Market Insight

PS4’s launch in China finally confirmed by SCE

November 03, 2014

Chenyu Cui Chenyu Cui Senior Research Analyst, Games
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During the Sony Expo 2014 in Shanghai the company officially confirmed that the PS4 would be coming to the country. Details on the release date and price will be announced later in 2014. At the event, Sony presented the latest PS4 and PS Vita consoles and allowed players to try out Drive Club and Knack on PS4, and Freedom Wars and Gravity Rush on PS Vita on site. Sony did not say whether these games will be available in China but stated that all the games have been submitted to approval. Additionally, in contrast to Microsoft, Sony implied that products bought on the established grey market in China would not enjoy warranty coverage in the country.

Sony signed a deal with Shanghai Oriental Pearl Group (OPG) in May to form two ventures for hardware production and software sales and networks, respectively. PS4 got the China Compulsory Certificate Mark (CCC Mark) on Oct 13, which is a compulsory mark for products imported, sold or used in China. The PS Vita handheld received its CCC mark on 27th October.

Our analysis: 

Microsoft recently started selling Xbox One in China and we do not expect PS4 and PS Vita to be too far behind. Considering Microsoft secured Xbox One's CCC mark three months before its official launch including time spent shipping in devices and packaging them in the Shanghai Free Trade Zone, we expect Sony to launch the PS4 before Chinese New Year, which occurs mid-February 2015.

Although PS4 has outsold Xbox One in many regions, they have to face the same hurdles of adoption in China, namely heavy games censorship, a well-served grey market, established games content markets across PC and smartphones and an entrenched freemium monetisation model. The hurdles to establishing the market suggests that adoption will be a slow burner and involve major investment in consumer education through retail partners. We believe that Sony's well known CE branding and established distribution network in surrounding country markets will help PS4 outsell Xbox One over the next five years.

The commercial partners of Sony and Microsoft are both partly owned by Shanghai Media Group (SMG). Compared to Microsoft's partner - BesTV - Sony's partner, Shanghai Oriental Pearl Group (OPG) has less exposure to the home entertainment business in China. BesTV achieved revenue growth of 19.98% year -over-year in Q3, driven by its set-top-box entertainment services while OPG’s yearly growth of 37% in Q3 was attributed to its tourism business. Rumours continue to circulate that both of these divisions of SMG will in fact be merged into one entity leaving both joint ventures managed by the same company. It is unclear at this stage how this merger might impact the nascent console market, although there is room to suggest that a more joined-up approach would be better positioned against the incumbent games markets in the country.

Compared to Xbox One’s home entertainment positioning with the aim of attracting a family audience, Sony plans to centre its strategy on gamers as it has done successfully in other markets. The execution of this strategy relies on bringing the right games content to the PS4, which due to the stringent regulation of content for the living room may prove to be a challenge.  

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