- Sony is matching the price point of the Xbox Series X at $499.
- According to FT’s report, Sony’s head of games said the PS5 might be its last console.
- Sony is making a big bet with digital games and at its digital edition is at a price disadvantage with the Xbox.
Sony is launching the PS5, and it is matching the price point of Microsoft’s Xbox Series X at $499. But, when asked if the PlayStation 5 could be Sony’s last ever gaming console in a future geared toward cloud gaming, PlayStation CEO Jim Ryan told the Financial Times:
The truth is, I don’t know and nobody does know…Seven years ago everybody was saying ‘PS4 is going to be the last one, it’s all going to be tablets and mobile phones’, and [more recently] it’s been ‘everything will be in the cloud’, so nobody knows.
The timing to release for what could potentially be the company’s final PlayStation makes sense.
Due to the prolonged pandemic, the gaming industry is booming. Newzoo analysts estimate the gaming console market to be worth around $45 billion, and the demand for online games is surging.
The launch of the PS5 puts Sony in direct competition with Microsoft to take on the gaming market by the year’s end.
The year-to-date performance of Sony. | Source: Yahoo Finance
If the PS5 becomes Sony’s last console, it could allow the firm to focus on online gaming services and ventures. They are far more scalable and challenge the perception of a traditional Japanese conglomerate.
Citigroup Also Believes PS5 Will Be the Last, But It Can be Optimistic
Kota Ezawa, a Citigroup analyst, said the bank also believes the PS5 will be “the last console.”
According to Ezawa, “games will likely be played entirely online for PS6,” predicting a switch to online gaming.
It takes significant resources to build a new console. Like smartphones, there is a plateau of growth with hardware. New consoles can only be so much better than previous ones when they are already equipped with high specifications.
Eventually, Goldman Sachs analyst Minami Munakata foresees Sony launching a disc-free PS5. That would kickstart a digital-only gaming console market. The analyst said:
“I expect digital sales will increase in the future because of this lower-priced model launching.”
Over time, Munakata said digital games sales would likely rise to 80% over the next five years, relative to disc-based sales.
For now, Sony itself is unsure if it would go down the path of digital gaming. When asked about the prospect of the PS6, Sony Interactive Entertainment CEO Jim Ryan said, “I don’t know.”
Ryan emphasized that, currently, nobody knows whether Sony would release a new console in the future. He said:
“Seven years ago everybody was saying ‘PS4 is going to be the last one, it’s all going to be tablets and mobile phones’, and [more recently] it’s been ‘everything will be in the cloud’, so nobody knows. The truth is, I don’t know and nobody does know.”
Strategists in Japan are optimistic about the leadership changes at Sony. Watch the video below:
How Can Sony be Successful With the Digital Route
Sony is directly competing against Microsoft and to be successful in the digital gaming space; diversity is key.
Sony’s digital edition is $100 more expensive than the Xbox Series S. At a higher price point; it would have to offer gamers more than what Microsoft has.
Ryan told Nikkei that he recognizes price is a major factor. But he said he is confident the PS5 would provide customers long-lasting entertainment. He said:
“I would be a fool to deny that price is not a big factor. People want certainty that their purchase will be valid for many years to come, and I think PS5 gives them that.”
Sony expects its gaming arm to generate 40% of its operating profit until March 2021. Its big bet on digital gaming could buoy Sony stock’s bull case or cause challenges in the near term.
The year-to-date performance of Microsoft stock. | Source: Yahoo Finance
The company might need to offer services, like backward compatibility for its library of games, and better online services.
Sony heads into the battle ahead with Microsoft at a price disadvantage with its digital edition. It remains to be seen whether the services would offset the price difference.