Will PS4 hardware be profitable on day one? It’s a bigger issue than that, says Sony’s UK MD Fergal Gara
Sony has emphasised that the PlayStation division has to be profitable this financial year, as it prepares to launch a major new console before the end of December.
This week it unveiled the retail price for the PlayStation 4, and confirmed that the home console will definitely be released in the US and Europe for Christmas holidays – although the company can’t commit to month or date.
“It’s been a considered effort for seven years, not a knee jerk decision in the last days and weeks”
Fergal Gara on the PS4 price
“Quite simply we don’t want to over promise and under deliver,” Gara told GamesIndustry International. “We’re not in mass manufacture right now so it’s impossible to be absolutely precise. I’m confident we’ll have very significant stocks for the UK and absolutely delighted we’re going to launch before Christmas. ”
Consumers and press have reacted favourably to the price of the system, which will retail for $399 in the US and £349 in the UK. But some are questioning those figures and whether the company will take a loss on sales of the hardware at launch.
“There’s no point in looking at the console in isolation,” Gara said. “Is PlayStation going to be a profitable business? It needs to be and it intends to be a profitable business over the next year.
“The balance of everything we do, whether that’s the console, the software, the accessories or the digital business, it all needs to be profitable and we expect it to be profitable in the short term and the medium term.”
Last year Sony’s PlayStation business recorded a slide in sales of more than 12 per cent, with profits dropping from $310 million to $18 million. The company warned in May that it had reduced expected profit margins from 8 per cent to 2 per cent.
This week rival console manufacturer Microsoft revealed that its new Xbox One console would retail for $499, putting it at a price disadvantage with Sony. But Gara explained that Sony had a $399 price in mind at the beginning of development for the system, after the company launched the PlayStation 3 at $499 and $599 to much criticism and slow initial sales.
“The reference point was PlayStation 3,” he said. “It wasn’t the competition because up until very late we had no idea what their price was going to be. Getting to a price point doesn’t happen in the final days and weeks, it happens years in advance as you plan for a target price point alongside your engineering, design and architecture of the system.
“You have to hit that combination of price and performance in power. I’m delighted in the horsepower per pound that we’ve delivered, it genuinely is one very high powered machine. It’s uncompromisingly built for one purpose above all other. Gaming, and performance around gaming, is front and centre. It’s been a considered effort for seven years, not a knee jerk decision in the last days and weeks.
It’s not just on price where Sony is winning in a new round of console wars. Microsoft is under fire for a number of online and sales initiatives that consumers feel are unfair and exploitative.
Sony used its pre-E3 conference this week to directly attack Microsoft, raising the roof from a supportive crowd and playing to an online community hungry for conflict.
“Expect premium games to carry a fairly premium price tag”
“Of course there was a little bit of play to the audience with the script and underlining the points of difference that we knew would be loved,” admits Gara. “We chose to do that, who wouldn’t? It’s a competitive market.” But he also makes it clear that there was never any other intention for Sony to copy Microsoft’s unpopular stance on used games or it’s insistence of an online connection “We knew what our message was, we’d decided on that some time ago. There were some small adjustments and refinements going on closer to the time but the fact is the message we have has gone down very well.”
But it’s still early days for both console manufacturers, and there’s time for both to either claw back public support or slip up in the months ahead.
One contentious issue may be the price of games. While smaller indie and downloadable titles can sell for reasonable prices, blockbuster games such as The Last of Us and Uncharted command high retail prices. When asked if there’s the possibility that triple-A games may rise further to help cover the cost of increasingly expensive development, Gara was more vague.
“We haven’t announced our pricing yet, we’re still looking at it. We’ll make our minds up to as exactly where that will sit. Expect premium games to carry a fairly premium price tag. But expect a lot more in between. We’ll have the full breadth of games both in terms of content and price,” he said.