Are New Consoles From Sony and Microsoft on the Horizon?

Since the release of the Playstation 4 and Xbox One in 2013, video gamers are already thinking about the next generation of major consoles.

In this segment from Industry Focus: Consumer Goods, the team discusses when the world may finally see theSony(NYSE: SNE) Playstation 5 or Microsoft(NASDAQ: MSFT) Xbox 2, if at all. As it turns out, new technology may completely change the way these companies approach their business models.

A full transcript follows the video.

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This video was recorded on March 23, 2017.

Vincent Shen:Moving on to the next big console player, this isSony.ThePlayStation 4 Pro is already available to gamers. While the PlayStation VR introduced a bit of that technology to the platform, I think the Pro ultimately adds some beefier specs, and it also enables some 4K capabilities, right? The next step forSonythat a lot of people are wondering about is based on historical intervals between generations, we touched on this, the PlayStation 5, potentially on store shelves by 2019. I thought it was really interesting, an analyst atMacquarieResearchactually believes thatthe release date might be even sooner,and this has to do with competition fromMicrosoft,who we will talk about soon.

For Sony,just to give you a little bit of perspective in term of how thePlayStation business folds into their overall company, the Game and Network Services segment, which includes the PlayStation business, $5.3 billion reported most recently. That's about one quarter of total sales. That potential PlayStation 5 --which is not confirmed, by the way. This is justrumors and speculation. But,if it does come out earlier if,they believe it will be because of Project Scorpio, which isthe project name at Microsoft. Can you tell us a little bit about that?

Seth McNew:Yeah. We'restill waiting to learn more about what Project Scorpio actually is. Is it an Xbox 2? Or a next generation? Wealready had the Xbox One S. So we'll see what that looks like. But,similar, we're seeing it's going to have the 4K gaming and the VR,certainly, Microsoft and Oculus announcing their partnership. We'll seewhat the technology looks like that really sets it apart.

Shen:Yeah. The release date is expectedpotentially later this year in 2017.I didn't realize it was going to be coming up that soon. Poised,of course, for the holiday shopping season,always important for these guys. In the latest quarter, again, for Microsoft, it's a little tougher, because it's such a big business, and obviously, you're thinking about all these other opportunities they have, their classic OS. But,Microsoft reported gaming revenue of about $3.5 billion, total top line of $24 billion for its latest quarter. Again, it's smaller, but it's not a trivial part of thebusiness, either. Ultimately, if you're looking for something in terms of exposure for gaming, I typically think, and I think a lot of investors, typically think of those major names we talked aboutActivision and Electronic Arts and Take-Two Interactive. But it's definitely an interesting approach that they have. They have flexibility, too.

McNew:Yeah. You wonder if this is similar to companies likeApplewith the iPhone, how long can they just keep going to the next console, and are theyputting them out because there's new technology to support a new release,or just because they're trying to breakinto that cycle of having a new one every couple years. So,hopefully, these new ones that come out,there really is some game-changing technology.

Shen:Andthe thing that's really starting to change is,traditionally, the PlayStation 3 or PlayStation 4comes out, it might bebackwards compatible, but you can't use your PlayStation 2 or 3 to playgames released specifically for the 4th generation. Things like that arestarting to get warped. You hearsome of the management from these companies talk about howthat kind of paradigm is changingbecause of digital downloads. It can change capabilities, and change what a game release means, the idea that you don't leaveany of your previous players behind by releasing a title,and it can be played across all these different consoles.

Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fools board of directors. LinkedIn is owned by Microsoft. Seth McNew owns shares of Apple. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Activision Blizzard, Apple, and Take-Two Interactive. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.