Sony Corp is expected to showcase a new PlayStation console on Wednesday in a pre-emptive strike against Microsoft Corp's bid to make its Xbox the world's leading hub for household entertainment.
The rare PlayStation event in New York comes amid industry speculation that Microsoft is set to unveil the successor to its Xbox 360, which beats the seven-year-old PlayStation 3's online network with features such as voice commands on interactive gaming and superior connectivity to smartphones and tablets.
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"Their focus is on establishing a beachhead for the next generation of consoles, and that's what February 20 is all about," said P.J. McNealy, CEO and founder of Digital World Research. "The reality is they have been playing catch-up."
Pushing ahead of Microsoft's Xbox and Nintendo Co Ltd's new Wii U could help Sony revive an electronics business hurt by a dearth of hit gadgets, a collapse in TV sales and the convergence of consumer interest around tablets and smartphones built by rivals Apple Inc and Samsung Electronics Co Ltd.
Tablets and smartphones already account for around 10 percent of the $80 billion gaming market. Those mobile devices, analysts predict, will within a few years be as powerful as the current slew of game-only consoles.
After six years, Sony PlayStation sales are just shy of Xbox's 67 million installed base and well behind the 100-million selling Wii, analysts said.
A lackluster launch in November of the Wii successor, the Wii U, gives Sony a chance to focus on toppling Microsoft as all three battle the encroachment of casual gaming on tablets and smartphones. Nintendo cut its sales target to 4 million machines from 5.5 million for the year ending March 31.
Microsoft's answer to the casual gaming threat has been software that gives users extra content and allows them to surf the Internet from their mobile devices. The Xbox already streams Netflix and ESPN and links to tablets and smartphones using Windows or Apple's iOS and Google Inc's Android. Sony's PS3 online network has lagged.
"For Sony, they have to come out and make this PlayStation event the definitive statement of why gamers need to adopt the PlayStation 4 or PlayStation Orbis or whatever they end up calling it," said Greg Miller, PlayStation executive editor at video game site IGN.com.
Sony's purchase in July of U.S. cloud-based gaming company Gaikai for $380 million hints that the Japanese company will pursue a similar streaming strategy to Microsoft. Sony, industry watchers say, may also offer an expanded range of free games to counter the threat from casual gaming.
Sony, which under its CEO Kazuo Hirai is focusing on gaming, mobile devices and cameras, needs a hit product. But by betting on a PS3 successor, Hirai, whose most profitable business is life insurance, risks deepening consumer electronic losses as he will have to sell consoles at below the manufacturing cost to gain market traction.
That choice is made harder because the other two pillars of Hirai's new Sony - cameras and mobile - are losing money.
Sony expects to post a $1.4 billion operating profit in the current fiscal year. Yet, much of that rebound is gains from offloading real estate, including $1.1 billion for its New York headquarters.
The PlayStation event in New York starts at 2300 GMT (1800 EST).
($1 = 93.5200 Japanese yen)
(Additional reporting by Reiji Murai; Editing by Ryan Woo)