Sony's PS4 Speeds Ahead as Microsoft's XBox Stumbles

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The top dog in this generation of video game consoles continues to pad its lead. Sony (SNE) revealed last week that it has sold 10 million PlayStation 4 systems since hitting the market nine months ago. Microsoft (MSFT) has yet to respond, but the latest data out of industry tracker NPD shows that the PS4 was once again the country's best selling system in July.

The last time we got comparable data it wasn't even close. Ahead of June's E3 gamer conference, Sony announced that it had sold 7 million PS4s. Microsoft countered by revealing that it had sold 5 million Xbox One consoles to retailers. This wasn't a difference of 2 million boxes. Sony's figure was for devices that had made it all the way into the hands of gamers, while Microsoft's tally included all of the systems collecting dust on store shelves. Technology blog Extreme Tech estimates that Microsoft has sold just half as many of the current generation consoles to consumers as Sony at this point.

Add it up, and it's not too shabby. Few figured that the Xbox One and PS4 -- released just a week apart last November -- would have sold a combined 15 million right now. And 5 million XBox Ones is nothing to sneeze at. This doesn't mean that Microsoft can rest easy. It's in a bind. History hasn't been kind to former market leaders that fail to keep up in future generations. If you need proof, just think about what Atari, 3DO and Sega are doing on the console front these days.

Gamers are noticing the shift in dominance. Investors will have to follow suit.

There Are No Cheat Codes

"History has shown us that the first company to reach 10 million in console sales wins the generation battle," is a quote that may come to haunt Microsoft. Those words were spoekn in 2008 by then-Xbox head Don Mattrick when the Xbox 360 beat the PS4 to that meaty milestone. It should be said that the Xbox 360 came out a year before the PS4. It also didn't help that the PS3 hit the market as the priciest of the three systems at the time, setting gamers back as much as $599 in its 2006 debut.

Sony learned its lesson. It made sure that it hit the market at a lower price than Microsoft this round. When Microsoft announced last year that it would hit the market at $499, Sony revealed that it would price its device at $399. When Microsoft infuriated gamers by suggesting that it would incorporate some software protective features, Sony cashed in by poking fun of the measures that Microsoft eventually abandoned.

The same Sony that gamers hated two years ago when its online gaming network was hacked has suddenly become the rock star in the eyes and controller-clutching grips of diehard gamers. Investors thought that this would be a close race, but folks who play the games and follow the industry knew that PS4 was going to have the early lead in this generation.

Microsoft's losing, and it doesn't have a lot of time to catch up.

Game On

Microsoft has gone from trying to please software developers last summer to trying to woo players this summer. It rolled out a new Xbox One that matches the PS4 at its $399 price point, forgoing the Kinect motion-based camera controller. This upset developers that were making games under the assumption that Kinect would be available to all players, but the gamble seemed to initially pay off when Microsoft announced that Xbox One sales tripled after the pricing move.

However, as long as Sony has the lead -- and NPD's data shows that PS4's lead is only widening this summer -- this could lead to bigger headaches for Microsoft. A console needs developers, and game makers aren't going to spend as much time working on titles to serve an estimated 5 million Xbox One players when that same time and effort can be used to target Sony's much larger audience of PS4 owners. Microsoft has several games that are exclusive to the Xbox One, but it's also not a surprise to see that last month's best-selling game -- "The Last of Us Remastered" -- is a PlayStation exclusive.

Sony is making sure that it doesn't take anything for granted. At E3 two months ago, it introduced a cloud-based game streaming service called PlayStation Now and entered the set-top media player market with PlayStation TV. Microsoft, on the other hand, continues to reel backwards. Last year's dreams of making the Xbox One the centerpiece of today's home theater haven't played out, and now it's closing the entertainment studio that was going to deliver original video streaming content. Microsoft is back to trying to market its Xbox One as a machine for gamers, but with 10 million early adopters already choosing its longtime rival, it's not going to be easy to stand out.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our newsletter services free for 30 days.
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