Sony's PlayStation Could Be About to Save Its Struggling TV Business

Sony's (NYSE: SNE  ) TV business is struggling. Despite being one of the company's most iconic products, Sony has been losing money on its TVs for most of the last 10 years. Cheap Chinese LCDs have weighed on Sony's market share, while high-end buyers have increasingly turned to Samsung (NASDAQOTH: SSNLF  ) for their sets. Sony's longtime rival, fellow Japanese electronics giant Panasonic, exited the plasma TV business last year.

But Sony has an asset other TV manufacturers lack: a firm grip on the video game market. Sony's PlayStation 4 has so far outsold its major rivals, and last year Sony sold more video game consoles than any other company.

Could Sony use the dominance of PlayStation to revive its TV business? The company is about is try.

Tapping into its entertainment assets
Despite facing pressure from activist investor Dan Loeb, Sony's management has steadfastly refused to spin off its entertainment assets, unanimously voting down the hedge fund manager's proposal last year. In a letter to Loeb, Sony's CEO Kaz Hirai argued that the electronics and content industries were converging, rather than diverging, and that Sony's unique combination of businesses would benefit the company in the long run.

Investors are about to get a look at Sony's convergent strategy. Beginning on June 30, select Sony TVs will gain access to PlayStation Now, Sony's cloud-based video gaming service. As PlayStation Now rolls out and expands, it could give Sony TVs a unique selling point.

Owners of Sony's TVs would be able to tap in to its large library of video games -- no expensive console required. Someone who owns a Samsung-made set could obviously do the same, but they'd need to purchase an additional PlayStation console -- a $200-$400 proposition.

Offering more value
That added value could prove highly enticing, though it will take several quarters to play out, assuming it has an effect at all. The PlayStation Now service rolling out on June 30 is a private pilot program for members of the PlayStation Now beta test -- it will not open to the general public for some time.

But bringing PlayStation Now to its sets could help Sony reverse the trends it's seen in its TV business. According to Strategy Analytics, Sony's share of the global flat panel TV market declined to 5.6% in the fourth quarter of last year, down from 6.2% in the year prior. Samsung sold almost four times as many sets, ranking as the top TV vendor with about 20% of the market.

Other services are coming
PlayStation Now is unlikely to be the only content service Sony brings to its TVs. Sony has said repeatedly that it's working on an Internet-based cable TV alternative, though it has remained mum on the details.

Earlier this year, at the Consumer Electronics show, Hirari said Sony would no longer offer "commodity products." Building PlayStation Now and a cable alternative into its TVs would allow Sony to do just that. Samsung and other TV giants would be unable to match Sony's offerings, and if consumers find them enticing enough, it could help turn around Sony's TV business.

If that happens, it would do much to boost the company's financials. In fiscal year 2014, Sony posted a loss of over $1.2 billion -- almost $250 million of that was from its TV unit.

PlayStation Now isn't guaranteed to succeed, but much of Sony's future appears to be riding on the service.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 30, 2014, at 4:52 PM, awang0718 wrote:

    There is no way Playstation Now will save anything, not as long as the pricinng system for PS Now is as expensive as it currently is.

  • Report this Comment On June 30, 2014, at 6:50 PM, URALLFOOLS wrote:

    Most people have their flat screens and any one who wants a console, this or last gen, has purchased it. I would not go out of my way to get a Sony TV JUST so I could have Playstation Now, which will be available on PS4, PS3 and the $99 PS TV. Sony needs to be more competitive with their prices.... that's their biggest problem in the television market for them. Adding Playstation Now to TVs will not help their struggling tv business.

  • Report this Comment On July 02, 2014, at 3:27 AM, LanceHairdo wrote:

    I just preordered the white Destiny bundle. I have the normal black PS4 but I’m selling it now, before it loses any value, and I’m getting the white one instead. It looks SWEET! Amazon still has some here if you’re interested: http://goo.gl/X9Xnro

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