Sony: Shares Up On Hope China May Axe 12-Year Console Ban

| About: Sony Corporation (SNE)

Shares of Sony Corporation (NYSE:SNE) are gapping up this morning after a report in China Daily suggests that the world's most-populous country may end a 12-year ban on the sale of video-game consoles.

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China banned the consoles in 2000 because of concerns about the potential harm to the physical and mental development of young people. Mitsuo Shimizu, an analyst at Iwai Cosmo Holdings Inc. said of the proposed move to lift China's console ban:

"Investors are welcoming the report. It would open up a new and huge market for the video-game makers."

This will come as a welcome news for Sony, which set up an R&D base in Guangdong, southern China, last year. The purpose of the base is to train inductees in development practices. That move became necessary after Microsoft's (NASDAQ:MSFT) Kinect made its way into several facets of life for educational and practical applications. Both Sony and Microsoft are trying their best to enter the China's huge games market, given the size of the country's population.

Sony Corp's PlayStation 3 received a certification of quality from a Chinese safety standards body last year, sparking speculation that China will end a decade-old ban on home game consoles. Though analysts warned against reading too much into Sony's new certificate, noting the organization that gave it has no regulatory authority.

Lisa Cosmas Hanson, managing partner of U.S.-based video games consultancy Niko Partners also doubted such a move:

The Ministry of Culture has the regulatory authority over the console segment and is the sole organization that can revoke the ban.

The China Quality Certification Centre website showed two models of the PlayStation 3, labeled "computer entertainment system" with an approval date of July 2012.

Sony confirmed that it had received certification but remained tight-lipped about whether that meant an imminent entry for the PlayStation into the world's second-largest economy or whether the company needed further certificates.

All products must pass the safety standard before they can be sold to Chinese consumers. Contrary to touchscreen computers and smartphones, such as Apple's (NASDAQ:AAPL) iPad and iPhone that are available legally, game consoles are available in the China through black-market retailers only. But at least there were signs that the Chinese authorities are taking a less hard-line attitude towards game consoles.

Games are popular in China, but since the ban went into effect, residents have largely had to rely on PCs, mobile devices and tablets for their gaming needs. With the expected launch of a new PlayStation, the prospect of the world's most populous country joining the fray could have a significant impact on the global video games market. If China lifts the ban, it would be a boon to console makers like Sony, Nintendo (OTCPK:NTDOF) and Microsoft.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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