Sony (NYSE:SONY) is developing an upgrade for the PlayStation 4, according to a recent Kotaku report. The new version of the console, which was originally launched in November 2013, will reportedly offer a beefier GPU for games running at 4K resolution. The current model can output photos and videos in 4K, but games are capped at 1080p. It is unclear if PS4 owners will be able to trade in their older generation consoles, or if they'll need to buy the new system, which has been nicknamed the "PS4.5".

The PS4. Source: Sony

Why would Sony do this?
It is not unusual for gaming companies to refresh their consoles several times within each generation with smaller cases, cheaper components, or bigger hard drives. With more customers buying 4K TVs, offering a 4K PS4 might generate fresh console sales and help Sony extend its lead against Microsoft's (NASDAQ:MSFT) Xbox One. According to industry tracker Vgchartz, Sony has sold 38.8 million PS4s worldwide to date, compared to just 20.4 million Xbox Ones.

Sony may also be upgrading the PS4 to complement the launch of PlayStation VR, its new virtual reality headset. Since the quality of a VR game depends heavily on its maximum resolution, upgrading PS4 titles from 1080p to 4K could make them comparable to the PC-based VR games playable with the upcoming Oculus Rift or Vive.

Microsoft could also refresh its Xbox One in the near future. During a press conference covered by Polygon in early March, Xbox chief Phil Spencer hinted at an Xbox One update, stating that PCs "have a very continuous evolution cycle in hardware, whereas between console generations most of the evolution is making it cheaper and potentially making it smaller."

Sony needs to be careful
It might be a smart move to upgrade the PS4, but Sony needs to beware of alienating its customers and developers. If some games are only supported for the PS4.5, owners of the current version who expected their consoles to last for several years might be upset. Likewise, developers could be annoyed if Sony pressures them to create both 1080 and 4K versions of newer titles, which could result in performance issues. Sony investors should keep a close eye on this developing story and its impact on the gaming business, which accounted for over a fifth of Sony's sales last quarter.

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