The video game circuit is on a date with the “PlayStation...

Sony launches the PlayStation 5 next week, hoping to achieve great success … With the Japanese company increasingly relying on the lucrative gaming sector, there is no room for error.
The PlayStation 5 will enter a direct battle with the new Xbox console, which Microsoft intends to launch two days before its Japanese competitor launches its latest products, as both companies hope to capture the market in the run-up to Christmas.
But the confrontation has more significance for Sony.
Since the launch of the first “PlayStation” device in 1994, games have become the largest portion of Sony’s business, after achieving the lion’s share of profits and about a third of sales, more than electronic or music products.
By comparison, games accounted for less than 10 percent of Microsoft’s sales for the fiscal year ending in June 2020.
Sony sold twice as many PlayStation 4 devices than Microsoft sold Xbox. Analysts say that was a result of the lessons learned from the disappointing launch of the PlayStation 3.
“We saw in the past that when a new device is launched, there are two main factors that affect its success, that it is the first to be launched and the cheapest,” said Maurice Garard, an analyst at Future Source Consulting.
He referred to the “relative failure” of the PlayStation 3, which began selling a year after the launch of the Xbox 360, at a higher price.
The price of “PlayStation 5” is $ 500, which is comparable to the price of the “Xbox Series X”.
Analysts pointed out that the profit margin of “Sony” from gaming devices will be small and may be losing, and the company relies on sales of games, services and online subscriptions to make profits.

Strong demand and growing pressure

So far, demand appears strong, as Sony announced that it has boosted production targets.
But to meet them, it will rely on suppliers, especially TSMC, the Taiwanese company that makes the device processor and graphics processing unit.
The company is already under pressure as the main producer of fifth-generation (5G) chips for smartphones.
“Whatever Sony produces, it will sell,” said Yasuo Imanaka, an analyst at “Rakuten Securities”. He expected sales of “PlayStation 5” to surpass the record of 157 million units achieved by the “PlayStation 2” device since its launch in 2000.
“Everything depends on what TSMC can provide,” he told AFP.
To outperform the Xbox, Sony will have to rely on its exclusive toys, according to Jim Ryan, the company’s chief of interactive entertainment.
Among its trump cards is “Spiderman: Miles Morales”, which will be released with the new machine. The previous version of this game was among the best games in the PlayStation 4.
The game was developed by the American studio “Insomniac Games”, which Sony bought last year for $ 229 million.

Focus on the short term

Despite the costs, Amir Anwar Zadeh, a strategist at Asymmetric Advisors, said the trend is rational given the risk of diminishing revenues for console manufacturers on games produced by third-party developers.
Hardware manufacturers charge game publishers a fee for every game sold for use on their devices, and nearly 70 percent of games sold from PlayStation devices come from third-party developers.
But Sony and other companies are under pressure from publishers to reduce these fees.
“If the franchise fee is lowered, companies will face a lot of trouble because then they will have to sell double the quantity of devices,” said Anwarzadeh, to avoid affecting their final profits.
“Sony” still has many powerful cards up its sleeve when it comes to the PlayStation 5 device, “the content portfolio, the power of social networks for consumers and the development of comprehensive technology … all of which will help encourage consumers to use the devices,” Garard said.
But he cautioned that Sony’s focus on controllers could risk focusing on short-term goals.
In addition to its subscription model, Microsoft is investing heavily in streaming, also known as cloud gaming, a strategy that “appears to be aimed at dominating this market in the long term,” Garard said. (AFP)