Sony, Microsoft Could Make Billions if Chinese Ban is Lifted

 
on January 28 2013 11:00 AM

While Apple (NASDAQ: AAPL [FREE Stock Trend Analysis]), Samsung and Google (NASDAQ: GOOG) are free to ship their devices nearly anywhere, Sony (NYSE: SNE), Microsoft (NASDAQ: MSFT) and Nintendo (OTC: NTDOY) have been prevented from selling their most successful hardware items -- video game consoles -- in China. That could change in the near future.

According to China Daily USA, Chinese authorities are reconsidering their decision to ban game consoles in 2000.

The ban, which has prevented the legal sales of PlayStation 2, PlayStation 3, Wii U, Xbox 360 and other game consoles, was implemented after seven Chinese ministries concluded that video games could potentially harm the physical and mental development of children.

Game console manufacturers tried to get around the law. Microsoft was somewhat successful when it launched Kinect -- a controller-free motion-controlled add-on for Xbox 360 -- in China. The device is being sold for medical, educational and other uses. It is not currently being marketed for gaming purposes in China.

Other console manufacturers have not been as lucky. Consumers, however, have still found a way to get their gaming fix via the black market. Game consoles -- like movies and most other forms of entertainment -- are readily available in China. Thus, Sony, Microsoft and Nintendo are already benefiting from the indirect sales of their hardware.

If the ban is lifted, however, sales of new game consoles could skyrocket. Console manufacturers would be free to promote their items and sell them in every store. And since consumers would no longer have to pay black market prices, consoles would become even more desirable to own.

This would be huge for the next generation of consoles, such as the tentatively titled PlayStation 4 and Xbox 720, but it could also help the sale of existing games and devices.

Sony, which recently stopped manufacturing PlayStation 2 for sale in some territories, could re-launch the console as a low-cost gaming device. Alternatively, Sony could heavily push older games via the PlayStation Store, the company's online game outlet. Since most Chinese consumers have never played or seen them before, those games could prove to be gold for Sony. Nintendo could reap similar benefits.

It might be harder for Microsoft to benefit from past releases simply because it is the newer kid on the block. The original Xbox did not sell very well; according to VGChartz, that machine sold just under 25 million units worldwide. Thus, Microsoft would have to focus on the sale of more recent games and devices.

Thus far, investors have reacted modestly to the rumor. Shares of Nintendo rose more than two percent Monday while Sony jumped more than five percent. Microsoft is currently up less than one percent.

Follow me @LouisBedigianBZ

 
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