PlayStation 5 Might Outsell New Xbox Series But Gaming Subscription Service Gives Microsoft An Edge, Analysts Say - Microsoft (NASDAQ:MSFT)

Sony Corporation’s SNE PlayStation 5 and Microsoft Corporation’s MSFT Xbox consoles released this month are following different strategies to vie for the attention of gamers and generate revenue — and the latter might just have an edge over the former, according to analysts.

Subscription Game-On-Demand: The key difference between the two platforms is their approach to subscription services akin to Netflix Inc NFLX, CNBC reported Sunday.

The Satya Nadella-led tech giant offers Xbox Game Pass, which has a catalog of more than 100 games covering titles released for its previous three consoles, for $10 per month.

Sony has a similar offering, albeit with 20 titles from its PlayStation 4 series, for $5 per month, bundled with its PlayStation Plus online multiplayer service.

Seamus Blackley thinks Sony will have an initial edge over Microsoft. “I don’t see any technologies in this generation that provide an obvious bump to the content,” he said, as per CNBC.

Content Over Hardware: The focus is shifting to Microsoft’s content and service revenue, including its Game Pass and Xbox Live services, which has been higher than overall gaming revenue growth in the past four quarters.

Lewis Ward, International Data Corporation (IDC) research’s director of gaming, expects the Japanese conglomerate to sell 5 million PlayStation 5 units in 2020 and Microsoft selling 3.8 million Series X and S units.

“I do think that Sony will probably come out of the gate more quickly with selling hardware, but I don’t think that Microsoft cares," Ben Throop, the co-founder of game developer Frame Interactive, told CNBC.

Higher console sales are not an aid to the finances of Microsoft as they drive down total gross margins, observed Morgan Stanley analysts Keith Weiss and Josh Baer in a client note last month.

Microsoft reportedly also has 23 game-development studios under its banner, which is larger than Sony’s 14 and is reaching out to game developers in Japan, Sony’s home-base, which means it can generate more gaming titles going forward.

The Mobile Edge: The Xbox maker’s Game Pass service is also available on Alphabet Inc’s GOOGL GOOG Android phones, although Apple Inc AAPL has refused the service listing on its App Store.

Sony’s PlayStation Now gaming service does not support mobile, leaving Microsoft to compete alone with Nintendo Co., Ltd’s NTDOY Switch platform.

Price Action: Microsoft shares closed 0.5% higher at $216.50 on Friday. On the same day, Sony shares closed 3% higher at $89.72 and fell 0.25% in the after-hours session.

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