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Sony aims at special client base with PS4

by Mie Sakamoto

Kyodo

The new PlayStation 4 reflects Sony Corp.’s renewed focus on value-added products to attract selected customers rather than the general public, as the company struggles to turn its slumping electronics business around.

In unveiling the successor to the PlayStation 3 launched in 2006, Sony Computer Entertainment Inc. President Andrew House highlighted the PS4′s enhanced network functions, which allows users to upload a video of their play to social networks midgame.

“We will show you how we are strengthening the PlayStation ecosystem” through hardware, software and network capabilities that create “truly magical experiences that can only be found in our world,” House said at an event in New York on Wednesday.

Though older-generation PlayStation games will not be compatible with the PS4, Sony is eyeing offering a library of such games through cloud computer technology.

“Given that the Internet connection appears to be the major premise for the new console, a hurdle may be very high for casual game users,” said Koki Shiraishi, senior analyst at SMBC Nikko Securities Inc.

Though the PS4 itself is unlikely to contribute to pushing up Sony’s overall earnings, “it feels more comfortable” to see the product secure a certain level of profit by appealing to core gamers, rather than making the product too big, Shiraishi said.

Sony has begun to focus on differentiating its products and selling high-end models, he said.

Its deteriorating television business due to cutthroat price competition with South Korean and other rivals has not helped its bottom line. Sony has posted losses the past four years through March 2012.

But Sony expects to return to profit this business year, bolstered by earnings from its financial services and movie businesses as well as sales of assets. But sales of its mainstay electronics products remain sluggish.

To rebuild the money-losing TV business, Sony Chief Financial Officer Masaru Kato said earlier this month that the company has stopped chasing higher sales volumes and is cutting costs.

“We will compete in markets if necessary, but withdraw from a futile fight,” Kato said.

Under Sony’s current strategy, the company is placing more emphasis on high-end products. In November, it released a new liquid-crystal display TV with 4K technology, which displays images four times finer than conventional high-definition resolution, with an expected retail price of ¥1.68 million.

In the digital imaging segment, where sales of compact digital cameras are declining due to the spread of smartphones, the company aims to recover profitability with high-value added products that Sony excels at, Kato said.

For example, in November Sony launched the RX1 compact digital camera, which is comparable in quality to single-lens reflex cameras, according to the company.

At Sony’s online store, the camera is priced at ¥248,000, whereas compact digital cameras made by other companies cost less than ¥20,000.

“Because of the high price, it is not the type of product which sells explosively,” said Sony spokeswoman Hiroko Nakamura.

“But sales have been larger than expected and we are seeing a shortage of supply since the launch.”

The PS4′s success depends, according to Masashi Morita, a senior analyst at Okasan Securities Co., on whether Sony is able to release attractive software titles that capitalize on its capabilities, which cannot be realized by smartphones, tablet computers or even the PS3.

Sony’s PlayStation Vita handheld device has faced sluggish sales as it lacks hit titles to stimulate purchases of the device.

After slashing its annual sales outlook for portable game consoles, including the Vita, by 3 million units to 7 million units, Sony has decided to cut the Japanese retail price for the device.

“For the PS4, we want to see exciting software,” Morita said, adding that efforts to prompt software makers to develop products that are exclusive to the console are also important.

Though Sony currently highlights the gaming features of the new console, its final goal is making the PS4 a hub for its network services allowing users to share music and picture content via portable devices based on cloud computing, Morita said.

“The company is seeking to establish its Internet-based services using the PlayStation as a platform and spread the competitive services to its smartphones and tablets with an ambition to grab (market) share held by U.S. technology giants like Apple Inc. and Google Inc.,” he said.