The strong first-day sales of the PlayStation 4 console is surely good news for Sony Corp., but it’s way too early to get excited about the boost the struggling company might get.
One million units of the PS4 sold within the first 24 hours of its launch in North America last Friday puts Sony on track to achieve its goal of selling five million units by the end of its fiscal year in March. But the success of a game console business can’t be determined in weeks or even months, said SMBC Friend Research Center analyst Hiroshi Sakai.
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“You distribute your console as widely as possible to create a user platform, so you can start making more money with software,” Mr. Sakai said. When strong hardware sales are followed by a string of major hit games, that’s when the business has really taken off. Sony takes a cut from the sales of software created by third-party game developers.
While the PS4 console has received generally positive reviews, many video game blogs have found the list of software titles at the launch disappointing. Still, Sony has promised that more games are coming over the next few months.
With the new hardware, Sony isn’t repeating the same mistake it made with the PlayStation 3, which carried expensive components that initially forced the company to sell the console at a loss. A recent teardown of the PlayStation 4 by Techinsights showed that the total cost of components for the PS4 came to $296, almost $100 below the console’s selling price of $399.
Still, the teardown results don’t mean Sony will record a profit of $100 every time it sells a PS4. Selling a game console involves a lot of other expenses, such as promotional campaigns and fees to secure shelf space at retailers, said Mr. Sakai. While the lower cost of PS4 components compared to its predecessor makes it easier for Sony to minimize losses or break even on the hardware side of the PS4 business, “hardware won’t be a huge money maker,” he said.
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“Sales remain very strong in North America, and we expect continued enthusiasm as we launch the PlayStation 4 in Europe and Latin America (on Nov. 29),” said Andrew House, the head of Sony’s video game division.
Sony is off to a good start and it shouldn’t be too hard to meet its five-million-unit sales target by March, said SMBC Nikko Securities analyst Koki Shiraishi. But strong sales in the first few months will only be the first step in Sony’s attempt to create a strong platform for distributing game software as well as other content such as movies and music in the long run, he said.
November is a big month for video game fans, with Microsoft Corp. set to launch its next-generation Xbox One console on Friday.
