Sony (NYSE:SNE) announced the pricing and the release date for its PlayStation VR that is priced at $399, at the low-end of the consensus $400-$500. The pricing is certainly reasonable given that SNE is pricing the hardware as a mass market item that is superior to the Samsung Gear and slightly below Facebook's (Oculus). However, the shipment date (scheduled for October) is slightly disappointing but launching the product by the time there is an abundance of content on the market makes sense from a marketing perspective.
With the right price and well timed launch date, I believe that PS VR could potentially be a successful VR product and allow SNE to make additional inroads in multimedia distribution and entertainment. In the near-term PS VR will be predominately gaming focused but the long-term implication of VR content (ie. entertainment, movies, videos) could drive growth higher as SNE leverages its PS Vue footprint across the US. I remain bullish on SNE and reiterate the stock being my top pick among the Japanese tech names.
On the first look, the $400 price tag is certainly attractive and very affordable to the mid-income consumers that already have a PlayStation console. However, I believe that product bundling may be necessary to build the foundation of SNE's ecosystem. Bundling has several advantages: First, the higher pricing (~$600-$800 with controllers and other gaming accessories) establish a higher upfront investment cost for the consumers that discourage ecosystem churn as more competing VR products flood the market. Second, a more comprehensive VR bundle allows the consumers to experience a comprehensive VR experience that drive user stickiness and retention. I think these two factors will be key in driving PS VR's initial adoption.
In the medium-term, I expect PS VR to drive higher PS4 volume. Worth noting that PS4 is already beating Xbox in terms of volume and with over 160 VR games in development (50 of which expected to be released in Q4) I think that the breadth and the quality content will be supportive of PS4 penetration. Gaming will be certainly a focus area for VR but I see multiple applications (ie. social VR, social games) to be another driver in the next five years.
Finally, PS VR will likely to push SNE deeper into the media distribution space. With SNE Vue already going nationwide in the US and that many content producers are investing in VR, I would not be surprised to see SNE to start distributing VR shows and movies through Vue. Worth noting that UK's Sky TV has already set up a VR studio focusing on producing content in VR across sports, movie news and entertainment genres throughout the year, and it is not difficult to foresee SNE taking a similar route with its studios division.
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