The shareholders of GameStop Corp. (NYSE:GME), the world’s largest multi-channel retailer of video games, are happy with Sony Corporation (ADR) (NYSE:SNE)’s PlayStation 4 (PS4). While GameStop has started taking pre-orders on Sony’s PlayStation 4 and Microsoft Corporation (NASDAQ:MSFT)‘s next generation entertainment system, the Xbox One, it is the PS4’s strategy which has no new restrictions on pre-owned titles that relieves GameStop Corp. (NYSE:GME) shareholders’ concerns for now.
Xbox One versus PS4
While both the PS4 and the Xbox One are expected to be launched in November 2013, the two consoles are taking very different approaches on Internet connection and game policies. Xbox One integrates and provides functions ranging from entertainment and TV to communication, such as Skype. At $499, the new Xbox One system comes with a new generation of Xbox Live and a redesigned 1080p Kinect, whereas Microsoft Corporation (NASDAQ:MSFT) is imposing more restrictive policies on lending and reselling the Xbox One games. Furthermore, an internet connection is required at least once every 24 hours. Microsoft’s aggressive shift toward an online ecosystem continues to pose threats for GameStop Corp. (NYSE:GME)’s game resale business.
PS4, on the other hand, is selling at $399 ($100 cheaper than Xbox One). PS4 features innovative second-screen features and offers an expansive gaming ecosystem through the PlayStation Network cloud technology. Sony Corporation (ADR) (NYSE:SNE)’s motion sensor, the PS4 Eye Camera, can be purchased for an additional $59. Unlike Microsoft Corporation (NASDAQ:MSFT)’s restrictive policy, the PS4 will allow gamers to trade, sell, and keep games that are based on discs from the previous consoles.
PS4 does not require disc-based games to connect online to work, and Sony basically won’t impose any new restriction on pre-owned titles. It is Sony Corporation (ADR) (NYSE:SNE)’s decision that eased GameStop Corp. (NYSE:GME) shareholders’ concern on pre-owned games for now. While used video game products contributed 27% toward GameStop’s revenue in 2012, it accounted for 44% of the gross profit. Resale margins are more than double those of new video game products.
The demand for the PS4 has been high, whereas the launch edition pre-orders are sold out already on Amazon.com, Inc. (NASDAQ:AMZN). As of June 14, 2013, the Xbox One’s pre-orders were lagging behind the PS4. The PS4 has now doubled Xbox One sales, whereas for every Xbox One unit that has been pre-ordered, two PS4’s have been pre-ordered. Based on the pre-order numbers, players seem to favor Sony’s offerings and its open policy on disc-based games more than Microsoft’s aggressive move toward an online ecosystem.
Sony Corporation (ADR) (NYSE:SNE) even raised its internal sales forecast due to positive signs about demand for the device. Sony also pointed out that demand may well outstrip supply. Amazon.com, Inc. (NASDAQ:AMZN) and GameStop Corp. (NYSE:GME) are already warning customers that they cannot guarantee shipment of the units on the promised release date.