Did Sony Botch PlayStation 4's Market Launch?

| About: Sony Corporation (SNE)

Last week, Sony's (NYSE:SNE) much anticipated PlayStation 4 hit the markets and it was sold out almost immediately. Thousands of people lined up in front of stores, many hours ahead of the release, in order to get their hands on a copy, even though the number of games available for the new console is very limited. Furthermore, many of these copies were sold on Ebay in the later hours for a nice profit. In summary, the reception of PlayStation 4 was huge.

Things changed a little bit once people actually tested their consoles though. Upon testing the product, a large number of users were highly disappointed with its performance. For example, within the first 3 days of PlayStation 4's release, more than 1,000 people reviewed the product on Amazon.com. Of the 1,204 products that are posted as of the time of me writing this article, 400 assigned the product with a 1-star rating. This number corresponds to 30% of all users.

A word of caution

Before I list some of the problems people reported with PlayStation 4, let me say something about the high number of people voting this product with a 1-star rating. Every time a product gets launched in the market, there will always be some people who won't be happy with the product. You can make some people happy all the time, you can make all people happy some of the time but you can't make all people happy all the time. No matter how well-made a product is, there will be always some people who will complain about it; this is a given with every product there is. Having said that, the rate of people who are unhappy with a product should be much lower for products that are well-made than those products that have lots of issues. If a product was rated negatively by 5-10% of the users, it is hard to blame the product, but if a product gets rated very negatively by every third buyer (especially within a few days of market launch), there has to be something wrong with the product.

How were older consoles rated?

Just for comparison, if we look at the reviews of PlayStation 3 on Amazon, we see a total of 933 reviews. Of these reviews, 89 are 1-star reviews with the average score being 4.3 out of 5.0. Basically, less than 10% of the users rated PlayStation with a 1-star rating, which means that PlayStation 4 is more than 3 times as likely to be rated negatively than PlayStation 3 (made by the same company, Sony). Similarly, Microsoft's (NASDAQ:MSFT), Xbox 360 received about 919 reviews, of which 110 were 1-star reviews. This corresponds to about 11%. Keep in mind that there are multiple versions of PlayStation 3, Xbox 360 and PlayStation 4 which range in memory, color and accessories. So each version of a product will have its own set of reviews; however, the trends will be about the same for all versions. For example, all versions of PlayStation 3 will get 1-star ratings from roughly 10% of the raters.

People call it "the blue brick"

So, what are some of the issues people are having with PlayStation 4? More than 100 people (roughly 10% of all reviewers) claim that their console either arrived dead or died within hours of first usage. One reviewer wrote: "I tried various recovery methods, some worked temporarily, but overall the system is dead." Someone else posted: "Unfortunately I can't review the product too much yet since, out of the box, it fails to work. One star is the lowest a review is allowed to go, but my particular unit, while physically existing in my hands, does not work. I will certainly update my rating to reflect my experience with the system once I am actually able to." This is another review by another user: "I also got a defective console right out of the box. I just get the blue flashing/pulsing light on the PS4 and never turns white; no display or sound. I am very disappointed in this whole mess. I don't think I've ever had a a piece of electronics fail right out of the box. I tried the different methods that I found online to get it to work, but they didn't do anything. I can't even get it to boot into the safe mode. Getting my refund and going to try to get one at a local store, if any are in stock."

Other problems

Of the "lucky" ones who were able to get their machines working, many reported other problems such as insufficient processor power. PlayStation 4's processing chips are produced by AMD (NYSE:AMD) which might not reflect very well on the company. AMD's investors are very hopeful that the new generation consoles will save the company from the difficult situation it is in, as the PC market has been on a sharp decline for the last few years. Many chipmakers that are heavily dependent on the PC market have been attempting to find other markets where they can see sufficient growth to offset the declining PC market, and AMD's recovery depends on the gaming market in a big way.

These are not the only problems experienced by the first wave of PlayStation 4 buyers either. Many people report that their console heats too much within a short time, and some users report that the machine is too noisy when it works. In fact, a lot of people on PlayStation network report the same problem. Apparently, the machine's fan kicks in within 10-15 minutes of usage and it is disturbingly noisy.


It looks like Sony could have used some testers before releasing its product in the market. Lately a lot of technology companies use their first buyers as "free testers" and this isn't a good move from a marketing perspective. It also looks like Sony rushed itself into releasing the product in the market even though it wasn't ready to do so. This botched launch will hurt not only Sony, but also its partners such as AMD. Will this launch help Microsoft and its Xbox One which will hit the markets very soon? It is very possible, but Microsoft has to make sure that it doesn't fall in the same mistake that Sony did. If a product has problems, it wouldn't hurt a company to delay the launch by a couple weeks and actually fix the problems, rather than launching a buggy product and hurting its relationship with the most loyal customers (the ones who rush to buy the product before everyone else).

Disclosure: I am long MSFT. 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.