I don’t enjoy writing articles like this. I own a PS3 and I actually think Sony did a lot right this console generation once they got past their disastrous launch. I was deeply skeptical of the PS3 when it first launched and then Sony turned around and made a console that was easy to fix and had a lot of streaming apps.
On the other hand, sometimes you have to read the writing on the wall. The PS Vita has officially become an albatross around the company’s neck, with it and the PSP combined selling a whopping 1.4 million units worldwide last quarter. That alone was enough to drag the gaming unit to a $45 million loss this quarter.
This is just the start: Here’s why.
Publishers Are Drying Up
What do Namco Bandai, Capcom, Sega, and Konami all have in common? All of them showed profits this quarter, and none of those profits were due to selling console games.
As I’ve mentioned elsewhere, there’s distinct financial pressure on Japanese publishers especially to abandon the console business to the West and just turn out mobile games. That pressure is just going to get more intense. If the Ouya or something like it takes off in Japan, that pressure will be overwhelming.
And this is a serious problem not least because in Japan, what pushes Sony consoles are RPGs. But these are games that aren’t technically demanding: they could easily be mobile apps. And if that makes more money, they’ll defect to Android and iOS in droves.
Physical Media Is Not Doing Well
Part of the selling point of the PS3 is that it’s not just a game system, it’s a media streamer, a music player, and it plays back DVDs. In fact, many home theater nerds own a PS3 to play back movies and nothing else.
Therein lies the problem: increasingly, people are dumping physical media altogether in favor of streaming. Sony was hoping for the Blu-Ray player in the PS3 to sell it like the DVD drive sold the PS2. That didn’t happen. But they have to be clinging to it for the PS4: They have no choice. So it could very well be an albatross.
Many Users Will See No Reason To Ditch Their Consoles
This isn’t just Sony’s problem: Microsoft’s got this one even worse, if that’s even possible. But the simple fact of the matter is for casual gamers, there’s no reason to buy a new console. Their current one streams their video and plays games like Fruit Ninja, which is all they really want, and it does it in 1080p. Why switch?
The hardcore will buy it… but it wasn’t the hardcore buying nearly 100 million Wiis or making the Kinect a hit. Sony ironically is somewhat shielded from this by the relative failure of the Move, but it also means Sony is facing a smaller audience that still may not want to change consoles.
The PlayStation 4 Will Be Sold At A Loss
The plan for these consoles is and always has been to sell them at a loss. If your gaming unit has been losing money and your entire argument is you’ll make it up in software, your investors may not have the stomach for it, especially if the larger company is in trouble.
Well, Apple, Google, Linux, Vizio, OnLive, Steam, Origin, Ouya, but especially Apple.
Leaving aside the iOS problem, here’s a useful analogy. If the video game industry is Batman, Apple has the potential to be Bane, except instead of breaking the industry’s back and leaving it at that, Apple would also squash the head and burn the corpse before finding the Batcave, chucking Alfred down it, and filling the whole thing with cement. Which then explodes.
Laugh all you want: they’ve already done this. Twice. The music industry is broken to their will and currently American cell providers are breaking themselves to get at the iPhone… which is driving them out of business. Apple might actually own AT&T by the end of the decade.
The only thing saving the gaming industry right now is that Apple is a closed system and doesn’t care about gaming. There is no iOS Ouya in the works.
But the giant waking up is frankly only a matter of time. Apple can no more ignore the next wave of smart TVs and streaming boxes than Sony can. Streaming games is a key part of these boxes. And unlike Sony, Apple can rouse huge desire for its products and has way more money to throw at it.
Microsoft is used to fighting Apple and you’ll notice they’re bracing for it with SmartGlass and the Surface. Sony, though, has no weapons and now that it owns Gaikai, making a dedicated gaming machine may be less compelling if you can just work your gaming into your TVs as a feature. Why pick a fight with a company that outgrosses you when you can just quit while you’re ahead and stop eating those quarterly losses?
What do you think? Can the PlayStation survive?