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With few attractive titles for the holiday shopping season and shipments falling short of the company's targets, doubts are growing whether Sony Co.'s PS5 can ever become a mass-market product.
When the device debuted in 2020, it was classic Sony— a new powerful machine that broke the limits of video games. The PS5 was billed as a worthy successor to the PS2, Sony's record-breaking console.
So far, the PS5 has struggled to find customers beyond a core fan base. The PS5 failed to reach 60 million unit shipments by March, short of Sony's initial target of 63.5 million.
After cramming its best franchises — Spider-Man, God of War and Final Fantasy — into the first few years, the Tokyo-based company is left with fewer games to show off this year, hurting hardware sales. Virtual Reality headset introduced in February 2023, called PlayStation VR2 , have mostly failed to expand interest beyond those who were already planning to pick up a PS5.
"All great consoles need a great fourth year, and Sony hasn't delivered one for the PS5," said Cornelio Ash, an analyst at William O'Neil & Co. in Los Angeles. "Investors thought over five years they could sell maybe 90 million units. But after this year, that's looking pretty much impossible."
Sony declined to comment on the forecast or plans for the PS5.
The holiday quarter historically accounts for about half of the game maker's sales, and analysts have been reducing their full-year estimates for operating profit and revenue since March. Sony shares have dropped about 22 percent since a January peak, wiping out more than $30 billion in market value. The drop was initially driven by short-selling hedge funds, but recent declines have been fueled by existing shareholders, according to data from Markit Securities.
"The stock is heading back to the level when the PS5 was revealed, which doesn't say great things about its long-term prospects," Ash said. Even so, 20 out of 23 analysts tracked by Bloomberg continue to recommend buying shares.
"2023 was a reality check and brought lofty expectations back down to Earth," said Michael Pachter, an analyst at Wedbush Securities Inc. "The PS5 is great, but is very expensive."
That opens the possibility of price cuts. History suggests reductions will have to be aggressive in order to work. Sales of the PS3 picked up only after prices were slashed by 100$ percent not even a year after launch, but the Vita didn't recover even after Nintendo dropped the price by about 20 percent two years after release.
"I don't see sales growing unless the price is reduced to below $350," Pachter said, indicating a 33 percent cut from the PS5's current price.
Another possibility is the introduction of different hardware versions. Credit Suisse Group AG sees "a strong likelihood" that new PS5 models will go on sale as soon as next year. "Any announcement to this effect would likely come before mid-2024, possibly as early as the next management policy briefing" analysts including Hanako Takahashi wrote in a report last week.
Apart from potential price cuts and new models, the other key to regaining momentum will be new games. PS5 is gettting big releases this year, including an Elden Ring DLC and a Star Wars title. Whether that can broaden the install base beyond core gamers remains to be seen. Tellingly, executives have stopped comparing the PS5 to the PS2 during investor meetings in recent months.
With hardware shipments missing the fiscal-year target, executives will face tough questions on how they plan to regain lost momentum. That could open up possibilities for bigger changes to the platform next year.
"The PlayStation 5 excitement has rapidly declined, " Ash said. "Unless there's significant change or something else new, the PS5 story has been exhausted."