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Game on as Sony faces Microsoft in China

JIJI, Bloomberg

Sony Corp. plans to launch its PlayStation 4 video game console in China, according to its Chinese partner for the project and other sources.

Following Microsoft Corp.’s lead, Sony will become the second major foreign company to launch a video game console in China, where the ban on sales of the products was partly lifted this year.

Sony agreed to form two ventures with Shanghai Oriental Pearl (Group) Co., owner of the Oriental Pearl Tower, to start making and selling PlayStation consoles after China lifted a 13-year ban on sales of the machines. Sony will have a 70 percent stake in one venture and 49 percent in the other, according to a statement filed with the Shanghai Stock Exchange.

They are expected to offer the PlayStation 4 home game console, informed sources said. The release date and price are unknown.

The PS4 is available in over 50 countries since it was first rolled out in November last year. Global sales have topped 7 million units.

China banned production and sales of video game consoles in 2000 amid concerns about their impact on young people. In January this year, authorities partially lifted the ban, allowing companies operating in the free trade zone to manufacture and sell them.

The move by the Tokyo-based company comes as Chief Executive Officer Kazuo Hirai seeks to tap players in the world’s largest market and help rebound from a projected sixth loss in seven years. It also comes after Microsoft Corp. announced last month plans to sell its Xbox One machine in China, and Nintendo Co. said it plans to expand in emerging markets with new devices. China’s video-game industry will generate about $10 billion in sales next year, according to PricewaterhouseCoopers LLP, and console makers are trying to distract Chinese players from games on their smartphones and tablet computers.

“China is a very promising market and we have prepared for the launch,” said a senior official at Sony’s gaming unit, Sony Computer Entertainment Inc.

“Sony entering the China market can broaden sales,” Ryosuke Katsura, a Tokyo-based analyst at UBS AG, said by phone. “PlayStation 4′s online game network service can help the company avoid piracy issues that are more prevalent with packaged games.”

In September, Shanghai inaugurated a free-trade zone with more relaxed financial and investment controls as China seeks to unleash market forces in the world’s second-largest economy. That is helping attract companies from console makers to banks.

Nomura Holdings Inc., Japan’s biggest brokerage, signed an agreement earlier this month with Shanghai Lujiazui Financial Holdings and others to form a venture in the free-trade zone.

“We think mainland China is an attractive market, we will consider various possibilities in the market,” Satoshi Fukuoka, a spokesman for Sony, said by phone.

Fukuoka declined to comment on whether Sony will sell the PS4 or design another console for China, and he also declined to comment on the timing for starting sales in China.

Japan’s No. 1 TV maker unexpectedly forecast a ¥50 billion net loss this year as slumping demand for its sets and video cameras was compounded by the costs of restructuring and exiting the personal computer business. That further set back Hirai’s plans to revive the Japanese icon by using the PlayStation and Xperia smartphones to lure consumers away from Apple Inc. and Samsung Electronics Co.

Console makers may face an uphill slog in their attempts to get a generation of gamers grown used to a free online model and increasingly migrating to mobile devices to pay hundreds of dollars for hardware. The companies also will have to battle rampant piracy of movies, music and games.

“Without any assurance that their intellectual property will be respected, it is difficult to see how any manufacturer can make money in China,” Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said in an email Monday.

“Microsoft has partnered with a television broadcaster, and hopes to sell its console as a multimedia device. I am sure Sony has similar plans.”

Microsoft and BesTV New Media Co., a subsidiary of Shanghai Media Group, formed a $79 million gaming venture in September to reach Chinese consumers.

TCL Multimedia Technology Holdings Ltd. said in April it will make a game player, the T2, that features a joystick that’s compatible with mobile games for Google Inc.’s Android system so they can be played on any TV.

The PlayStation 4 beat Microsoft’s Xbox One to first place in U.S. console sales in April, extending its lead for a fourth month, according to Port Washington, New York-based NPD Group Inc. Games like the PS4′s Killzone Shadow Fall are helping drive demand among hardcore gamers.

“In China you don’t need to have a large market share to hit your numbers,” said David Rubenstein, a managing director at Advanced Research Japan in Tokyo. “You just need a few million enthusiastic gamers.”

Nintendo President Satoru Iwata said this month his video-game company plans to expand in emerging markets with new devices starting next year. The Kyoto-based company will develop completely new game machines for emerging markets rather than sell cheaper versions of existing devices such as the Wii U, Iwata said in a May 8 interview.

Nintendo is studying the regulations regarding entry into China, Iwata said in a May 7 interview. Yasuhiro Minagawa, a spokesman for Nintendo, said the company has nothing more to disclose regarding sales in China.