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Sony will "rigorously pursue" PS4 sales

Sony will "rigorously pursue" PS4 sales

Tue 27 May 2014 9:54am GMT / 5:54am EDT / 2:54am PDT
HardwarePublishing

"The biggest driver for our network business will be the PlayStation 4" - Kaz Hirai, CEO

Sony CEO Kaz Hirai has emphasised the importance of the PlayStation 4 to the company's future, telling the press that it valued increasing its installed base over profit growth.

That stands in stark contrast to the company's electronics business, where unit sales are no longer as important as profitability. The reason for this candour, Hirai said, was the huge revenue potential that will come with expanding the reach of Sony's network.

"We have to rigorously pursue install-base numbers," Hirai said, according to Reuters. "The biggest driver for our network business will be the PlayStation 4."

Sony revealed that revenue from Sony's network business reached 200 billion (almost $2 billion) for the year ended in March, which represents a 70 per cent year-on-year increase. Sony's network now has 52 million active users, most of which come from PlayStation console owners.

Hirai described the company as being on the verge of fulfilling a longstanding plan to use its hardware as a platform for its myriad content services. Indeed, Hirai dated that vision all the way back to the late Eighties, when Sony founder and chairman Akio Morita established its music and film divisions.

"Now we've got broadband and can send content in the blink of an eye...the technology has finally caught up with the times," he said.

In the last generation, the popularity of Xbox Live was a major boon for Microsoft, but Sony has done a fine job of closing the gap in a relatively short space of time. An example of this is the success of the subscription-based PlayStation Plus service, which counts half of all PS4 owners among its members.

And the next step for Sony will be PlayStation Now, a streaming service that will tap into its huge back-catalogue of games. The service is currently in closed beta, with no fixed launch date.

"The network is becoming increasingly important for our other businesses, too," Hirai said. "Our TVs have video-on-demand and Music Unlimited. PlayStation Now will be launched on Bravia TVs next."

15 Comments

Klaus Preisinger
Freelance Writing

1,073 1,008 0.9
Let's see how rigorously Sony will accept price parity between the two consoles.

Posted:3 months ago

#1

Christian Keichel
Journalist

643 880 1.4
Let's see how rigorously Sony will accept price parity between the two consoles.
Looking at the losses they already take on every PS4 and taking another look at their financial situation in general and in the end taking a long look at their debts, I think they aren't in a position to lower the price of the PS4.

Posted:3 months ago

#2

Klaus Preisinger
Freelance Writing

1,073 1,008 0.9
I'd say that depends. Just the other day, Sony was trumpeting that the PS4 might make them more money than the PS2. In this announcement, Sony mentioned the high adoption rate of PSN+.

It seems Sony is being very confident in the revenue per user being rather good and getting better over the next years. Having a company believe that, might very well be the prelude to a price cut, or aggressive bundles being released. On the other hand you still can't get the PS4 for its suggested retail, since it is still sold out practically everywhere.

Posted:3 months ago

#3

Nelsun Rivera
Mixed Media

14 14 1.0
PS4 is not being sold at a loss. Turning things around a will take more than that but I do believe Sony is on the right track. Taking more of a service stance versus total hardware.

Posted:3 months ago

#4

Donald Dalley
Freelance writer

50 31 0.6
The other day, I read the the PS4 is already profitable, so that shouldn't worry them or us.

However, their steaming service will only get better if/when the ISPs stop using data caps.That is putting the brakes to this kind of service, so we all should be vigorously campaigning to eliminate these ridiculous data caps. There is no way that I will partake in Now or Netflix with the current payment system.

Posted:3 months ago

#5

Nicholas Pantazis
Senior Editor

1,017 1,463 1.4
Too bad they aren't rigorously pursuing Vita sales.

Posted:3 months ago

#6

Christian Keichel
Journalist

643 880 1.4
PS4 is not being sold at a loss.
The other day, I read the the PS4 is already profitable, so that shouldn't worry them or us.
Then I am not sure where the losses in the Playstation department should come from. Surely the Vita doesn't sell enough units to have a positive or negative effect on their profits at all. This would leave the PS3, but if Sony can't make money from the 80+ million userbase of the PS3, how should they ever make money with the PS4?

Posted:3 months ago

#7

Anastasios Hatzis
Community Manager

13 32 2.5
Surely the Vita doesn't sell enough units to have a positive or negative effect on their profits at all.
Can you clarify this statement? As far as I understand, a product that doesn't sell enough units can perfectly cause a huge loss (fixed expenses e.g. R&D, or increased inventory costs, or price cuts below manufacturing costs).

Also, business models, cost structures, competition, and other things are too different between PS3 and PS4 for making oversimplified revenue estimations with PS3 numbers. It is also known that the PS3 was not a profitable product for a long time. And as a final note, we don't know since when the PS4 is profitable. I assume that this happened rather recently, not since launch day.

