Video game console makers -- including Sony, Microsoft (MSFT) with its Xbox, and Nintendo (NTDOY) with its Wii -- have taken great pains to ensure that their devices do more than just play the latest Mario or Halo title. As March video game sales figures show, hardware sales are still anemic thanks to weak consumer spending. Pitching their products as multi-use entertainment devices is one strategy to stop the downward trend.
This strategy has had limited success so far. Sony is finally starting to move more consoles as consumer spending improves, but the 44% year-over-year jump it saw in PlayStation 3 sales in March (313,900 units sold in total with a price tag that starts at $299) was due almost solely to the release of a big-name video game sequel -- God of War III.
And before you start crunching numbers on how much revenue that brought in for Sony, it's important to note that the company actually loses money on each PS3 it sells. Almost a year ago, Sony made the decision to slash PS3 prices about $100 to spur sales on the hope that consumers hooked on the device would generate higher software sales. But many insiders have been critical of Sony's failure to tap into sales among hard-core gamers.
Despite the limited impact of Sony's non-video game offerings for the PS3, what's important for investors to watch is the company's commitment to keep pushing the envelope. The move to bring MLB regular season games to the PlayStation is a great example of outside-the-box thinking as video game console companies try to broaden their audience.
Here are the specifics: Sony and Major League Baseball are joining to offer out-of-market baseball games, streamed live to anyone who owns a PS3. Rumors have been circulating for a while that Microsoft is courting Disney (DIS) for access to content from its ESPN stations on the Xbox 360. But SNE appears to have beaten MSFT to the plate on this one.
The cost of the package for consumers is still unclear. MLB.TV, the league's own streaming service that offers all 2,430 professional baseball games, charges $99.95 per year or $19.95 per month for its basic service. This is essentially the service that SNE will provide via its PlayStation. Enhanced playback controls and HD access cost extra. We'll find out at the end of the week if MLB is looking to discount service (or whether Sony will subsidize service) on the PS3, or if it will come in slightly higher. Stay tuned.
As a point of comparison, satellite television provider DirecTV (DTV) offers similar access with its MLB Extra Innings package, but that comes in at over $212 for the entire season. DTV has seen huge success with sports programming like this, and investors should be wondering whether recent insider buying at DTV is timed to this baseball season. The profit potential is clearly there if Sony can figure out how to tap into it.
Whatever the price tag, this will be an interesting trial run at bringing paid non-gaming content to a video game console. If it works, Nintendo and Microsoft will be scrambling to forge similar deals. If it flops, Sony investors may start to voice frustrations over the PlayStation 3 becoming a gadget with poor profit potential. SNE stock was downgraded this week by Louis Navellier, and shares are down about 10% in the last month of trading.
As of this writing, Jeff Reeves did not own shares in any of the stocks mentioned here.