Sony (NYSE:SNE) is holding a press conference on Wednesday, February 20th at 6PM EST. The conference is rumored to be centered around the release of the highly anticipated Playstation 4 gaming console. The console could be the item needed to propel shares of Sony going forward.
There is a reason that video game players and websites dedicated to gamers will be tuning in Wednesday. Gamers have been waiting over six years for the new console from Playstation. The Playstation 3, which began sales in 2006, has gone on to sell over 77 million units since its launch. The Playstation 2, launched in 2000, was the best selling console of all time with 150 million units moved.
The announcement comes at a key time for the video game industry. People are shifting to social and free games and avoiding $60 console games at alarming rates. However, the release of a new console from Nintendo (OTCPK:NTDOY) in 2012 and new consoles from Sony and Microsoft (NASDAQ:MSFT) in the next twelve months brings hope back to the video game industry.
Here is what investors should be looking for during the conference:
Currently the Playstation 4 is rumored for a November release date. This would make sense as it gives the console the holiday season to dominate sales in retailers. Nintendo did a similar move last year by releasing its Nintendo WiiU console in November. Microsoft has not announced when it will be releasing its XBOX 720 console, but it was originally thought in 2014. If Sony can release before the holiday season of 2013, it could take an early lead on its rival.
According to "Game Informer", the Playstation 4 will come with two different priced models available. The consoles will be for sale in the United States for $429 and $529. It's not known if this is true, but there is a good chance that the new console will begin with a lower price point than the previous Playstation 3. Sony's last gaming console started at $599, when it began sales in 2006. Sony has been hit or miss when it comes to announcing the price of its consoles, but normally gives a pricing guide for Japan in yen and leaves the American announcement for a later date.
If I was an executive at Gamestop (NYSE:GME) or Gamefly, I would be nervous listening to the February 20th press conference. There are rumors floating around the internet that both Sony and Microsoft will release new consoles that do not allow gamers to play used games. Sony could make this announcement as early as Wednesday. The company does have several patents for technology that uses RFID tags embedded into discs to show whether a game has been played.
The risk here for Sony is the competition. If Sony decides to only let gamers play new games and Microsoft allows used games, the XBOX 720 could easily outsell the newest Playstation model. Gamers will be curious to see if they can play their old Playstation 2 and Playstation 3 games on the new console.
Sony has a history of announcing the hardware specifications of its consoles during events like these. Shares of Advanced Micro Devices (NASDAQ:AMD) could see a nice pop on Wednesday after hours or Thursday's trading session. The company, whose shares now trade for less than $3, is expected to be responsible for the processor and graphics card in the new Playstation 4.
Since Sony purchased Gaikai for $380 million in July of 2012, streaming games have been long rumored. It appears that the Playstation 4 will allow users to stream games online and purchase them from the company's huge back catalog. New reports linked to Sony and Gaikai show that the companies purchased several cloud gaming domain websites. These include: "playstation-cloud.org", "ps-cloud.net", and "playstation-cloud.com".
By allowing streaming and focusing more heavily on direct sales to customers, Sony cuts out the middle man. Profit margins would be higher as the games wouldn't need packaging or a retailer to sell them directly to consumers.
Sony is a huge electronics conglomerate with several business segments. In 2012, the consumer products and services segment made up 47.2% of revenue. Of this segment, gaming was 24.3%, making gaming responsible for 11.4% of Sony's total sales. This number would obviously grow huge in 2013 if the console is released. Expectations are not very high for Sony's revenue or earnings over the next year so the conference will likely send shares up.
Shares of Sony trade for less than $15. The company has struggled with several business units over the last year. Shares have traded for between $9.57 and $22.35 over the last fifty two weeks. This announcement is a huge deal for Sony and also its rivals. If the company releases enough details to get gamers and investors excited, shares should have a nice run-up throughout the week. If the console is going on sale before Christmas of 2013, shares of Sony may be a nice early Christmas present for yourself.
If Sony announces that used games will not be playable on its Playstation 4, expect Gamestop shares to take a plunge. That could mark the end of retail stores selling games and would hurt Gamestop more than any other company.
Be prepared to take a chance on AMD if the company is involved in the Playstation 4. I know I will be looking further into this sub-$5 stock soon.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AMD, SNE over 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.