PS4: PlayStation, consoles not dead yet

(MoneyWatch) Is Sony (SNE) dead? Despite losing money for years and losing its way like a Dante in a consumer electronics forest, no, it's not. And neither is the newly announced PlayStation 4 -- or the other major gaming consoles from Microsoft (MSFT) and Nintendo -- despite the onslaught of social gaming, smartphones and tablets.

However, Sony is walking a thin line with the PS4. It wants to be hip, but needs to do more than trade on terms like "social." The company must move quickly, with Microsoft, which has led game console sales for more than two years, expected to announce the new version of its Xbox console this year. Sony must also avoid the years of initial financial loss its new models have racked up in the past.

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At a time when gaming is expanding to mobile platforms, you might argue that Sony waited far too long -- seven years -- to introduce a new hardware platform. Many people have come to appreciate the combination of portability and low prices in mobile gaming, with tablets and smartphones now accounting for an estimated 10 percent of a nearly $80 billion gaming market.

Expensive and long lifecycle

Yet there are good reasons for Sony's long delay in rolling out the PS4. Consoles are wickedly expensive to develop and for years are typically sold at a loss. Essentially, they are special-purpose personal computers that use custom parts rather than the standard off-the-shelf components that make for low-cost PCs. Although console makers also get royalties on third-party game titles, the entertainment divisions of these corporations can show losses for years after the introduction of a new gaming system.

Now Sony and its gaming rivals are in catch-up mode, though not to the degree that some observers think. Yes, the PS4 will emphasize social gaming, but it's not exactly as though players have been clicking away in isolation. In fact, console games were early pioneers in connecting consumers through networks so that they could play one another and share experiences. Incorporate streaming of TV and movies? Again, console manufacturers, Sony and Microsoft in particular, have been aggressive on that front for years.

Can't get Halo experience on an iPad

Still, consoles have lost some users as many people found that they didn't need one to get a satisfying gaming experience. Some part of that mobile gaming subset were never console users and picked up cheap games like Angry Birds because the titles were readily available for download and the users had time between meetings, on mass transit, at lunch or sitting on the couch.

To speculate on the death of consoles is analogous to saying that the PC will die off in the face of mobile devices. Both are greatly exaggerated. If you want to construct a complex spreadsheet or do heavy-duty graphics or video editing, a mobile device with small screen and relatively low-power processor doesn't cut it.

Similarly, to play games with the complexity and graphical sophistication now commonly available, you need more than a tablet. And there is still a large global market of hardcore gamers who will pay the money for hardware and software that deliver a more immersive, complex and fantasy-fulfilling experience. Revenue has been dropping in the industry, but then it has been some time since the last major change. Even Microsoft's Kinect product was only an add-on to the Xbox 360, and it became the more quickly adopted consumer electronics device in history.

Wooing hardcore gamers

The PS4 has some smart features that hardcore gamers will mentally translate into benefits. For example, 8 GB of RAM means games run faster. A sleep function that lets them pause a game and then take it up again where they left off is a great new convenience, particularly if they are in the middle of a level, need to do something else, but don't want to lose the progress they've made.

The PS4's new controller design incorporates traditional sensors, a touchpad (for those who have gone to the dark side of smartphone and tablet gaming), and both body motion and voice controls to compete with Microsoft technologies like the Kinect motion-detection system.

From a business perspective, of course, Sony still has to find a way to make this pay off. It may not be able to afford year after year of losses as it tries to acquire market share for the new console, especially with an economy that remains shaky and no guarantees that the PS4 will be a hit for the all-important holiday shopping season later this year.

Image courtesy of Sony