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Sony (SNE - Snapshot Report) recently announced that it has come up with PlayStation 4 (“PS4”), its fourth iteration of the massively-popular console system. The announcement of PS4 comes on the heels of Nintendo’s Wii U, the upgraded version of its first console.

PS4 is set to hit the market in the holiday season this year and is equipped with next-generation game play capabilities. However, the look and price of the console has been kept under wraps.

Apart from the regular features of a video game console, PS4 is equipped with Dual Shock 4, a new controller. The console also comes with a touch pad, a headphone jack and a camera, which tracks the position of the controller.  Among a host of other features, PS4 enables gamers to ‘share’ and ‘like’ the games they play.

PS4 has streaming capabilities and apart from games, content from Netflix (NFLX - Analyst Report), Amazon’s (AMZN - Analyst Report) Prime and Hulu Plus will also be available for download.

We believe that PlayStation’s new upgrade, which comes after 7 years since the release of PS3 in 2006, should be able to drive hardware sales in the video game industry this year. Moreover, Microsoft (MSFT - Analyst Report) is expected to announce its console upgrade in June this year, which should also help sales.

In Jan 2013 hardware sales increased 5% year over year. Incidentally, hardware sales had an abysmal 2012. According to NPD data, hardware sales dropped 27% year over year in 2012.

The long-term prospects of these hardware upgrades are positive for the video game industry. However, the hardware sales decline is likely to continue in the near term as customers might postpone their purchases to get the new and improved consoles.

Moreover, competition from social games and the emergence of mobile platforms, such as smartphones and tablets from Apple and Samsung, have been and remain headwinds for video game hardware sales. Video game publishers are now inclined to make games that are compatible with these devices. However, on the positive side, hardcore gamers preferring to play the games on consoles are aplenty.

Currently, Sony along with Amazon and Microsoft carry a Zack Rank #3 (Hold) while Netflix has a Zacks Rank #2 (Buy).

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