PlayStation has become Sony's cornerstone
PS4 is great, and PSVR/Neo will drive hype - but Sony's success is also down to its competitors' failures giving it a clear run at a thriving market
Sony expects to sell 20 million PS4 consoles this financial year. It's a bullish figure, one that would see the firm's PlayStation division's revenues rising well north of $15 billion and operating income topping a healthy $1.2 billion. If these targets are hit, the PS4 will become the first Sony console to sell 20 million units in a single year since the PS2 narrowly beat that number in 2003; prior to that, it had only hit the 20 million mark twice, with the PS2 in 2002 (22.52 million units sold) and the PS1 way back in 1998 (21.6 million sold). Everyone knows the PS4 is doing fantastically, but it's hard to deny that exceeding that 20 million mark would be a major psychological milestone for Sony - confirming, in hard figures, that it's returned to the trajectory of the all-conquering PS1 and PS2 consoles.
What gives Sony the confidence to forecast these sales? In part, it's simply an extension of PS4's curve thus far; to boost itself over 20 million unit sales, the console simply needs to continue growing at the same pace it did last year (slightly less, actually), and with more big-name AAA titles on the shelves, and a healthy base of budget titles from earlier in the console's lifespan starting to form, that kind of growth isn't impossible by any means - though unless Sony's financial forecasters have forgotten the old mantra of "under-promise, over-deliver", it seems likely that they're expecting something else to plump up their sales this year.
"Sony would be well advised not to be complacent - Microsoft has a great team, deep pockets and, though it made some very misguided choices with the Xbox One to begin with, it executes superbly in other ways"
There are two candidates; PSVR, and the elusive, thus far very poorly stage managed, "PS4 Neo" updated console. PSVR is unlikely to make much difference to the bottom line this year. It's highly anticipated but will likely be very supply constrained through the holiday season and beyond; something like 3 to 4 percent of the PS4 installed base is likely the absolute ceiling on PSVR's sales in FY2016. With the hardware supposedly not being sold at a loss, this will make some contribution to income, but nothing too dramatic. What's likely to be more dramatic is the "halo effect" from PSVR; despite the head start enjoyed by Oculus and HTC, it's almost certain that Sony's headset will be the headline grabber when it launches later this year, not least because of its accessibility to the general consumer. Even though PSVR won't end up in the hands of a large proportion of consumers in 2016, the coverage and buzz it generates, and the perception of PS4 as a platform that can do real virtual reality, should help to drive amazing sales of the console this winter.
Neo, meanwhile, remains a little bit of an enigma. Not in hardware terms - everything suggests that the leaked specs of the system are pretty much on the nose - but rather in terms of how on earth Sony is going to handle the messaging and communication around the updated system. The implied balancing act - "your old hardware will run everything great! But the new hardware is even better so you should upgrade! But your old hardware is fine! But upgrade please!" - seems like a very tough thing for Sony's often hit-and-miss marketing and communication teams to pull off. The radio silence which has allowed a narrative suggesting that PS4 Neo will be essential for a good PSVR experience to take hold doesn't inspire confidence. Yet, there's little doubt that Neo will drive hardware sales - many early adopters will upgrade their existing PS4s, so there'll be a certain degree of market cannibalism, but that will help to push second-hand systems out to more cash-strapped consumers too. Plus, Neo's launch will likely see a price drop for the existing PS4, opening the market out even further. Any damage it does to the PS4 brand through poor messaging or communication is likely not to be felt immediately.
All that being said, let's be honest; the main thing that suggests Sony's ability to hit 20 million units for the first time in over a decade is nothing to do with Sony (though its PS4 execution thus far, pending judgement on Neo's presentation, has been excellent). It's got everything to do with the competition. Nintendo is out of the game for this year; it won't have much of anything to offer over the holiday season, with the NX (and the Zelda title that will serve as Wii U's swansong) pushed well into 2017. Whatever your view of Nintendo's future ability to compete in the home console market, an NX launch this Christmas would likely have made a serious dent in Sony's projections, simply by virtue of being the Shiny New Thing for the holiday season - a role that PSVR will now fill unchallenged.
Then there's Microsoft, whose Xbox One is lagging in every market, and seriously, seriously struggling in markets outside the USA. The dominance of NPD's sales figures in the specialist press (even the specialist press outside America) disguises the true nature of this race; on very rare occasions, Xbox One nods ahead of PS4 in the USA for a month or so, and media outlets wet themselves with excitement. In every other territory, though, Microsoft is in serious trouble - and the "it's doing better than the Xbox 360 did, it's just that PS4 is doing amazingly!" narrative dried up some time ago, as Xbox One's sales stuttered at around the same point in its lifespan that Xbox 360 sales had lit up. Sony would be well advised not to be complacent - Microsoft has a great team, deep pockets and, though it made some very misguided choices with the Xbox One to begin with, it executes superbly in other ways. Nobody in their right mind would bet on Xbox One catching up with PS4's lead in this generation, but it could start clawing back some ground; or alternatively, Microsoft might choose to try something radical, and see if they can't change the rules of the game entirely.
Rumours this week suggest that Microsoft might attempt to do both of those things. If the rumour mill is to be believed, two Xbox hardware revisions are in the works at the moment; a slimmer, cheaper Xbox One to launch this year, followed by a very significant power upgrade for the system to launch in 2017. The former would be an attempt to claw back market share; competing with Sony on price (which hasn't really been the story of this generation, both sides being largely content to keep their hardware at around the same price point) and building buzz around a redesigned console. The latter, though, would be an attempt to change the rules of the game; launching a new console which would, it seems, be a much bigger upgrade than the PS4 Neo revision, and might even abandon all claim to being a unified platform or an "Xbox One-point-Five" in favour of simply being a new, muscular, high-end console - designed, perhaps, for high end VR.
"These projections, if borne out, will further cement PlayStation as the beating heart of the company; we're a very long way from the days when videogames were a skunkworks project on the far fringes of Sony's engineering empire"
It's hard to say what Sony's response to that might be; Neo is probably about as far as it's willing to push things, in terms of mucking with the console model and tearing up the "your hardware will last X years" implicit contract it holds with its customers. Although Microsoft's major upgrade remains the province of rumour and speculation for now, it's worth noting that Microsoft could do this, in a way that Sony would find challenging, precisely because it's in such a distant second place; the leapfrog strategy only works if you're the guy in the rear. If it's accompanied by a thoughtful, well-considered change to the business model - perhaps moving towards something more like the carrier subsidised smartphone model - then it could work, and even expand the console market significantly. The danger, of course, is that it just ends up breaking the aforementioned contract; convincing consumers, already wary of what happened to Wii U, that buying anything other than the "winning" console will lumber you with hardware that's obsolete in a small number of years, no matter how big and powerful the platform holder may be. That would be a tough change in public perception for consoles to work through.
In the meanwhile, though, the sun is shining and Sony is making hay. These projections, if borne out, will further cement PlayStation as the beating heart of the company; we're a very long way from the days when videogames were a skunkworks project on the far fringes of Sony's engineering empire. Whatever the future may hold, 20 million PS4 sales this year would make the system into the pillar that holds up one of the world's most recognisable electronics brands and one of Japan's greatest corporations - a hell of an achievement from a remarkable console.