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Sony Unveils PlayStation 4 in Bid to Revive Console Sales

February 21, 2013

ony Unveils PlayStation 4 in Bid to Revive Console Sales

Members of the media and game fans attend the unveiling of the Sony Corp. PlayStation 4 in New York on Feb. 20, 2013. The PlayStation 4 service will offer both free games and episodic titles, the company said. Gamers will be able to broadcast their play to friends. Photographer: Victor J. Blue/Bloomberg

Sony Corp. (6758) unveiled the PlayStation 4, its first video-game console in seven years, introducing new cloud and social-media features as Chief Executive Officer Kazuo Hirai seeks to reignite sales.

Andrew House, CEO of Sony’s PlayStation unit, announced the product yesterday at an event in New York. Consumers will be able to see what friends are playing and take over games in progress from others, and will eventually be able to stream older titles. The console will go on sale for the year-end holiday season, Sony said, without announcing prices.

The PlayStation 4 makes its debut amid an industry shift toward mobile play on smartphones and tablets, raising the question of whether gamers will shell out several hundred dollars for a new device. The console will allow self- publishing, mimicking the open architecture of smartphones that encourages smaller developers to create titles for the growing ranks of casual players.

“This enhanced PlayStation experience is simply not revolutionary to overcome big disruptions facing the industry,” Amir Anvarzadeh, a Singapore-based manager for Asia equity sales at BGC Partners Inc. (BGCP:US), said in an e-mail. “Sony’s heavy emphasis on the social aspect of PS4 seems a bit too ambitious to deliver on.”

Sony, Nintendo

Mobile games and those downloaded to computers are taking a bigger portion of sales at the expense of traditional gear. U.S. revenue from those titles rose 16 percent last year to $5.9 billion, according to Port Washington, N.Y.-based researcher NPD Group Inc. Sales of the $60 packaged titles for consoles fell 21 percent to $8.9 billion.

Sony is working to combat mobile devices with hardware and software that will make games available to play or share at the press of a button on a console, the PlayStation Vita portable player or even a smartphone. Announcing the product now gives the company a head start in building awareness.

Old game discs won’t play on the new system, said Richard Doherty, head of research at Envisioneering Group.

Sony’s American Depositary Receipts fell 2.7 percent to $14.08 in New York trading. Its German shares fell 3.7 percent to 10.63 euros. Nintendo Co., which released its new Wii U console in November, advanced 1.4 percent to 8,860 yen in Osaka.

The new console “is unlikely to deliver sufficient cash flow to turn around the company’s credit profile,” Fitch Ratings, which has a BB- rating for Sony’s long-term debt, said in a report issued today.

‘Home Run’

The new PlayStation will include social-gaming features that let players tag and share videos and watch what others are doing at the same time, according to Mark Cerny, the lead architect, who demonstrated the new controller, the DualShock 4, which includes a touchpad and “share” button.

“We’ve taken a deeply consumer-focused and developer- centric approach to the PlayStation 4,” Cerny said from the stage.

Personalization will be a compelling feature, Cerny said. The system is designed to learn players’ likes and dislikes. Based on those, it will make recommendations, have potential purchases ready and let customers begin playing new titles before they are fully downloaded to the machine’s hard drive.

“Game-wise, it was an absolute home run,” said Michael Pachter, an analyst at Wedbush Securities in Los Angeles.

Free Games

The console will appeal to Sony’s core gaming audience with exclusive titles, and could give it a lead over Microsoft Corp. (MSFT:US) by making games easier to develop using a PC-based architecture, he said in an interview. Hirai has said he considers the console to be the centerpiece of a universe of exclusive content running on Sony phones, tablets and TVs.

The PlayStation 4 service will offer both free games and episodic titles, the company said. Gamers will be able to broadcast their play to friends.

“What we’re creating is the fastest, most powerful network for gaming in the world,” said David Perry, CEO of Sony’s Gaikai online game service.

The company will probably set the price for the device after seeing how sales of Nintendo’s Wii U go, Keita Wakabayashi, an analyst at Mito Securities Co. in Tokyo, said by phone today. Nintendo cut its unit sales forecast for the Wii U to 4 million from 5.5 million through March as it struggles to compete with Apple Inc. and Samsung Electronics Co. tablets.

Microsoft, based in Redmond, Washington, plans to begin selling a new Xbox by the end of 2013 that includes more processing power and more home-entertainment features, people with knowledge of the situation said last year.

Third Place

The PlayStation, once a profit center for Sony consumer electronics, lost its lead in the last generation of consoles while remaining an important launchpad for the Tokyo-based company’s new technologies and services, including DVD and Blu- ray players and its online video and music stores.

Sony’s PlayStation 3 fell to third place. Nintendo’s Wii and Microsoft’s Xbox 360 vied for dominance in the living room, while Sony lost money on the PlayStation 3 its first four years.

PlayStation, through three console iterations, has sold about 332 million units, said Dan Race, a spokesman.

One long-term goal with the new PlayStation is to tie Sony’s hardware together to let consumers continue games or movies on one device after they’ve started on another. Perry introduced features that let customers switch back and forth between the console and the PlayStation Vita.

Hirai wants to generate 70 percent of revenue and 85 percent of operating profit in Sony’s electronics from games, digital imaging and mobile devices by March 2015. Its troubled TV business is being squeezed between Samsung Electronics (005930)’ efficient manufacturing and Chinese set-makers’ lower pricing.

Sony projects a 20 billion-yen profit ($214 million) this year after selling its New York headquarters for $1.1 billion.

“It’s unlikely that PS4 will boost Sony’s sales and profit in the long term,” said Mitsushige Akino, chief fund officer at Ichiyoshi Asset Management Co., which oversees about $356 million. “Only core gamers buy game consoles like the PS4.”

To contact the reporters on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net; Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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