will Microsoft and Nintendo let it succeed?

Jun 7, 2014 at 5:00PM

Sony (NYSE:SNE) announced that it is launching its PlayStation 4 in China. The move by Sony comes after Microsoft (NASDAQ:MSFT) announced plans to sell its Xbox One machine in China and Nintendo said it intends to expand in emerging markets with new devices.

The Chinese gaming market is desirable for console providers. The market has grown into a $13.75 billion industry. With growth of 38% in 2013 and analysts projecting 2014 revenue of $17.61 billion, there are significant prospects for Sony and Microsoft.

Number one spot
Sony's PlayStation 4 beat the Xbox One console to first place in U.S. console sales in April, according to NPG. Sony reported that 7 million PlayStation 4 consoles have been sold. Microsoft posted on a company blog that 5 million units of the Xbox One had shipped to retail outlets.

The Chinese deal
This step allows Sony to offer its console in China as a rival to Microsoft's Xbox One. In the deal, Sony agreed to form two ventures with Shanghai Oriental Pearl to make and sell PlayStation 4 consoles in China. One venture will be responsible for the PlayStation's hardware, while the other will be focused on the software. One of the ventures will be 51% owned by Shanghai Oriental and 49% owned by Sony's China operations. The other will be 30% owned by the Chinese company and 70% owned by Sony in China.

Challenges
Mainland China is likely to be a difficult market for game consoles, which regulators only permitted this past January. The Chinese market for games is very different from traditional console markets in Japan, Europe, and the U.S. Chinese gamers mainly play computer and mobile games.

Sony will have to battle the rampant piracy of movies, music, and games in China. Without total certainty on the respect of its intellectual property, Sony may find it difficult to make money.

Entering a huge market in China comes with other risks. Will Sony face issues with censorship? Will the rampant theft of its intellectual property cut into Sony's software sales? Sony will face these issues.

However, with its large footprint Sony should overcome its challenges. The partnership with Shanghai Oriental Pearl gives the company a big advantage when it comes to sales in China. While Microsoft has a first-mover advantage, Sony's move could help it catch up with Microsoft in the market.

Foolish takeaway
In moving into China, Sony is seeking to tap players in the world's largest market and rebound from a projected sixth loss in seven years. Eventually, Sony will turn its PlayStation 4 into a main driver of the company's fast-growing network and streaming-services business. This will in turn spur sales across Sony's product categories where the Playstation 4 now has the top spot. The move could also help the PlayStation 4 maintain its global sales lead over the Xbox One console and ultimately decide the winner of the console wars.

China's gaming market is huge, but this is a $14.4 trillion revolution
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on Amazon.com at its IPO, and then just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure-play" and then watch as the industry -- and your company -- enjoy those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.

Mark Girland 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers