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Increasingly dependent on the lucrative video game industry, giant Sony launches its new PlayStation 5 console on November 12, two days after Microsoft’s brand new Xbox, betting it has no room for error.
The PlayStation 5 wages another close war with the new Xbox, hoping they will both take market share ahead of Christmas.
Since the launch of the PS1 in 1994, the gaming industry has grown into Sony’s largest line of business, generating most of the profits and about a third of sales, more than electronics or music.
By comparison, for Microsoft, the gaming industry accounted for less than 10% of sales in the fiscal year ending June 2020.
Sony has sold twice as much PS4 than Microsoft’s Xbox One, and analysts say it has learned a lesson from the PS3’s disappointing results.
“Two factors influence the launch of a new generation of consoles: being the first to come out and the cheapest,” says Morris Garrard, analyst at Futuresource, recalling the “relative failure” of the PS3, which came out a year after its rival and more expensive.
This time, the retail price of both consoles is $ 500.
Both developers, in turn, sell a version without a CD player, but the PS5 will be more expensive, $ 400, than the XBox Series S, $ 300, and is less powerful.
Will he be able to break the PS2 record?
To keep the console from running out, Sony has stepped up production, although the pace has been set by subcontractors, most notably TSMC, the Taiwanese supplier of the console’s processor and graphics card, which also equips the 5G phones.
“What Sony produces will be sold,” said Yasuo Imanaka, an analyst at Rakuten Securities. But “it will all depend on TSMC’s pace of production,” he told AFP.
Imanaka believes that the PS5 can break the record of the PS2, released in 2000 and which has sold a total of 157 million consoles.
To differentiate itself from its Xbox competitor, Sony has an exclusive catalog of games that will “make or break” the PS5, said Sony Interactive Entertainment president Jim Ryan.
Among the Sony exclusives, the new Spider-Man: Miles Morales, whose predecessor was among the best-selling PS4s.
The game’s developer, the American studio Insomniac Games, last year became the 14th video game company controlled by the Sony group, acquired for 229 million dollars.
“Short-term strategy”
This trend to internalize increasingly expensive developers also occurs in Microsoft, which announced in September the purchase of ZeniMax for $ 7.5 billion.
“About 70% of the games” on PlayStation come from third parties, says Amir Anvarzadeh, a strategist at Asymmetric Advisors. From each sale, Sony has collected the access rights (royalties) to its console, but pressure from video game publishers forces it to review them.
When this new framework is finalized, Sony “will have a hard time selling twice as much” as game consoles to achieve the same result. “A crucial point for your long-term benefits.”
At a time when the market is moving towards a “cross-play” dynamic, with players playing the same game on different gaming consoles or computers, developers have “less and less incentive to work with a single platform”, Anvarzadeh points out.
Microsoft, better positioned in this sense, offers a subscription formula to access a hundred games on both Xbox and computer.
This opening strategy, combined with a higher investment than its rival in (online) streaming gaming, “appears to indicate long-term dominance” by Microsoft, notes Morris Garrard.
Garrard believes, however, that Sony’s “variety of content and technology” will “tip the consumer balance” for the PS5. Among the predictions on the disappearance of physical video game consoles, “Sony’s strategy seems to me to be oriented towards the short term”.
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