Sony's (NYSE:SNE) PlayStation 4 launched last week, selling more than 1 million consoles in the first 24 hours. This is an impressive improvement from the PlayStation 3's 200,000 units sold in its first two weeks on store shelves. Along with the successful sales numbers comes technical problems and concerns for investors.
The "Blue Light of Death"
Shortly after the successful debut of the PlayStation 4, complaints surfaced on Sony's PlayStation forum that focus on a flashing blue light that marks a failing console. Called the "Blue Light of Death," the console has received over 700 one-star reviews on Amazon.com from consumers who have encountered the problem.
While this flaw is annoying for gamers, it was not unexpected by Sony. The company stated that the expected failure rate for the PS4 was 0.4%. With over 1 million consoles sold, there are an estimated 4,000 consoles being opened that experience the blue light problem. This leaves the vast majority of PlayStation 4 purchasers, around 996,000 people, with properly functioning systems.
Sony has posted a troubleshooting guide with potential solutions that include reinstalling software and making sure that the hard drive is properly installed. If the problem can't be fixed, customers can exchange their broken console for a working one.
The "Blue Light" problems are not the first time gaming consoles have had malfunctions at launch. According to a study done by CNET UK, 60% of Microsoft's (NASDAQ:MSFT) Xbox 360 consoles experienced failure with the "Red Ring of Death," the Blue Light's namesake. This was followed by PS3 and Nintendo (OTC:NTDOY) Wii failure rates of 16% and 6%, respectively. Despite having a larger failure rate, the Xbox 360 still sold 44.86 million units in the U.S. This is only 0.09 million less than the consistently working Wii and 17 million more than the PS3 The study was self-selecting rather than a random sampling of console owners so its results might not be an accurate picture of every console, but it does shows that the Xbox had much more negativity related to console failure than the PS3 or Wii.
One major difference between the Blue Light of Death and the Red Ring of Death is that the Blue Light is happening at a time when social media is more popular. If someone has a malfunctioning console, it's easy to broadcast the problem on Twitter or Facebook. Since roughly 27.8% of Americans use social networking sites as their top news source, these posts can be viewed like headlines instead of one person in a much larger survey.
The Red Ring of Death forced Microsoft to extend warranties on all of its Xbox 360 systems and cost a massive $1 billion dollars. This cost would be harder for Sony to deal with if problems continue.
Right now, investors should not be worried about the Blue Light of Death ruining the PlayStation 4's sales. Only a small percentage of consoles are expected to have the problem, and consumers who have purchased these consoles will be able to fix or trade them in for a new one. The PS4 sold more in one day than the PS3 did in two weeks, and with every console sold there is potential for sales of games, downloadable content, and a PlayStation Plus subscription. Keep an eye on the Blue Light problem, but currently I think the console launch was a success for Sony and its investors.