Courtesy of Benzinga.
Sony’s forthcoming console will not launch anytime soon.
There have been many conflicting reports (and many conflicting assumptions among consumers) about the so-called 10-year cycle that Sony (NYSE: SNE) proposed for PlayStation 3. In the beginning, it sounded as though Sony would merely support its third console for 10 years, just as it did the PlayStation 2. Not long after the console launched, however, Sony began to indicate that a 10-year cycle meant more than 10 years of devoted support this time around. Rather, it sounded as if Sony had intended to not release a new console for 10 years.
To be clear, Sony has not provided a definitive answer regarding whether or not it will release a new machine before PlayStation 3 turns 10. But here are some facts:
Sony is Not in a Hurry
In the good old days, console manufacturers didn’t wait for the competition to tell them when to release a new device. But it seems as if Sony (which fell behind the handheld market – Nintendo 3DS arrived almost a full year before PS Vita in most territories) no longer cares about the threat of new competition.
Despite the countless rumors that PlayStation 4 and Xbox 720 would be unveiled this June at E3, Sony has repeatedly insisted that it will not show off the next PlayStation in 2012. Most recently, Jack Tretton, the President and CEO of Sony Computer Entertainment America, told IGN that he would be “very distracted” if he had talk about next-generation hardware this year.
New Consoles Aren’t Typically Profitable at Launch
Sony and Microsoft (NASDAQ: MSFT) spent a great deal of time whining about how they lost hundreds of dollars on every new console sold when the PlayStation 3 and Xbox 360 were first released. This was in spite of the fact that PlayStation 3 debuted with a $600 price tag (a cheaper, $500 model was available in limited supply).
Why would any game company be willing to sell new hardware at a loss? Unlike TVs and other ultra-pricey items, Sony and Microsoft have the opportunity to make billions in game sales. That’s why no console manufacturer should balk at the idea of selling hardware at a fair price – even if it means they incur a loss. After all, Sony can’t sell a million copies of each Uncharted sequel if it doesn’t sell a million consoles first.
Still, no console manufacturer can resist the lure of console profitability. And now that PlayStation 3 is profitable, the company is happy to sell as many units as it can. But while Microsoft forcefully persuaded hundreds of thousands of consumers to buy a new Xbox 360 after the Red Ring of Death turned their consoles into rubbish, PlayStation 3 has been a rather stable machine. Therefore the vast majority of new consoles that Sony sells are to first-time buyers.
Thus, Sony is looking for any excuse to get consumers to buy a PlayStation 3. For better or worse, releasing a new console is not one of them. Inevitably, some consumers that would have purchased a PlayStation 3 may decide to get a PlayStation 4 instead, despite the higher price tag. Sony does not want this; the company would prefer to sell another 50 million PlayStation 3s before moving on to a new generation.
Sony Doesn’t Like Competing With Itself
To quote Tretton (from the aforementioned IGN interview), “…Right now, we’re focused on PlayStation 3, and I’ve got another platform (PlayStation Vita) to get out the door in seven days, so I don’t want to be thinking about trying to launch new technology anytime soon.”
This sums up the feeling of every console manufacturer. Nintendo released the Nintendo DS two full years before Nintendo Wii arrived. Sony released PSP 18 months before PlayStation 3. By the time Wii U arrives, Nintendo 3DS will be 18 months old. Expect this trend to continue.
Game Developers Aren’t Prepared
Here’s one really sad reality about the next generation of consoles: game developers are nowhere near prepared. They may have a few software development kits. They may have a graphic engine lined up and ready to go. They might even have a few game concepts that are ready to be programmed. But in terms of actual game content, they’re a good 12 to 24 months away from producing anything of quality – and that’s if we’re lucky. Historically, third-party game developers don’t produce great launch titles. This means that even if PlayStation 4 arrived in 2013, we probably wouldn’t see the first triple-A game arrive until 2014 or later.
Sony is Content with Being Last
While Sony used to be at the forefront of innovation, it is currently content with being dead last in just about everything. That’s not to say that the company no longer produces good products. But when it comes to fresh ideas – such as touch screens and motion controls – Sony has been well behind the competition. (Patent filings suggest otherwise, but consumers don’t really care about that. They only focus on the final item that they can personally pick up and use. And if Nintendo or Microsoft hit the market first, they’ll receive all the credit.)
Consoles Typically Arrive 18+ Months After the First Unveiling
From Nintendo 64, Dreamcast and the original Xbox to PlayStation 3, Nintendo Wii, and the forthcoming Wii U, console manufacturers almost always unveil their new machines 18 months or more before they are finally released.
There are two prominent exceptions: the Nintendo 3DS arrived nine months after its June 2010 unveiling, while the Xbox 360 shipped to stores just six months after it was first shown in May 2005. However, it is worth noting that both of these consoles launched with the most awful selection of games in console history. While the original Xbox had a killer lineup of underappreciated classics, Xbox 360 had a disgraceful lineup of undesirable garbage. That’s why I waited until January 2006 to get one. I wish I had treated the Nintendo 3DS – whose launch lineup was even worse – with the same respect.
To be clear, this does not mean that consoles should not come out immediately after their unveilings. But the proof is in the pudding, and the eight-minute stuff just isn’t as tasty as the sweet and creamy pudding that takes 18 months to prepare.
At Best, We’re Looking at a Christmas 2014 Release
Some consumers expect Sony to make its big PlayStation 4 unveiling at E3 2013. That being the case, the console would probably ship in time for Christmas 2014 – eight years after PlayStation 3 arrived. For Bob Consumer who just purchased a PlayStation 3 this year, that’s okay. But for the many consumers who rushed out to get one in 2006, eight years is an insanely long time to wait for a new console.
And that’s assuming the console is announced next year. If it’s not, the 2016 release date should begin to look a little more realistic.
Follow me @LouisBedigian
For more Benzinga, visit Benzinga Professional Service, Value Investor, and Stocks Under $5.
