Rumor: Sony to Ship 16 Million PlayStation 4 Units in 2013

 
on March 05 2013 10:52 AM

Could Sony (NYSE: SNE [FREE Stock Trend Analysis]) ship a record-breaking number of consoles this holiday season?

According to DigiTimes, Sony anticipates that PlayStation 4 will reach annual shipments of 16 million units in 2013. If true, this would make it the largest launch of any console.

DigiTimes' sources claim that Sony will be begin mass-producing the hardware in August. This mirrors a previous DigiTimes report, which indicated that Sony would begin assembling the new machine in the third quarter.

Historically, console manufacturers do not ship a significant number of units when hardware first becomes available. This is heavily due to the limitations and the extreme costs involved in producing new consoles.

Demand is also an issue. While none of the companies have publicly stated that they have intentionally caused a shortage, it is safe to assume that they would rather ship fewer units than have them sit on store shelves.

Last fall, Nintendo (OTC: NTDOY) seemed to have a hit the jackpot when its newest console, Wii U, arrived at retail. At the time, GameStop (NYSE: GME) clerks at multiple locations informed Benzinga that the first round of shipments had been accounted for. Many outlets had waitlists with anywhere from 50 to 100 people who signed up to be notified when additional units became available.

In an effort to avoid the shortages incurred by the original Wii (and sell as many units as possible before Christmas), Nintendo continued to ship dozens of Wii U units to every store.

This strategy ultimately failed. While the company had initially expected to sell 5.5 million units through the end of this month, Nintendo now believes that it will only sell a total of four million units.

Those numbers are very important for a couple of reasons. First, it shows that even if Nintendo had met or exceeded expectations, it would have taken the company five months (November 2012 through March 2013) to sell more than five million units. Second, by failing to achieve that expectation, Nintendo will ultimately end up with a console that (on average) sells less than one million units per month.

In order for Sony to sell 16 million PlayStation 4 units by the end of March 2014, it would need the console to be four times as popular as Wii U. Even if it is, the company could have hardware sitting on store shelves if it ships too many units too soon.

Logistically, the 16 million mark seems impossible to reach -- so impossible that you may want to question the wording of the DigiTimes report:

"Having high hopes on its PlayStation 4 (PS4) game console, Sony internally expects the machine's annual shipments to reach 16 million units in 2013 with the supply chain expected to start mass shipments in August, according to sources from PS4 component makers."

This implies that Sony wants to ship 16 million units this year. However, it could simply mean that Sony will ship enough units this year to be on track for 16 million units every 12 months. This would mean that by fall 2014, Sony will have shipped 16 million PlayStation 4s.

Shipments are not the same as sales, so one could argue that Sony will send millions of consoles to retail and hope for the best. That would be nice for consumers who don't want to fight massive crowds this holiday season, but it is unrealistic.

In order for Sony to ship 16 million units, PlayStation 4 would have to launch in most (if not all) regions this fall. However, Sony execs are unwilling to commit to a 2013 release date for the European market.

Even if PlayStation 4 launches in all regions simultaneously, 16 million is an enormous number to achieve.

Consider how many PlayStation 2 units Sony shipped when the console was released 13 years ago.

Only 500,000 units were available in North America. They were sold out in 24 hours. The company promised to ship another 100,000 units every week through the end of the year, though it is unclear if Sony achieved this goal.

Before PlayStation 3 shipped in 2006, Sony allocated a mere 100,000 units for Japan and 400,000 units for North American consumers. At the time Sony aimed to ship 1 to 1.2 million units by the year's end.

In 2007, Jack Tretton, President and CEO of Sony Computer Entertainment of America, told NBCNews.com (formerly MSNBC.com) about the challenges of launching PlayStation 3.

"I don't think there's any question that there were missteps, but I don't think anybody is being honest with you if they say that the first year of any platform goes perfectly according to plan," he said. "I think the biggest miss for us was the launch, in that we had easily a million consumers in North America alone that wanted to get their hands on a PlayStation 3 … and we had roughly 200,000 units to take advantage of that demand."

Tretton's words indicated that the company fell short of its goal of shipping 400,000 units domestically, but the company did manage to ship and sell one million units by the end of 2006.

As impressive as that was seven years ago, it was a far cry from 16 million units.

Follow me @LouisBedigianBZ

 

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