Posted:3 months ago

#8

Greg Wilcox
Creator, Destroy All Fanboys!

2,158 1,078 0.5
That title allllllmost makes it seem if any current PS3 owner doesn't upgrade, someone at Sony will "vigorously pursue" them and force them to buy a PS4 at some point... :D

Posted:3 months ago

#9

Christian Keichel
Journalist

643 880 1.4
As far as I understand, a product that doesn't sell enough units can perfectly cause a huge loss (fixed expenses e.g. R&D, or increased inventory costs, or price cuts below manufacturing costs).
What R&D costs? Sony didn't release new games for the device any more, except ports of PS2 and PS3 games, that are extremely cheap. The costs for the development of the hardware were paid a long time ago and cuts dor selling below manufacturing costs are paid a long time ago too, as the vast majority of Vitas on the shelfs are the original Vita models introduced in 2011 and obviously manufactured in the first years of the life of the device. The Slim Vita is cheaper to produce and if you look at the quantities of old Vitas on the shelfs you get an idea how many devices are still left, waiting to be sold.
Also, business models, cost structures, competition, and other things are too different between PS3 and PS4 for making oversimplified revenue estimations with PS3 numbers.
Where's the difference in the business model? It's selling a console to sell software for it and persuade people into subscribing to PS+, nothing different from the PS3 and they already have around 50 million subscribers and still don't make money, because PS+ costs Sony lots of money, those free games don't come for free for Sony.
It is also known that the PS3 was not a profitable product for a long time. And as a final note, we don't know since when the PS4 is profitable. I assume that this happened rather recently, not since launch day.
The PS3 was never sold at a profit, it always made a loss, but as the sales of the PS3 have fallen in the last fiscal year and Sony sold PS4 units instead of PS3 units, the losses have risen as well. At the same time, the revenues from software sales rose by about 30% and they got many new PS+ subscribers. Nonetheless, their loss has deepened, this makes it very obvious, that the the PS4 hardware isn't profitable at all. On a side note, the device is on the market for 6 months now, if it wasn't profitable 6 months ago, it's impossible, that it's profitable now. Manufacturing costs don't change that fast. There is a reason, why the PS4 is supply constraint since launch, it's because Sony isn't willing to sell more consoles, because they can't afford it to take an even bigger loss.

Edited 1 times. Last edit by Christian Keichel on 27th May 2014 11:07pm

Posted:3 months ago

#10

Paul Jace
Merchandiser

904 1,342 1.5
On the other hand you still can't get the PS4 for its suggested retail, since it is still sold out practically everywhere.
I'm not sure where you are located but here in the US the PS4 has been in stock everywhere since atleast March.

Edited 1 times. Last edit by Paul Jace on 28th May 2014 4:50am

Posted:3 months ago

#11

Nicholas Lovell
Founder

185 170 0.9
The statement that the PS4 is profitable is misleading. Hiram said it was profitable at the hardware unit basis. That means Sony is no longer losing money on every PS4 sold. That does not mean that the PS4 is profitable: it excludes the enormous costs of getting the PS4 to launch. It excludes ongoing marketing costs. It excludes the salaries go all the people working on PS4 whose costs are not included in costs of goods (I.e. Everyone not involved in manufacturing and, perhaps, distribution).

It is deeply disturbing how lazy journalism in the games industry can lead to very misleading opinions.

Posted:3 months ago

#12

Christian Keichel
Journalist

643 880 1.4
Hiram said it was profitable at the hardware unit basis. That means Sony is no longer losing money on every PS4 sold. That does not mean that the PS4 is profitable: it excludes the enormous costs of getting the PS4 to launch.
Additionally I think the profitability on the hardware unit basis only comes from the limited quantities Sony is shipping. Back in 2007 when the Wii was supply constraint for a longer period Nintendo openly admitted, that they would be able to meet demand, but this would hurt their profits, as costs per unit would rise, because of the new contractors/fabs that have to be paid.
I don't see why Sony shouldn't be able to meet the demand for the PS4 on a technical level, the console doesn't contain exotic components and their competitor is making an almost similar box without having supply problems.

Posted:3 months ago

#13

Anastasios Hatzis
Community Manager

13 32 2.5
Indeed, XBox doesn't have a supply problem because it has a demand problem.

The AMD SoC for both, XBO and PS4, is produced by TSMC. TSMC capacities reportedly are maxed out until end of 2014. It is rumored TSMC is the bottleneck if it comes to manufacturing capacities for PS4. As far as I understand, in 2013 TSMC had the world's largest foundry capacities in the dimension of the next three competitors. So this is probably no easy task for Sony to get additional capacities, unless an existing customer of TSMC will free up capacities.

Posted:3 months ago

#14

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