Sony At CES 2014: PlayStation Now Announcement Causes Game Stop Stock Drop

During 2014 International CES this week, Sony demonstrated its latest development, a cloud-based streaming service that will give gamers instant access to upcoming PlayStation 4 games and classic PS3 titles. Entitled PlayStation Now, Sony plans to launch the recent development to U.S. gamers this summer. Shortly after Sony President and Group CEO Andrew House made the announcement on stage at the consumer electronics show, popular gaming retailer GameStop (NYSE: GME) saw its stock price plummet as much as 8 percent on Jan. 7.

The recent announcement caused Stifel, a full-service brokerage and investment banking firm, to change its rating on GameStop from “buy” to “hold.” According to financial information site MarketWatch, GameStop’s “prospects for software sales are incrementally worsened” by the upcoming launch of PlayStation Now.

GameStop’s shares have risen a small amount since their decrease on Jan. 7. Despite the alarming drop, Wedbush Securities analyst Michael Pachter questions whether the service will affect retail sales long term. “Sony’s sell-through number helps GameStop much more than the launch of PS Now hurts them -- yet GameStop shares are getting hammered,” he stated. “The sell-off in GameStop shares that followed the PS Now announcement is overdone.” He also notes that investors have been aware of Sony’s goals to stream games since it purchased technology company Gaikai in 2012, stating that there’s no reason to believe that the service will be successful.

“It is important to note that PS4 has no backwards compatibility with PS3 discs, meaning that the availability of PS3 digitally streamed games will not directly result in lower used sales of PS3 games to PS4 owners.”

“GameStop’s used gaming sales from PS3 discs on PS3 consoles are most likely to be impacted; however, until we know more about game availability, timing and pricing, among other factors, we do not see a meaningfully negative impact to GameStop in the near-term,” Pachter added.

Sony shared a post on its blog on Jan. 7, giving gamers a preview of what PlayStation Now will offer. The service will allow you to stream PS4, PS3 and Vita games across multiple devices, including smartphones, tablets and Sony’s BRAVIA television models. You will also gain instant access to games at any times by logging into your Sony Entertainment Network account, allowing you to play the most updated version of your chosen game. The company plans to begin a beta program in the U.S. by the end of January.

Do you think PlayStation Now will affect GameStop’s sales long term? Leave a comment below.