Sony Corporation’s SNE virtual reality system for PlayStation4 – PlayStationVR (PS VR) – has been garnering unprecedented sales since its release in October, braving the market odds which have been hurting other business lines for long. As on Feb 19, 2017, Sony Interactive Entertainment (SIE), the gaming division of the company, reported that it had sold 915,000 PS VR units in the four months following its launch.
This impressive sale performance is pretty satisfying for the company, which had estimated around unit sales of about a million in the first six months. According to the New York Times, the success of the PS 4 VR system is a close second to Apple Inc.’s AAPL iPhone, which had surpassed the 1.4 million mark in 2007 within the first three months of launch.
A Strategic Launch
Sony had previously deferred the launch of the VR headset for the flagship PlayStation 4 console from Jun to Oct 2016. The company had wanted to ensure that it has an extensive range of software available for the rollout so that it can ship an adequate number of units post launch. More than the deferred launch, the company’s decision to price VR at just $399 was considered a prudent move as it offered the device for a discount of over $200 when compared to the offering of the rivals.
Sony played smart by leveraging on its powerful installed base of PS4 customers to drive VR sales. The fact that the company already had 53.4 million PlayStation 4 units in use lent it an edge over peers.
Where Do the Competitors Stand?
Though Sony’s chief VR competitors, namely Facebook, Inc.’s FB Oculus Rift and HTC Vive, have not released the official sales figures, sources claim that they lag Sony by a wide margin. According to independent research firm SuperData Research, Oculus Rift has sold approximately 243,000 headsets while HTC managed to sell 420,000 units as of the end of last year.
Higher costs as well as the need of high-performance PCs to support the other VR headsets are clearly acting in favor of Sony VRs. Meanwhile, the company is certain that its proprietary VRs offer the same level of quality and experience.
Sony Bets Big on VR
The VR has attracted significant attention since its inception. Opinions have been divided with one group believing that virtual reality is the next big thing in the gaming space while others exhibited a cautious outlook. Leading companies, including Sony, have had reservations about how quickly virtual reality will be embraced. Recently, Facebook, which has been one of the earliest stake holders of VR, expressed its interest to invest up to $3 billion in the VR platform.
Sony’s exceptional sales clearly offer it an advantage in the budding VR market. As of Feb 19, 2017, PS VR software titles and experiences reached more than 100 globally with about 360 developers and publishers.
Sony has chalked out lofty plans for VR as is evident from its series of game announcements for the headset. The upcoming launches, including that of ACE COMBAT 7 (BANDAI NAMCO Entertainment Inc.), FINAL FANTASY XV (SQUARE ENIX CO., LTD.), STEEL COMBAT (COLOPL, Inc.), TEKKEN 7 (BANDAI NAMCO Entertainment Inc.), Farpoint and Gran Turismo Sport (SIE WWS) are sure to pique consumer interest. By the end of 2017, over 100 new software titles and experiences are expected to be released.
Gaming Raises Hope
Leveraging on the strength of its flagship gaming product, PS4, Sony has braved most headwinds plaguing its other business lines. Over the past three months, the company’s shares have returned 4.3%, in line with the Zacks categorized Audio Video Home Productindustry average. PS4 continues to experience the fastest and strongest demand in the PS hardware history.
This Zacks Rank #3 (Hold) company expects the sales momentum to continue through fiscal 2016 and exceed the 17.7 million unit mark, which was recorded in the last fiscal. As per the company’s mid-term business plan, console sales, subscriber addition to the PlayStation network and VR headset prospects are likely to emerge as key growth drivers. We believe VR headsets will drive the sales of PS4 gaming consoles further.
Another stock worth mentioning in the same space is Dolby Laboratories, Inc. DLB. This Zacks Rank #2 (Buy) stock has a striking earnings surprise history, with an average surprise of 30.9% for the trailing four quarters, beating estimates each time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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