With PlayStation 5 launch, Sony needs a high score

High-stakes game: Gaming has become the biggest share of Sony’s business, generating the bulk of the company’s profits and about a third of its sales. (AFP)

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06 Nov 2020 03:11:10 GMT9

New console faces ‘make-or-break battle’ with Microsoft arch rival Xbox

TOKYO: Sony launches its PlayStation 5 console next week angling for a mega-hit, and with the Japanese firm increasingly dependent on the lucrative gaming sector there is little room for error.

The PlayStation 5 will enter a head-to-head battle with rival Microsoft’s new Xbox, released two days earlier, with both hoping to capture the market in the run-up to Christmas.

But the showdown has significantly higher stakes for Sony. Since the PS1 launched in 1994, gaming has become the biggest segment of Sony’s business, generating the lion’s share of profit and about a third of sales — more than electronics products or music.

By comparison, gaming made up less than 10 percent of Microsoft’s sales for the year ending in June 2020.

Sony sold twice as many PS4s as Microsoft did Xbox Ones, and analysts say it has learned lessons from the disappointing roll-out of the PS3. “We have seen in previous generations that at launch there are two major factors that will impact a generation’s success — the first to launch and the cheapest,” said Morris Garrard, an analyst at Futuresource Consulting.

He cited the “relative failure” of the PS3, which went on sale a year after the Xbox 360 and at a higher price.

The PS5 is priced at $500, like the Xbox Series X, while a version without a disk reader costs $400.

That is more than the $300 price tag for Microsoft’s less powerful Xbox Series S, which also has no disk reader.

Sony’s margin on the consoles will be slim —possibly even loss-making — analysts say, and the firm is counting on sales of games, services and online subscriptions to turn a profit.

So far, demand looks strong, and Sony has reportedly boosted production targets. But meeting those will depend on suppliers, particularly TSMC, the Taiwanese firm that makes the PS5’s processor and graphics-processing unit.

It is already under pressure as a key producer of chips for 5G-compatible smartphones.

“Whatever Sony produces, it will sell,” said Yasuo Imanaka, an analyst at Rakuten Securities, who thinks PS5 could exceed the record 157 million PS2 units sold since the 2000 launch. But “everything depends on what TSMC can supply”, he said.

To stand out against the Xbox, Sony will be counting on its games line-up, including exclusive titles that Sony Interactive Entertainment president Jim Ryan says will “make or break” PS5.

Among its trump cards is “Spider-Man: Miles Morales”, which will be released with the new console. Its predecessor is among the best selling PS4 titles.

The game was developed by the American studio Insomniac Games, which Sony bought last year for $229 million.

The purchase brought the number of studios Sony owns to 14, and represents a popular strategy of bringing increasingly expensive game development in-house.

Microsoft has made its own forays, buying ZeniMax in September for a record $7.5 billion.

Despite the costs, Amir Anvarzadeh, a strategist at Asymmetric Advisors, said the trend makes sense given the risk of diminishing returns for console manufacturers on games produced by third-party developers.

AFP

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