Market Overview

PlayStation 4 Units Could be Scarce as Sony Falls Behind Schedule

When Sony's (NYSE: SNE) released PlayStation 3 in 2006, the company shipped a mere 200,000 units to America.

This was half the number of units that Sony had expected to ship. At the time, Sony estimated that there were one million consumers vying for those consoles.

To prevent another system shortage from occurring, Sony was rumored to bring 16 million PlayStation 4 units to retail in 2013. Not all of these consoles would be allocated to the United States, but a significant number would surely come stateside, preventing a repeat of the PS3 debacle.

That was just a rumor, however. Now, just weeks before the 2013 Electronic Entertainment Expo, another rumor is contradicting the last one.

According to DigiTimes, Sony "may have trouble achieving shipments of 12-16 million units in 2013 as expected, as the related upstream supply chain has not yet received any shipment instructions from the Japan-based vendor, implying a possible delay in the game console's mass shipment schedule."

Even in the best-case scenario, it seemed hard to believe that Sony would ship 16 million units.

Hardware manufacturers traditionally ship a few hundred thousand units to each territory (Japan, Europe, the United States, etc.) before flooding retailers with an overabundance of consoles. In doing so, they can increase demand (or make it appear that demand is higher than it actually is) and prevent any excess units from sitting on store shelves.

Nintendo (OTC: NTDOY) pioneered this strategy when it created the first massive system shortage in 1996. At the time, Nintendo shipped a very limited number of Nintendo 64 units, creating a shopping frenzy as consumers rushed to get one before Christmas.

In 2006 -- 10 years after Nintendo 64 arrived at retail -- Nintendo found itself in a similar situation even after shipping millions of Wii consoles. The demand was so great that the system shortages continued in 2007, particularly around the holiday shopping season.

If PlayStation 4 proves to be even more popular (and thus in higher demand), Sony could easily produce and sell 16 million units during the console's first year of release. In a quarter, however, that is not possible.

First of all, game consoles are not smartphones. They are not adopted and replaced overnight. While there may be eight million people who are already interested in buying PlayStation 4, it will take time before Sony can persuade 16 million individuals to open their wallets.

Thus, even if Sony could manufacture 16 million units this fall, it is very unlikely that the company will ship all of them at once.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

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