Video game blogs have been spouting rumors as of late about Sony (SNE) instituting a $50 a year premium online gaming service for its PlayStation console that could include a downloadable game each month. This would be a bit of hybrid between the Microsoft (MSFT) Xbox Live online gaming service and Nintendo (NTDOY) with its Wii Shop channel to download games for varying prices. On the heels of some huge success by Activision Blizzard (ATVI) to forge ahead with ATVI online video game sales through its latest Call of Duty expansion pack, more gaming companies are looking to the web to boost profits and earnings.
Xbox live is a big moneymaker for Microsoft, with a fee of about $50 a year. However, while features of this video game networking service include movie streaming of Netflix (NFLX) titles and social networking programs like Facebook and Twitter, Xbox live requires gamers to already own the games they want to play online. The launch of a similar service for the PlayStation 3 that also offers downloadable content would allow Sony to get a leg up on MSFT stock.
Online gaming is very profitable for software studios like Activision Blizzard, which posted recently offered up a downloadable add-on for its video game Call of Duty 4: Modern Warfare with a price tag of $15 and sold over 3 million copies. For those you who can’t do math, that’s about $45 million in cash for ATVI stock — with no overhead like packaging or distribution! Competitors such as Electronic Arts (ERTS) and Take Two Interactive (TTWO) also are rolling out online software to tap into this revenue stream.
But video game console makers are looking to get in directly on the action, and since Sony has its own subsidiary video game studios, it’s natural to expect the company to try and cut through the layers of cost and get its products directly to PS3 gamers via the internet.
Microsoft has yet to do this with video games, but has seen considerable success from its $50 Xbox live premium gaming service. MSFT stock posted its earnings report for its third fiscal quarter at the end of April, and the results highlight great growth in its software and Xbox divisions.
The launch of an online gaming service for Sony is intriguing, and could provide a much-needed boost to this company’s video game street cred. Sony SNE stock has been waning as a video game leader as of late.
Also rumored to be in the works: A successor to the PSP that could have a touch screen and half the processing power of the PS3. If true, it’s a clear shot at taking back the portable gaming market from the dominant Nintendo DS.
As of this writing, Jeff Reeves did not own positions in any of the stocks named here.
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