Analysts Have Mixed Opinions About Sony's Plans to Cut R&D for PlayStation 4

Market Observers Don't Believe in Sony's Next Console

by Anton Shilov
05/29/2011 | 10:59 PM

After Sony Corp. confirmed that it had started development of the PlayStation 4 game console, many market observers started to make predictions about the forthcoming gaming machine considering the fact that it would not be as breakthrough as Sony PlayStation 3 from technological point of view. At least some analysts do not believe in the success of the new system.

 

"I have always wondered if Sony would be able to make another console, so I guess it is good news that they are working on PS4. I am not sure that Sony is in a position to lose as much money on console system sales anymore and this undoubtedly puts Microsoft in the driver's seat for the next console cycle as they can take a bath on systems and make it back from software sales and XBL. It could mean that Sony isn't going to invest too much in developing from scratch by using more existing parts," said Asif Khan, an analyst with Panoptic Management Consultants, reports IndustryGamers web-site.

Sony invested tremendous amounts of money into PlayStation 3 game consoles, which is currently still the worst-selling system in the current generation behind Nintendo Wii and Microsoft Xbox 360. In particular, the consumer electronics giant co-developed Cell heterogeneous multi-core microprocessor with IBM and Toshiba and invested into chip manufacturing facilities, developed Blu-ray disc standard and spent money on BD replication plants, created a number of other technologies. Sony had been losing money on all PS3 consoles it sold for years after the introduction in 2006.

But that is not something that is going to happen to the PlayStation 4. The company is going to try to cut research & development as well as manufacturing costs. Partly, those expenditures should be reduced because the firm no longer plans to make major chips itself using proprietary manufacturing processes on its own fabs. In addition, the firm does not seem to have plans to create a new microprocessor for the console from scratch.

"What I think it means is 1) they are not going to be in a hurry to launch a PS4; 2) when they do launch a new system they are going to make sure the hardware is profitable. Obviously this may mean a higher price for the hardware; however, if Nintendo and Microsoft launch new systems first they may be able to be pretty high powered comparatively for a reasonable price," said David Cole, an analyst with DFC Intelligence.

Still, Sony cannot afford a "me too system" with minimum cost.

"If the PS4 is just a me too system when compared to Project Cafe and the next Xbox, it could fail. Which is pretty pathetic given the huge lead they had from PS2 momentum. [...] Management continues to lack any kind of vision. So yes, I think the risk of the next Xbox being better than PS4 is very high. Microsoft wants to win the next console war and it will most likely come down to them versus the Big N. XBL is a great platform and Microsoft is going to give it their all," said Mr. Khan.

What Sony will have to do is to reconsider its approach to game consoles. Instead of offering the best possible hardware, it may need a system with the best functionality.

"The consoles of the future will focus more on functionality and less on graphics. If we have learned anything from the onslaught of mobile and social games over the last three years, it is that consumers are beginning to prefer function, simplicity, and cross-entertainment integration," said Jesse Divnich, an analyst with EEDAR.

Naturally, nobody knows for sure whether Sony has already set the final specifications for the console and set the design targets. That said, everything can change in the several years.

"I think it is more than 3 years away, so pretty early to speculate. My view is that they started 'development' on PS4 when the PS3 launched, and felt compelled to disclose now because of Wii 2. They won't settle on final specs for another two years," said Michael Pachter, an analyst with Wedbush Securities.