Outlook for PS4, Switch dims as cloud gaming looms ahead

World
Europe

Despite posting record quarterly earnings on Friday, shares in Sony fell on Monday morning after announcing falling sales of its PlayStation 4 video console, amid growing concerns about the outlook for the overall console sector.

Shares fell 8.2 percent in the Tokyo-listed company, just days after a similar slump for fellow gaming giant Nintendo, which revealed Thursday it was cutting its sales outlook for its Switch console.

On Friday, Sony revealed a record quarterly profit of 3.46 billion U.S. dollars, boosted by its music business after purchasing EMI for 2.3 billion U.S. dollars in November.

However, that same period saw Sony sell only 8.1 million PlayStation 4 consoles. While the figures are still arguably impressive for a machine that was first released in 2013, Sony's gaming operating income fell 14 percent year-on-year.

That drop has forced Sony to reduce its forecast for the coming fiscal year, cutting its expected total sales outlook by 200 billion yen (1.82 billion U.S. dollars).

While Sony expects to sell its 100 millionth PlayStation 4 console this year, the hugely successful machine is ageing, meaning many developers are reluctant to invest in new blockbuster titles for it.

Console gaming has dealt with the challenge of mobile gaming in recent years, with the PlayStation 4, Microsoft's Xbox One and Nintendo Switch all achieving strong sales despite the new handheld competition.

The Switch has been a big success story for Nintendo, after sales of its previous Wii U console disappointed. /VCG Photo

The Nintendo Switch, an innovative console that can be played at home and on the move, has sold an impressive 32 million units since its launch in March 2017, even with much less powerful hardware than its rivals.

Despite its popularity, the machine that features exclusive games like Mario, Pokemon and Zelda is struggling to maintain momentum, based on Nintendo's most recent data release.

The company, which this year celebrates its 130th anniversary, said last week that it expects to sell 17 million consoles for the fiscal year ending March 30 – three million fewer than earlier estimates.

Investors pushed the share price down by as much as 9.47 percent, clearly not impressed with Nintendo's plans to create a physical store, theme park and movie featuring its characters. Shares recovered by five percent on Monday.

Such moves, along with further plans for Nintendo mobile phone games, represent efforts to convince investors that there will be life beyond the console in the coming years.

The advent of 5G and advances in streaming technology suggest that a new disruptive force is imminent in the gaming sector, possibly spelling the end for home gaming machines.

Does Assassin's Creed's move to cloud gaming signal a new era for the games industry? /VCG Photo

2018 saw the release of several “cloud” games, with Ubisoft offering gamers a free, streamed demo of Assassin's Creed: Odyssey through Google's Project Steam and Nintendo's Switch.

This new generation of streamed video games pushes current broadband speeds to their limits. However, companies like Google expect 5G technology to transform the way we game.

Instead of splashing out on a console, the future of gaming will see players simply opening web browsers to stream games. There will be no need for the console, game discs or cartridges, or even physical video game stores. Companies will likely monetize games by charging fees on a more lucrative "pay-as-you-play" basis, rather than one-off purchases.

That leaves Sony, Nintendo and Microsoft stuck in a difficult position. Do they develop a new console, or move on and focus entirely on cloud gaming? With more streamed games expected, 2019 could be the year that changes gaming beyond all recognition.