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Analyst Blog

by Patrick Anderson

Sony (SNE - Snapshot Report) has recently announced that they have sold seven million PS4s since its release five months ago. They have beaten their sales expectations of five million units. Meanwhile Sony’s competition, which includes Microsoft (MSFT - Analyst Report) and Nintendo (NTDOY), has had mixed results.

Both Nintendo and Microsoft had strong launches that then fell flat outside of their launch period.  Microsoft announced in January that they had sold three million Xbox Ones after their launch in late November; however, they have been silent since then on how many Xbox Ones have sold since January.

Meanwhile Nintendo is expecting to have a loss of 25 billion yen, and they are slashing Wii U sales projections from nine million to under three million after a weak holiday season.

Currently the PS4 is off to a stronger start then the PS2 which ended up having 155 million sales in its life cycle. The questions experts are asking is why is the PS4 performing so well? What makes the PS4 more appealing to gamers over the Xbox One and Wii U?

Why is the PS4 appealing?

Until the mid-2000s the console’s selling point was the games they offered, and the library of each system had a variety of exclusives that were only found on their platform.

Now consoles like Xbox One and PS4 mostly have multi-plats like Call of Duty with a few major exclusives each year. For example, Sony’s biggest exclusives to date is Killzone and Infamous: Second Son, meanwhile Xbox One has three big exclusives including Forza, Titanfall, and Dead Rising.

Granted, it’s still early in the consoles' life span as they will be major releases coming out this fall for both Xbox One and PS4 which includes titles from Ubisoft such as Tom Clancy’s Division along with Assassins Creed Unity, and Activision (ATVI) will be releasing Destiny which is made by the creators of Halo. The thing is these big games won’t come out at the earliest until this fall. It is surprising to see a console sell so well this early when the amount of games for the system is lacking.

What might explain the strong sales is the changing demographics and how people use their console nowadays. In the early 2000s the PS2 and Xbox could only play games, DVDs, and CDs. Nowadays the Xbox One and PS4 have plenty of multimedia services including Netflix (NFLX - Analyst Report), HBO GO, Hulu Plus, MLB.TV, a web browser, Facebook (FB - Analyst Report), and other services that aren’t tied to video games.

The Xbox 360 had strong sales in the first half of its life cycle over the PS3, and one competitive advantage Microsoft had over Sony at the time was having streaming services like Netflix. In 2014 Sony is on the same level by offering the same multimedia services as Microsoft, but there is one key difference. Sony doesn’t require you to have a Playstation Plus membership to use applications like Netflix, meanwhile Microsoft requires you to have Xbox Gold if you want to watch Breaking Bad on Netflix. On the PS4 you don’t have to cough up $60 a year to use these services unlike Microsoft.

Then add in how the PS4 is $100 cheaper in the US, and overall cheaper around the world compared to the Xbox One makes the PS4 appealing when they are offering in essence the same thing.

Now the question remains, why is Nintendo struggling after the Wii being a huge success for them? A lot of people debate this from poor marketing as consumers have come out saying they are confused on what is the difference between the Wii and Wii U.

Another reason is the slow release of games with key titles like Super Smash Bros to Mario Kart won’t be out anytime soon; however, gamers can get their hands on Super Mario 3D World and Wonderful 101. Surprisingly big titles like Super Mario didn’t push console sales as expected, and it has lead Nintendo to cut sales expectations.

Sony’s console is back on top in a changing and competitive video game market. After the struggles and issues Sony had with the PS3 launch, they seem to have learn their lesson and have found a winner early on in this generation.

Keep in mind it’s still early in this generation’s life cycle, and things can change in the next couple of years. For example the PS3 performed horrible early in its life cycle, but now it has sold more units worldwide then the Xbox 360. So saying the PS4 won the console war is premature as this generation will last for several more years, but it is safe to say Sony is winning the console war so far. Read the Full Research Report on SNE
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