Will Sony’s PS4 Sales Fly or Falter?

This week, Sony (SNE +1.21%) released new details about its upcoming eighth-generation console, the Playstation 4 (PS4), which is scheduled to hit U.S. stores on Nov. 15. Sony answered many burning technical questions that gamers had been pondering, but one major question remains unanswered -- will Sony's new console fly or flop?

Source: Company website.

To answer that question, we should go back and review the lifetime sales of Sony's three previous Playstation consoles.

Source: Vgsales.wikia.com

By most accounts, Playstation 3 console sales have been disappointing, roughly matching the 77 million Xbox 360 units that Microsoft (MSFT +0.60%) sold between 2005 and 2013, and trailing the 100 million Wii units that Nintendo (NTDOY +3.20%) sold between 2006 and 2013.

With the Playstation 4 on the way, it looks doubtful that the Playstation 3 will ever match the total number of Playstation 1 or Playstation 2 units sold.

Hardware only tells half the story

Yet even though Sony sold fewer seventh-generation consoles than Microsoft or Nintendo, its software attach rate -- from which it actually generates revenue -- was far better than either rival. In other words, people purchased fewer consoles from Sony, but used them to play more games.

As a result, Sony held on to a 52.5% market share in the console industry in 2013, compared to the Xbox 360's 34.9% share and the Wii's 12.6% share.

In addition, even though sales of all three consoles fell throughout 2013 due to the anticipation for newer consoles, sales of the Playstation 3 declined the least.

Source: Vgchartz.com

Therefore, just like its predecessors, Sony is likely to keep the Playstation 3 alive for a few more years. Nintendo discontinued the Wii earlier this week, and if Microsoft follows the same transitional pattern as it used with the original Xbox and Xbox 360, the 360 could still have two or three more years of life left.

What should we expect from the Playstation 4?

That brings us to the Playstation 4 -- the product that could make or break Sony, a company that has been struggling to offset losses from televisions and consumer electronics with higher sales of video games and mobile devices.

On Oct. 30, Sony released a comprehensive list of details about its upcoming console. Here are four disappointing facts that I noticed:

• No support for external hard drives

• No ability to play audio CDs or MP3s

• No ability to stream media across a home PC network

• Not compatible with games from previous generation Playstation consoles

By comparison, the Xbox One will play CDs and stream media from home PCs. However, the Xbox One will also initially lack external hard drive support, support for MP3 files, and support for previous generation games. What's more baffling is that the Playstation 3 was able to do all of these things -- which makes the Playstation 4 a big step backwards in terms of being a media hub.

Yet it's part of a bigger plan for Sony -- by locking users out of their own media collections, Sony is trying to herd users into its own walled garden of cloud-based media services. It's similar to what Apple (AAPL +2.65%) did with the Apple TV -- but Apple was prudent enough to allow users to stream media from their own PCs as well as purchase content from the iTunes Store. Apple realized that locking out users completely from their own media collections could alienate plenty of users -- a risk that Sony looks like it's willing to take.

Do these improvements outweigh the drawbacks?

Despite those drawbacks, the Playstation 4 still features some improvements:

• The ability to log on to your account from different consoles

• Voice controls

• Remote play (a second screen display) with the PS Vita

With the PS4, gamers will be able to log on to a friend's console without kicking off the first user. It's a step forward in cloud-based sharing, which will make it easier to share games and save files.

As for voice controls, I'm not convinced that they are all that important for console gaming, but apparently Sony and Microsoft do. The PS4 will feature voice controls, while the Xbox One will step it up a notch with both voice and gesture-based controls.

Meanwhile, Remote Play via the PS Vita could be interesting. For example, in a two player game, a second player could wirelessly use the handheld PS Vita as a second screen display for an independent perspective in the game. It's not terribly revolutionary, however -- Nintendo used a similar idea back in 2001 when it connected its handheld Game Boy Advance to the GameCube console for use as a second controller and display.

PS Vita Remote Play. Source: Company website.

On the downside, Sony noted that the ability of the PS Vita to function as a second screen could be limited by bandwidth -- meaning that it would work optimally on a home WiFi network, rather than a mobile one.

So why isn't there more excitement?

That brings us to the last point I noticed -- there just isn't that much excitement building up for the PS4 as there was with its predecessors.

Back in 2000, the Playstation 2 generated mass hype, especially with the claims that its proprietary "Emotion Engine" -- which was really just another buzzword for its faster CPU -- would be able to render incredibly lifelike graphics.

In the end, the Playstation 2's actual graphics were slightly inferior to its original tech demo, but no one cared -- the graphics were a huge step up from the blocky polygons of the original Playstation. The graphics on the Playstation 3 were also a major upgrade from the Playstation 2, especially in large sandbox environments -- all it took was a side by comparison of Grand Theft Auto: San Andreas and Grand Theft Auto IV to convince gamers that the next generation had arrived.

GTA: San Andreas for PS2 (left) vs. GTA IV for PS3 (right). Source: Gtanet.com

However, with the upgrade to the Playstation 4 and Xbox One, it's getting tougher to tell the difference, despite a big upgrade in processor speed and memory -- unless the games are played on larger, high-definition screens. Another factor that has dampened the "wow" factor is the evolution of PC gaming. Many gamers are now used to the more polished graphics of PC games in comparison to their console counterparts -- a fact that Valve is trying to capitalize on with the upcoming release of the Steam Box.

I believe that Sony and Microsoft are also aware of these challenges, and have added more cloud-based bells and whistles to make their consoles truly feel "next-gen." Whether or not this strategy attracts more gamers or alienates them, however, remains to be seen.

Stay tuned for more updates regarding the upcoming release of Sony's Playstation 4 and its launch titles!