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Sony (NYSE: SNE) recently confirmed that he was developing a new generation PlayStation console. In an interview with The Financial TimesSony CEO Kenichiro Yoshida said it was "necessary" for Sony to develop a next generation console, but declined to call the next device the "PlayStation 5".
Kenichiro has not revealed any additional details about the future console, but Sony's investors should follow this news because the company's Game & Network Services (G & NS) unit has become its main engine of growth in recent years.
From Sony Horizon Zero Dawn. Source of the image: Sony.
How important is the PlayStation for Sony?
The last quarter, Sony G & NS's revenues grew 36% annually and accounted for 24% of its total sales. The unit's operating profit jumped 372% and accounted for 43% of its operating profits. These growth rates have enabled Sony's G & NS division to achieve the fastest growth in its division.
Sony attributed the growth of its unit to the strength of sales of its PS4 software, including via the PlayStation Network. Sony has sold nearly 82.7 million PS4 since the launch of the console at the end of 2013, according to Vgchartz, making it the current best-selling gaming console in the world. Its previous console, the PS3, had reached 86.9 million shipments before being interrupted last year.
NintendoThe 3DS notebook ranks second after the PS4, with 72.7 million shipments, followed by Microsoft38.9 million shipments on Xbox One. The new Nintendo Switch console, launched last year, ranks fourth with 20.4 million copies.
Over the past two years, Sony and Microsoft have upgraded their consoles to meet the highest graphics requirements of modern games and support 4K content. Sony launched the PS4 Pro at the end of 2016 and Microsoft launched the Xbox One X at the end of 2017. Sales of both consoles are included in the current tables for the PS4 and Xbox One.
What do we know about the PlayStation 5 so far?
The original Sony PlayStation lasted a little over five years before its successor, the PS2, launched in 2000. The PS2 lasted more than six years before the arrival of the PS3 and the PS3, seven years before the launch of the PS4.
On the basis of these previous launches, many industry observers were expecting Sony to launch the PS5 between 2018 and 2020. However, the launch of the PS4 Pro as a "half-upgrade" could extend the current cycle beyond 2020.
Sony PS4 Pro. Source of the image: Sony.
Earlier this year, Sony said The Wall Street Journal that the new generation PlayStation would probably not arrive until 2021. Wccftech also claims that Sony use AMDCustom APUs (like the PS4) in its new console and the chip maker is developing its new Navi graphics architecture specifically for the device.
Focus on virtual reality and games on the cloud
We do not know much about the next-generation PlayStation, but we know that Sony will probably build it by taking into account two key markets: virtual reality (VR) and cloud games.
Sony launched its VR headset, the PlayStation VR, in late 2016, complementing the launch of the PS4 Pro, which offers smoother VR performance than the original console. Sony revealed to have delivered 3 million PSVR units by the end of July – a high figure for the nascent virtual reality market, but a very small compared to its total shipments PS4. Therefore, it is likely that the PS5 will be designed with high-end virtual reality games, and could even include a new generation PSVR to bring more players and developers on board.
Sony also has a big lead in the cloud gaming market with PS Now, the cloud gaming platform launched in 2015. The platform, which broadcasts PS2, PS3 and PS4 games on PS4 consoles and PCs Windows now offers more than 650 titles – making it the world's most developed cloud gaming platform.
PS now faces new competition from new competitors such as Microsoft's Project xCloud and AlphabetGoogle's "Project Stream", Sony will therefore strongly promote the integration of PS Now – with the PlayStation Network – into its next-generation PlayStation.
The delivery
The continued growth of Sony's gaming business offset many of its mistakes in its film, mobile and trolling semiconductor business in the last quarter. Analysts expect this trend to continue and increase Sony's revenue and earnings by 1% and 21%, respectively, this year.
We will not see Sony's new generation of PlayStation in the near future, but this will probably give Sony's game unit an even bigger share of its business, which should help the conglomerate to offset the more volatile growth of its weaker businesses.
Suzanne Frey, a member of the Alphabet Executive, is a member of The Motley Fool's board of directors. Teresa Kersten is a LinkedIn employee and is a board member of The Motley Fool. LinkedIn is owned by Microsoft. Leo Sun has no position in the mentioned actions. Motley Fool owns shares and recommends Alphabet (A shares) and Alphabet (C shares). Motley Fool has a disclosure policy.
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