Sony: PlayStation business needs to be profitable this year

Will PS4 hardware be profitable on day one? It’s a bigger issue than that, says Sony’s UK MD Fergal Gara

Sony: PlayStation 4

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.



Upgrading to new consoles could generate $2.5bn in credit at GameStop

US retailer likely to see busy trade-in period at launch of new hardware

Upgrading to new consoles could generate $2.5bn in credit at GameStop


Consumers trading in current generation games and hardware for the new Xbox One and PlayStation 4 consoles will generate almost $2.5 billion in credit at GameStop.

That’s according to Colin Sebastian at Baird Equity, who met with GameStop management last week to discuss diversifying sales through the pre-owned market, as well as growth in the mobile sales business.

Microsoft’s public-facing message on the Xbox One’s support for used games has lack clarity, with an expectation that those who buy games second-hand will have to pay a significant activation fee, which could also apply to borrowed or rented games.

Whether new policies will disrupt traditional retailers remains unclear at this point, although GameStop does have leverage with Microsoft – it’s responsible for 50 per cent of Xbox 360 sales in the US, boasts a member base of 30 million people and 24 million consoles in its successful Power Up rewards program.

“Used inventory tends to increase into platform launches, and we estimate that GameStop could create nearly $2.5 billion in credits for consumers upgrading to new platforms,” suggested Sebastian.

Shares in GameStop have fallen roughly 14 per cent since the lack of clarity on used games following Microsoft’s Xbox One reveal. More visibility on second hand policies from Microsoft and Sony is expected at E3 next week, but in the meantime “shares will likely remain choppy near term from headline and sentiment risks”.

GameStop has also indicated that mobile device sales account for 10 per cent of operating income even with a limited roll-out across stores, and the mobile market is a multi-billion dollar long-term opportunity for the retailer that will help offset some decline in used games.


Microsoft to announce next-gen Xbox on May 21

Microsoft to announce next-gen Xbox on May 21

As expected, the company will be holding a special event prior to E3 to unveil its new Xbox [UPDATE: The event will be live streamed]

Microsoft finally announced today that it’s planning to unveil its next generation plans during a special event on May 21 at Microsoft’s Redmond campus. The news came via press invites sent out to media this afternoon.

The event, dubbed “A New Generational Revealed”, lists a start time of 10 a.m. and mentions that Don Mattrick will lead the announcement. And in case there’s any doubt that the event is to announce a new Xbox, the invitation also includes the Twitter hashtag #XboxReveal.

Given all the controversial rumors about the next Xbox being always-online and requiring players to possibly need to be online even to play solo, it’ll be very interesting to see what the final feature set on the new hardware ends up being. Many are expecting hardware specifications somewhat similar to what Sony is including in the PS4, and given Sony’s developer-centric and more open approach to the PS4, a number of developers are hopeful that Microsoft will be equally open with the next Xbox.

Update: Microsoft representatives have confirmed to GamesIndustry International that the event will be streamed live on, Xbox Live and it will appear on Spike TV. Additionally, Microsoft will be showcasing its next-gen lineup for the next Xbox at E3 this year with an event at the Galen Center in Los Angeles on June 10. That event will be streamed online as well.